Kelsey Laymon
- A federal judge allowed a lawsuit against X, formerly known as Twitter, to move ahead on Friday.
- X is accused of failing to pay annual bonuses promised in the lead-up to and after Elon Musk's takeover.
- The lawsuit was filed by Mark Schobinger, Twitter's former head of compensation, in June.
A federal judge allowed a lawsuit against X, formerly known as Twitter, to move ahead on Friday. The company is accused of failing to pay staff their promised annual bonuses.
The lawsuit was filed in June by Mark Schobinger, the company's former head of compensation, on behalf of himself and thousands of other current and former employees.
The claimants are suing the company for allegedly failing to honor verbal promises that all employees working at X as of January 1, 2023, would be paid a portion of their annual bonuses.
The total amount owed exceeds $5 million, according to the court filing.
In a statement shared with Business Insider, the plaintiff's attorney, Shannon Liss-Riordan, said the bonuses owed amounted to "tens of millions of dollars."
"We estimate about a couple thousand employees would have been eligible for the bonuses," she added.
On Friday, Judge Vince Chhabria dismissed calls from X's lawyers to throw out the case.
The lawyers had argued that the company couldn't be forced to uphold verbal contracts between Schobinger and the former management.
But the judge wrote that Schobinger's case "plausibly stated a breach of contract claim" under California state law.
"Once Schobinger did what Twitter asked, Twitter's offer to pay him a bonus in return became a binding contract under California law. And by allegedly refusing to pay Schobinger his promised bonus, Twitter violated that contract," the judge said.
The lawsuit claims that management at Twitter promised employees they would be paid 50% of their 2022 annual bonus if they stayed with the company during Musk's takeover, which was finalized in October 2022.
The annual bonuses are usually paid out in the first quarter of the following year, per Forbes. According to Schobinger, those payments never happened.
X's lawyers argued that this verbal contract did not stand up under Texas law, where they claimed the case should be tried. But the judge ruled that the case would be governed by California law, and, regardless of state law, all claims for dismissal "failed."
Schobinger quit in May and said that X "reneging on various promises it had made to employees," including its failure to pay the 2022 bonuses, was to blame, per the complaint.
Chhabria's ruling on Friday adds another lawsuit to X's growing pile of legal troubles.
The company has faced several lawsuits in recent months over missed payments on rent and other services, as well as unsuccessful suits from employees who were laid off or quit shortly after Musk's takeover.