Main Facts:
A judge in California has ruled that X’s old agreements to pay incentives to former Twitter employees were valid, paving the way for workers to sue the company for millions of dollars that it refused to pay in the tumultuous months following its acquisition by billionaire Elon Musk.
Main Background:
According to the lawsuit, former Twitter CFO Ned Segal promised Shobinger and other employees that they would be paid 50% of their target bonuses based on the company’s bonus plan – a compensation system tied to the company’s overall financial performance. After Musk acquired the company in November, employees were told their 50% bonuses would still be honored if they chose to remain with the company under the new leadership. Shobinger claimed he “regularly received calls from recruiters and companies about other job opportunities” in the months following the acquisition, but he turned them all down due to the promised pay. Historically, Twitter had paid bonuses in the first quarter of the new year – typically in March – but when the quarter ended, no employee received any part of the promised bonus. Shobinger filed a breach of contract lawsuit in June.
Case Details:
Judge Chabria ruled against X’s request to dismiss Shobinger’s lawsuit on Friday, finding that he had “adequately alleged a breach of contract under California law.” X’s lawyers argued that the company’s performance bonus plan is not a valid and enforceable contract, and they cannot be legally compelled to honor the terms of an oral agreement between Shobinger and the old management of the company. However, Judge Vince Chabria stated that California’s rules regarding oral contracts “only apply when there is a valid and actually enforceable written contract,” and X had already argued that a written contract specifying discretionary bonuses was not valid.
Impact of the Case:
If the lawsuit and similar cases succeed, the company may be required to pay millions of dollars to Shobinger and other former employees who claim they were promised bonuses if they stayed on after Musk’s purchase of the social media company. X, which no longer has a public relations team, could not be reached for immediate comment.
Conclusion:
The case involving Elon Musk, X, and the employee contracts at Twitter serves as an example of the legal challenges companies may face after acquiring another company. Employees may have legal rights and contracts with the original company that the new company must adhere to. Companies should be cautious in handling employee contracts and financial obligations after an acquisition to avoid lawsuits and the legal costs that may arise from them.
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