Ex-Twitter CEO Parag Agarwal can proceed with severance pay claim against Elon Musk

Elon Musk faces a legal setback in his attempt to avoid severance payments to Twitter’s former top executives, fired during his 2022 takeover of the company.

On Friday, a judge ruled that former CEO Parag Agrawal, along with other top executives, can proceed with their claims that Elon Musk terminated them right as the deal closed to avoid paying severance.

In a lawsuit filed in March, the executives argued that Musk intentionally cut them off before they could formally resign, denying them agreed-upon compensation. The suit also referenced a statement Musk made to biographer Walter Isaacson, revealing that Musk was eager to close the deal to avoid “a $200 million differential in the cookie jar between closing tonight and doing it tomorrow morning.”

Agrawal is joined in the case by Vijaya Gadde, Twitter’s former legal chief; Ned Segal, former CFO; and Sean Edgett, former general counsel, who all allege that they are owed one year’s salary plus unvested stock awards valued at the acquisition price.

Elon Musk faces multiple legal battles

This is not Musk’s first legal battle over employee compensation. After buying Twitter, which he rebranded as X Corp., Musk laid off thousands of staff as part of a massive restructuring. Many of those employees have filed claims for unpaid severance, alleging that Musk did not honour compensation terms.

In July, Musk and X Corp. won a class-action lawsuit where laid-off employees sought $500 million in severance under the Employee Retirement Income Security Act. However, in September, a former employee was awarded unpaid severance in a private arbitration session, potentially setting a precedent for similar cases.

US District Judge Maxine Chesney, overseeing the executives’ case, also denied Musk’s request to dismiss a similar claim filed by former “core tech” general manager Nicholas Caldwell, who is seeking $20 million in compensation for lost severance.