Elon Musk’s social-media company X, formerly known as Twitter, has agreed to a tentative settlement in a high-stakes class-action lawsuit brought by ex-employees seeking $500 million in unpaid severance. The deal, disclosed in a court filing this week, marks a significant turn in a legal saga that began shortly after Musk’s $44 billion acquisition of the platform in October 2022. According to details from ABC News, the agreement aims to resolve claims from thousands of workers fired in the chaotic aftermath of the takeover, who alleged they were denied promised payouts.

The lawsuit, filed in July 2023 by former Twitter employees Courtney McMillian and Ronald Cooper, accused Musk and X of breaching severance agreements under the federal Employee Retirement Income Security Act (ERISA). Plaintiffs claimed that after Musk’s purchase, the company abruptly terminated about 6,000 staffers—roughly 80% of the workforce—without honoring commitments to provide at least two months’ pay plus benefits. This mass layoff, which eliminated teams focused on trust and safety, human rights, and accessibility, drew widespread criticism and multiple legal challenges.

The Path to Settlement and Legal Twists

Initially, a federal judge in San Francisco dismissed the case in July 2024, ruling that the severance plan wasn’t governed by ERISA, as reported by Reuters. However, the plaintiffs appealed to the Ninth Circuit, setting up a hearing for September 17, 2025. The tentative settlement, announced just weeks before that date, prompted both sides to request a postponement, which the appeals court granted on Thursday. While specific terms remain undisclosed, sources indicate the deal could distribute funds to around 6,000 affected workers, per coverage in the San Francisco Chronicle.

This resolution avoids a potentially protracted appeals process that could have exposed more details about X’s internal operations under Musk. Industry observers note that the settlement reflects broader pressures on tech giants to manage layoff fallout amid economic uncertainty, though X’s case stands out due to the sheer scale and speed of the cuts.

Implications for Corporate Governance

For Musk, who has rebranded Twitter as X and integrated it into his portfolio alongside Tesla and SpaceX, the payout represents a costly but strategic concession. Posts on X itself, including those from users tracking the case, highlight mixed sentiments: some celebrate it as justice for laid-off workers, while others decry it as another financial hit to the platform’s viability. One recent post echoed frustrations, noting the irony of Musk’s wealth funding settlements while X struggles with advertiser exodus.

The lawsuit’s origins trace back to Twitter’s pre-Musk era, where executives had assured employees of generous severance in the event of a change in control. Musk’s team, however, offered minimal packages—often just one month’s pay—leading to allegations of bad faith. As detailed in Fortune, which first reported on the settlement’s latest developments, the agreement underscores how ERISA claims can pressure even the most aggressive corporate restructurings.

Broader Industry Repercussions

Beyond X, this case signals risks for other companies pursuing rapid downsizing. Tech firms like Meta and Amazon have faced similar scrutiny over layoff practices, but X’s high-profile nature amplifies the lessons. Legal experts suggest that clear communication and adherence to benefit plans are crucial to avoid multimillion-dollar liabilities.

If finalized, the settlement could provide closure for former employees, many of whom have moved on to new roles but carried the grievance for years. For X, it clears a legal hurdle as Musk pivots toward AI and payments integration, though ongoing lawsuits over discrimination and executive pay indicate that litigation remains a persistent challenge.

Looking Ahead: Finalization and Fallout

The parties are expected to formalize the agreement in the coming weeks, with a federal judge’s approval required for the class-action payout. Analysts estimate the $500 million figure aligns closely with the original claims, potentially straining X’s finances amid reported revenue declines since the rebranding.

Ultimately, this episode illustrates the human cost of disruptive leadership in tech. As one insider told The Independent, the settlement not only compensates workers but also serves as a cautionary tale for future acquisitions, emphasizing the enduring power of employee protections in an era of billionaire-led transformations.