Elon Musk plays Grinch this Christmas season, faces lawsuit over unpaid bonuses

A federal judge's recent ruling has thrust X, previously known as Twitter, into a legal tussle over alleged unfulfilled bonus payments to its staff. The decision, denying X's motion to dismiss the case, marks a pivotal development in the ongoing legal battle.

The lawsuit, filed in June 2023 by Mark Schobinger, a former senior director of compensation at X, accuses the company of failing to distribute annual bonuses following its acquisition by billionaire Elon Musk in October 2022. Despite assurances from X's executives pre-and post-deal, the promised bonuses allegedly remained unpaid, leading to legal action on behalf of employees.

The case, initiated in a San Francisco federal court, seeks class action status for both past and present X employees who did not receive their 2022 bonuses. A US District Judge, Vince Chhabria, deemed Schobinger's claims against X plausible, allowing the lawsuit to proceed.


In a crucial ruling last week, Judge Chhabria emphasized, "Twitter's offer to pay him a bonus in return became a binding contract under California law." Despite X's attempt to dismiss the case, arguing against the binding nature of an oral promise and advocating for a Texas trial, the judge upheld California's jurisdiction concerning the enforceability of contracts.

X, having done away with its public relations team, remained unresponsive to CNN's request for comment on the matter, further intensifying the legal complexities. The company's motion to dismiss the lawsuit was grounded on the premise that oral promises should not be legally binding, a contention refuted by the judge's reliance on California law.

The legal complaint in June highlighted employees' concerns regarding the fate of their compensation and annual bonuses post-Musk's acquisition announcement. Leading up to the finalization of Musk's acquisition, X's executives reportedly assured employees that 2022 bonuses would be disbursed at 50% of the target. However, the alleged failure to fulfill these promises post-acquisition prompted Schobinger to depart from the company in May, citing X's failure to honor commitments made to its employees.

The case now progresses, accentuating the intricate legal debate surrounding the enforceability of verbal commitments within the jurisdiction of California law. As X, formerly Twitter, navigates this legal battle, the outcome holds implications not only for the company but also for the realm of contractual obligations and employee rights in corporate acquisitions.