Golden Handshakes at Last: X Corp Settles the Twitter Fallout

Image Source: Business Standard

In a dramatic turn of events that could bring closure to one of the longest-running legal sagas in tech history, Elon Musk’s X Corp—formerly Twitter—has reached a tentative settlement with thousands of former employees over unpaid severance. The lawsuit, originally filed in California, alleged that Musk’s mass layoffs following his 2022 acquisition of Twitter violated the company’s own severance policies, leaving thousands of workers without the compensation they were promised.

While the financial terms of the settlement remain undisclosed, the agreement marks a significant moment in Musk’s turbulent stewardship of the platform. Attorneys for both sides have asked the US Court of Appeals to postpone a scheduled September 17 hearing to finalize the deal.

Key highlights from the court filings and legal commentary reveal the scope, stakes, and implications of this landmark settlement.

1. Background: The layoffs that sparked a legal firestorm

- Elon Musk acquired Twitter in late 2022 for $44 billion and immediately initiated sweeping layoffs
- Approximately 6,000 employees were let go, including entire teams focused on trust and safety, accessibility, and human rights
- Many of the dismissed workers claimed they were entitled to severance under Twitter’s 2019 plan, which guaranteed two months of base pay and one week of pay for each year of service
- Senior staff were eligible for up to six months of pay, but most received only one month—or nothing at all

2. The lawsuit and its lead plaintiffs

- The class action was led by Courtney McMillian, former head of total rewards at Twitter, and Ronald Cooper, an operations manager
- Filed in California, the lawsuit sought $500 million in unpaid severance for thousands of affected employees
- Plaintiffs argued that Musk’s X Corp failed to honor legally binding severance agreements, violating both contract and labor laws
- In July 2024, a federal judge dismissed the case, prompting an appeal to the Ninth Circuit Court

3. The settlement in motion

- On August 20, 2025, attorneys for both sides informed the court that they had reached a settlement in principle
- A formal request was made to delay the September 17 hearing to allow time for finalizing the agreement
- The San Francisco federal appeals court granted the postponement, signaling judicial support for resolution outside of trial
- The settlement, once finalized, could compensate thousands of former employees and end a nearly three-year legal battle

4. Broader implications for Musk and X Corp

- The severance lawsuit is one of several legal challenges Musk faces over his handling of Twitter’s workforce
- Other cases, including one filed by former CEO Parag Agrawal and top executives, remain active in courts across California and Delaware
- Musk’s aggressive cost-cutting measures have drawn criticism for undermining employee rights and corporate governance norms
- The settlement may help X Corp avoid further reputational damage and legal exposure as it continues to rebrand and restructure

5. Echoes beyond Silicon Valley

- Musk’s mass layoff strategy has reportedly influenced federal workforce downsizing under the Trump administration’s Department of Government Efficiency
- A controversial email titled Fork in the Road, offering deferred resignation to federal workers, mirrored Musk’s 2022 message to Twitter staff
- Legal experts suggest the Twitter case could serve as a precedent for future disputes over severance and mass terminations in tech and government sectors

6. What’s next

- Final terms of the settlement are expected to be filed in the coming weeks
- If approved, the deal could bring long-awaited relief to thousands of workers who were abruptly dismissed
- X Corp may use the resolution to pivot toward stability and innovation, distancing itself from the chaos of its acquisition era

As Musk’s X Corp inches toward closure on this $500 million dispute, the tech world watches closely. The case is a reminder that even in the age of disruption, accountability still matters—and that severance is more than just a line item, it’s a promise.

Sources: Reuters, The Hindu, The Hans India, MSN News, Indian Express