Tentative Settlement Reached in Laid-off Twitter Employees' Severance Lawsuit Against Musk

Former Twitter employees told a federal court in Northern California on October 9 that they had reached a tentative settlement with X Corp., X Holdings Corp., xAI Holdings Corp., and Elon Musk in a lawsuit seeking unpaid severance pay.

The tentative settlement followed a private mediation held on September 28. The lawsuit was filed in November 2025 under the federal ERISA law governing employee benefit plans, alleging that Twitter had operated a formal severance plan since 2019, and that approximately 3,700 employees were laid off on November 4, 2022, following Musk's acquisition of the company.

The plaintiffs in the complaint are demanding that the plan be funded and that benefits estimated at no less than $500 million be paid, holding Musk personally liable as a plan fiduciary. The defendants had filed a motion to dismiss the amended complaint in March 2026, which remained pending before the settlement was reported.

The settlement amount was not disclosed, no class has been certified yet, and there are currently no claims to be submitted. Both parties asked the court to stay all remaining deadlines and hearings and to grant the plaintiffs until January 15, 2027, to file a motion for preliminary approval of the settlement, to be followed by a final approval hearing before any funds are disbursed.

What Do These Terms Mean?

Preliminary Settlement: An initial agreement between the parties to a dispute that is reported to the court before drafting the final agreement and obtaining court approval.

ERISA Law: A US federal law that governs standards for employee benefit plans, such as severance, and allows participants to sue plan fiduciaries.

Preliminary Approval: A judicial step that allows potential class members to be notified of the settlement and begins the claim or objection process prior to final approval.