SAN FRANCISCO (CN) — Arguing to dismiss a class action by former employees in a hearing on Thursday, X, formerly known as Twitter, argued that promises for bonuses if employees stayed on once Elon Musk took over are not enforceable.
“It’s purely oral, and there was nothing performed,” said Eric Meckley, Twitter’s attorney, about the bonuses in question, during the hearing at the U.S. District Court for the Northern District of California in San Francisco.
Texan Mark Schobinger, senior director of compensation at the social media company from early 2019 until late May 2023, says in a class action filed in June that the company has an annual employee bonus plan that’s paid out in March for their performance in the prior year.
Once Musk took control of the company in October 2022 and renamed it X, to much derision, executives — including the former chief financial officer — repeatedly promised to pay the bonuses out at what’s described in the complaint as “fifty percent of target.” Schobinger says employees took these promises into consideration when deciding whether they wanted to quit their jobs at the company or not, and whether to look for other jobs.
But those bonuses never came, Schobinger said.
"In the months following Musk’s acquisition of Twitter, plaintiff regularly received calls from recruiters and companies regarding other employment opportunities. However, plaintiff turned down these opportunities, secure in the knowledge that Twitter would pay him his promised 2022 annual bonus during the first quarter of 2023," Schobinger writes in the complaint.
Schobinger levies claims of breach of contract and promissory estoppel — a doctrine for handling a promise made by one party to another, where the promised party relied on that promise in a reasonable way — at the social media platform.
Meckley argued that the oral promises made to employees couldn’t, legally, modify the terms of their integrated agreements, a provision that states that the agreement made is final and complete and was discretionary, and that there was no written or signed agreement for bonuses.
“I think I understand your position. You’ve got a written contract which says that whether to give you a bonus is entirely under our discretion,” said U.S. District Judge Vince Chhabria, an Obama appointee. “That if the executives subsequently say ‘hey, you know that plan that you’re a part of, the discretionary bonus plan? We know there’s an acquisition that’s going on now, so we want to make clear that if you stay, if you stick around through the acquisition, you are guaranteed that bonus that is contemplated by the plan.' You are saying that is not a binding contract? The executives are not allowed to do that?”
Meckely responded that, yes, under promissory estoppel, the executives could not do that.
“We didn’t allege, as defendants are trying to read it, that there is this bonus plan, and under this bonus plan Twitter owes its employees this money. That would be a claim for a breach of contract of the bonus plan. Instead what we repeatedly said was a promise was made that we’re going to pay you this amount, and the amount is set forth in the bonus plan,” Shannon Liss-Riordan, Schobinger’s attorney said in response.
In response to a number of cases in both California and Texas that Meckely brought up to bolster X's argument that oral promises made to employees can’t modify the terms of integrated agreements, Liss-Riordan brought up similar, and even the same cases from both states that she said showed that a written contract could be replaced with a new contract by an oral promise.
Since Musk’s acquisition of Twitter, he’s faced a series of legal actions, including fraud claims by the Securities and Exchange Commission, wrongful termination suits from fired former employees, non-payment of Twitter bills, and a lawsuit from company investors claiming Musk manipulated Twitter stock leading up to his $44 billion buyout of the platform.
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