Elon Musk’s X Settles $500M Severance Lawsuit with Former Twitter Employees
August 24, 2025
SAN FRANCISCO, CA – Elon Musk’s social media company, X Corp, has reached a tentative settlement to resolve a high-profile class-action lawsuit filed by approximately 6,000 former Twitter employees, who claimed they were owed $500 million in unpaid severance following mass layoffs after Musk’s 2022 acquisition of the platform. The agreement, announced in a court filing on August 20, 2025, marks a significant step toward closing one of several legal battles stemming from Musk’s tumultuous takeover.
Background of the Lawsuit
The lawsuit, filed in 2023 in the U.S. District Court for the Northern District of California, was led by former Twitter employees Courtney McMillian, who oversaw the company’s employee benefits programs, and Ronald Cooper, an operations manager. The plaintiffs alleged that Twitter violated a 2019 severance plan, which guaranteed most employees two months of base pay plus one week of pay for each full year of service, with senior employees like McMillian entitled to six months of base pay. Instead, the lawsuit claimed, laid-off workers received at most one month of severance, and many received none at all.
Musk’s $44 billion acquisition of Twitter in October 2022 led to the termination of roughly 6,000 employees—about 80% of the workforce—as part of aggressive cost-cutting measures. The layoffs, which included high-profile executives like former CEO Parag Agrawal, sparked multiple lawsuits, with the severance dispute being the largest. The case, McMillian v. X Corp., gained traction as a proposed class action, representing thousands of affected workers.
Settlement Details
The tentative agreement, disclosed in a joint court filing, prompted both parties to request a postponement of a scheduled September 17, 2025, hearing before the 9th U.S. Circuit Court of Appeals. The 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.”
While the financial terms remain confidential, the lawsuit originally sought up to $500 million in unpaid severance. The settlement, pending district court approval, is expected to provide compensation to the affected workers, though the exact distribution and amounts have not been disclosed. The pause in appellate proceedings, granted on August 21, 2025, allows time to finalize the deal.
Context and Broader Implications
The settlement follows a July 2024 dismissal of the lawsuit by U.S. District Judge Trina Thompson, who ruled that the claims fell outside the Employee Retirement Income Security Act (ERISA) jurisdiction. The plaintiffs’ appeal to the 9th Circuit prompted renewed negotiations, culminating in the current agreement. Other lawsuits, including one by former Twitter executives like Agrawal, remain pending in California and Delaware courts.
Musk’s approach to the Twitter layoffs, including a 2022 email titled “Fork in the Road” offering employees a choice to stay or accept severance, has drawn parallels to his leadership of the Trump administration’s Department of Government Efficiency (DOGE), which cut tens of thousands of federal jobs earlier in 2025. The severance dispute has fueled public debate, with posts on X reflecting mixed sentiments—some praising Musk’s business decisions, others criticizing the layoffs’ impact on workers.
Reactions and Next Steps
The settlement has been met with cautious optimism by plaintiffs’ attorneys, who see it as a step toward justice for former Twitter employees. However, details remain sparse, and approval by the district court is not guaranteed. Legal experts suggest the agreement could set a precedent for resolving similar mass layoff disputes, particularly in tech.
For Musk and X Corp, the settlement avoids a protracted appellate battle but does not resolve all legal challenges tied to the Twitter acquisition. As the company, now rebranded as X, continues to navigate regulatory and legal scrutiny, the resolution of this $500 million lawsuit marks a critical, if incomplete, milestone.