Elon Musk's X, accused of withholding bonuses promised to staff, will have to face a court battle

NEW YORK -- A federal judge has ruled that X, formerly Twitter, must face a lawsuit after staff accused the company of failing to pay bonuses promised to them. The judge on Friday denied X's motion to dismiss the case.

X stands accused of failing to pay out annual bonuses to staff after its October 2022 acquisition by billionaire Elon Musk - despite repeated assurances from executives in the lead-up to and following the deal that the company would do so, according to a lawsuit filed in June 2023 on behalf of employees.

The lawsuit was filed in a San Francisco federal court by Mark Schobinger, who was a senior director of compensation at X until he left the company in May. The suit is seeking class action status for former and current X employees who did not receive their 2022 bonus.

A federal judge late last week said Schobinger's case against X was plausible, and he allowed it to go forward.

"Twitter's offer to pay him a bonus in return became a binding contract under California law," US District Judge Vince Chhabria said in a ruling Friday.

X, which has effectively done away with its public relations team, did not respond to CNN's request for comment. The company, in its motion to dismiss, had argued that an oral promise should not be binding and that the case should be heard in Texas. But the judge said in matters questioning whether a contract can be enforced, California law applies.

The June complaint stated that after it was announced that Musk was acquiring the social media company last April, "many employees raised concerns" over the fate of "their compensation and annual bonus" if and when the deal closed.

In the months leading up to Musk completing his acquisition of X, company executives repeatedly promised employees that 2022 bonuses would be paid out at 50% of the target, according to the complaint. "The promise was repeated following Musk's acquisition," the complaint said.

Despite the promises, however, X did not pay out bonuses, the lawsuit says. Schobinger left the company in May following "Twitter's reneging on various promises it had made to employees, including its failure to pay promised bonuses," according to the complaint.

The-CNN-Wire & 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.