X, formerly known as Twitter, has reached a tentative settlement with former employees who sued the company for US$500 million in severance pay.

Both sides asked to postpone a September 17 hearing to finalize the agreement, according to a court filing.

Settlement terms have not been made public.

The proposed class action was brought by ex-employees Courtney McMillan and Ronald Cooper, who alleged the company failed to pay promised severance after mass layoffs following Elon Musk’s 2022 takeover.

Thousands of Twitter staff were let go, including teams focused on trust and safety, human rights, and accessibility.

Other lawsuits from former executives, including ex-CEO Parag Agrawal, are still ongoing.

🔗 Source: The Associated Press

🧠 Food for thought

1️⃣ Mass layoffs without proper severance create expensive long-term legal liabilities

The $500 million settlement highlights how aggressive workforce reductions can backfire financially when companies don’t handle severance properly.

Musk’s approach of laying off 80% of Twitter’s workforce, reducing staff from approximately 8,000 to 1,500 employees, while implementing a cash-only severance plan created a massive legal problem2.

Over 2,000 former Twitter employees filed arbitration cases against the company, demonstrating the scale of potential liability when severance promises aren’t kept3.

Employment law precedents show that wrongful dismissal cases frequently result in substantial awards, with courts regularly awarding 10-20 months of severance for long-term employees, and some cases reaching over $800,000 including punitive damages45.

Companies often offer severance packages specifically to avoid lawsuits, with small and mid-sized businesses facing an average of $125,000 in legal costs to defend against employee lawsuits6.

2️⃣ The “Twitter playbook” is being scaled to reshape government workforce management

Musk’s workforce reduction strategy at Twitter has become a template for federal government restructuring under the Department of Government Efficiency.