Elon Musk and X Corp Settle $500M Lawsuit with Former Twitter Employees
San Francisco, CA — August 23, 2025 — Elon Musk and his social media company, X Corp, have reached a tentative settlement in a high-profile class-action lawsuit brought by approximately 6,000 former Twitter employees, who claimed they were denied at least $500 million in severance pay following mass layoffs after Musk’s $44 billion acquisition of the platform in October 2022. The agreement, announced in a court filing on August 20, 2025, marks a significant resolution to a nearly two-year legal battle and awaits approval from a federal district court judge.
The lawsuit, led by former Twitter employees Courtney McMillian, the company’s ex-head of compensation and benefits, and Ronald Cooper, a former operations manager, alleged that Musk and X Corp violated a 2019 severance plan. According to the complaint, the plan entitled most laid-off employees to two months of base pay plus one week of pay for each year of service, while senior employees like McMillian were promised six months of base pay. Instead, the plaintiffs claimed that fired workers received at most one month of severance pay, with many receiving no compensation at all, and no additional benefits such as continued health insurance or outplacement services.
The case, initially filed in July 2023 in the U.S. District Court for the Northern District of California, was dismissed in July 2024 by Judge Trina Thompson, who ruled that the federal Employee Retirement Income Security Act (ERISA) did not apply to Twitter’s post-buyout severance plan due to the absence of an “ongoing administrative scheme.” The plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit, supported by an amicus brief from the U.S. Department of Labor, which argued that the severance policy qualified for ERISA coverage. The tentative settlement, announced just weeks before a scheduled September 17, 2025, hearing, halts the appeal process and aims to resolve the litigation entirely.
Details of the settlement, including the exact compensation amount, remain undisclosed, pending finalization of the agreement and court approval. A joint court filing stated, “The finalized settlement agreement will include a proposed distribution of funds to the members of the settlement class(es). If the district court approves the proposed distribution, the agreement will resolve the litigation in its entirety and moot this appeal.” Posts on X, including one from @allenanalysis on August 22, 2025, celebrated the settlement as a victory for the laid-off workers, with some users like @calichicacine arguing that the amount should be higher given the scale of the layoffs.
The layoffs, which reduced Twitter’s workforce from about 7,500 to fewer than 2,000 employees, were part of Musk’s cost-cutting measures to address a reported $4 million daily financial loss at the time of the acquisition. The settlement does not address other pending lawsuits against Musk and X, including a $128 million severance claim by former Twitter executives, including ex-CEO Parag Agrawal, and allegations of unpaid bonuses and discriminatory layoffs targeting women and workers with disabilities.
This resolution follows a separate arbitration win for a former Twitter employee, reported on September 24, 2024, which could set a precedent for over 2,000 similar individual claims. As Musk and X navigate these legal challenges, the settlement represents a significant step toward addressing grievances from the tumultuous post-acquisition period, with the final terms expected to provide clarity on compensation for the affected workers. The legal community and former employees alike await the district court’s ruling, which will determine the next chapter for those impacted by the 2022 layoffs.