X faces legal setback as Judge rules violation of employee bonus contracts

A federal judge ruled on Friday that Twitter, now rebranded as X Corp, violated contracts by failing to fulfil promised bonuses amounting to millions of dollars for its employees. The ruling comes in response to a lawsuit filed by Mark Schobinger, Twitter's former Senior Director of Compensation, who departed Elon Musk's company in May and subsequently sued Twitter in June for breach of contract.

Schobinger's legal action contended that, both before and after Elon Musk's acquisition of Twitter last year, the company assured employees of receiving 50% of their 2022 target bonuses but failed to make these payments.

US District Judge Vince Chhabria, in denying Twitter's motion to dismiss the case, determined that Schobinger had presented a plausible breach of contract claim under California law and was covered by a bonus plan. The judge stated, "Once Schobinger did what Twitter asked, Twitter's offer to pay him a bonus in return became a binding contract under California law. And by allegedly refusing to pay Schobinger his promised bonus, Twitter violated that contract."

Despite the legal setback X Corp has not issued a response to the ruling and the company no longer maintains a media relations office.

Twitter's legal defence asserted that the company made only an oral promise, not constituting a contract, and argued for Texas law to govern the case. However, the judge ruled that California law applied, stating that "Twitter's contrary arguments all fail."

This ruling adds to a series of legal challenges X Corp has faced since Elon Musk's acquisition, including lawsuits from former employees and executives. These legal actions encompass allegations of discrimination against older employees, women, and workers with disabilities, as well as claims of inadequate notice for mass layoffs. X Corp has consistently denied any wrongdoing in response to these legal claims.

(With Reuters inputs)