X will go to court after failing to pay staff millions in annual bonuses
businessinsider.com
businessinsider.com
It seems like a gap in the law/regulation if a former owner (in this case, the pre-Elon Twitter management) can make verbal pronouncements that the new owner is beholden to, without a paper trail. With that said, the complaint does state that promises were made post-acquisition, although this is only mentioned once.
It seems even more puzzling to enforce this on non-profitable private companies. The precedent that would be set here would severely undermine the ability of a private company to operate if it came in far under revenue targets, and was beholden to pay out bonuses to employees.
It's EVEN more puzzling that Twitter, a Delaware corp owned by X, a Nevada corp, is being sued by an employee based in Texas, under California law.
Ownership doesn't change contracts. Verbal agreements are also agreements, just harder to prove.
What matters is who had the power to make such agreements at the time. Management made a contract on behalf of Twitter at the time. Promises after firing management would have little meaning.
> It seems even more puzzling to enforce this on non-profitable private companies. The precedent that would be set here would severely undermine the ability of a private company to operate if it came in far under revenue targets, and was beholden to pay out bonuses to employees.
All depends on the conditions for the bonus. A promise is a promise. If you buy a car, but then have a large medical bill and can't pay for it, you'll still need to pay for the car.
> It's EVEN more puzzling that Twitter, a Delaware corp owned by X, a Nevada corp, is being sued by an employee based in Texas, under California law.
Why is that puzzling? Twitter has its HQ in California.
You ask: "Hey manager, will we get a bonus this year?" The manager smiles at you and says nothing. Can you sue the company if you don't get the bonus?
You should tell businessinsider and the lawyers too.
I.e. if an exec promises me a bonus, I'm presuming that it's not a personal promise they're paying out of their own funds. They're making a promise on behalf of the company to pay me with company funds.
That it's not in writing is odd, but I'm guessing both sides of the conversation are willing to testify.
> It seems even more puzzling to enforce this on non-profitable private companies. The precedent that would be set here would severely undermine the ability of a private company to operate if it came in far under revenue targets, and was beholden to pay out bonuses to employees.
Then they shouldn't have made that promise. In reality, it was going to cost them either way though. They either promise a minimum bonus and pay that, or more engineers quit and they spend the money replacing those engineers.
It's also worth noting that at the time the promise was made, Twitter would have still been profitable after paying the bonuses. Musk failing to maintain that profitability does not free him from contractual obligations to employees anymore than it frees him from contractual obligations to other companies.
They were promised that someone else would reward them. That someone else disagrees. That looks like a problem coming from the first employer.
Assuming this is all true, of course.
It is the current managements "fault". They bought the company, all it's assets, all it's liabilities. They don't get to conveniently decide they get the company, but none of it's debts.
> They were promised that someone else would reward them.
They were promised Twitter would reward them, by people with the authority to make binding promises on behalf of Twitter.
> That looks like a problem coming from the first employer.
There is no first/second employer here. They were employed by Twitter before the acquisition, they were still employed by Twitter afterwards.
Of course it is! Elon bought Twitter and all that came with it, including all the contracts set up by the previous management.
You could have an argument that if Twitter intentionally nuked their entire company between signing the deal and the acquisition date, the old management probably committed some kind of fraud, but that's not the case here; these bonuses seem pretty reasonable for a company like Twitter before Elon took over, to ensure the transition goes well.
It's the same employer, just the ownership that changed hands.
See the issue?
Here’s another way of framing this point: when selling a company, which liabilities do you feel should follow through to new ownership and which shouldn’t? Tax obligations? Real estate mortgages? Employee compensation?
Selling a company shouldn’t be a one-way risk valve. You punch the ticket, you take the ride.
The guy who is spearheading the case worked there during the time the promise was made and then for sometime after. So he either didn't mention it to the new owners on purpose (unlikely), or more likely, he has evidence the deal was acknowledged or at least known about by new management and still was not paid.
The lawsuit was filed in June by Mark Schobinger, the company's former head of compensation, on behalf of himself and thousands of other current and former employees.
He left in May, the promises were made sometime before he left and the case was established in June.
Sounds like the information was available but someone didn't do their due diligence and ask enough about the compensation structure before finalizing the acquisition ?
Now, if, during the course of the sale, the management didn't communicate to the new owners what promises had been made, maybe the company could sue the old management, but the company is still liable for its contracts.
I'm prob just out of touch, tbh.
I just wonder how/if twitter will exit at this point.
Sounds like threads is catching up to twitter.
That's a very hard thing to do given that social media naturally evolve into monopolies. A whole lot of alternatives (Bluesky, Threads, Mastodon) but none as good, since they simply don't have the userbase. Chances are they will keep not having it.
Neither the article, nor the court document supports that. They both state that it exceeds $5 million. This affects the jurisdiction:
> This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. § 1332(d)(2). Plaintiff and Defendants are citizens of different states, and the matter in controversy for the class exceeds $5 million.
> In a statement shared with Business Insider, the plaintiff's attorney, Shannon Liss-Riordan, said the bonuses owed amounted to "tens of millions of dollars."