Former X Corp. Employees Lose Bid to Compel Arbitration, for Now

Former employees of Twitter Inc., who are pursuing a class action alleging the company refuses to arbitrate claims that it engaged in a variety of unlawful acts, jumped the gun by seeking to compel arbitration before class certification, a federal trial court ruled.

The company, now known as X Corp., is facing multiple suits alleging labor and workplace violations, including its failure to pay thousands of workers laid off last year after owner Elon Musk acquired the company.

More than 2,000 former employees of X have tried to pursue arbitration claims against the company after it successfully moved to compel arbitration in several federal class action cases in court against it, according to the class petition to compel arbitration. The company, however, “has used multiple excuses not to participate in arbitration with the majority of employees who have brought claims against it,” the employees said in the petition.

Granting summary judgment on the merits of a class action is generally not appropriate until the class has been certified and notified, Judge Jon S. Tigar of the US District Court for the Northern District of California said, citing Ninth Circuit precedent.

The employees “seek only orders compelling arbitration,” Tigar said. “Thus, their motion is dispositive because it will resolve the merits of this case,” he said.

If the court were to grant the motion prior to certification, other plaintiffs “would remain free to re-litigate ostensibly decided questions,” Tigar said, citing a 2011 ruling by the Northern District of California.

The court also denied the employees’ motion for a preliminary injunction as to the named petitioners, finding they failed to show they would otherwise suffer irreparable harm.

"[I]t is unclear what resources Petitioners contend they will be forced to expend absent preliminary injunctive relief, let alone why expenditure of those resources would be irreparable,” Tigar said.

Tigar said he would be “amenable to hearing” the motion for class certification on the same date as a motion to compel arbitration.

The employees allege in their petition to compel arbitration that X engaged in “a variety of unlawful acts, including failing to pay laid-off employees promised severance payments, discriminating against employees on the basis of sex, race, age, and disability, failing to pay promised bonuses, violating the [Worker Adjustment and Retraining Notification Act] and [Family and Medical Leave Act], and other legal violations.”

The class petition alleges the company has refused to pay full arbitration fees except for cases filed by employees who worked in certain states and has refused to move forward with claims before Judicial Arbitration and Mediation Services “for employees in many states where JAMS does not have an office and/or arbitrators who are licensed to practice in the state.”

The suit seeks an order requiring X to arbitrate “the claims of Petitioners and those similarly situated, pursuant to the rules of the arbitration providers it agreed to, JAMS” and the American Arbitration Association, including “paying the arbitration fees and costs JAMS and AAA have determined are necessary to empanel arbitrators and allow the arbitrations to proceed.”

The employees also seek an order that the company “cooperate with Petitioners and those similarly situated in order to allow their arbitrations to proceed, including allowing arbitrators to be appointed even in states where JAMS does not have an office or arbitrators and producing arbitration agreements for employees who do not have a copy of their signed arbitration agreement.”

Musk fired about half of Twitter’s 7,500 workers in November, following his $44 billion purchase of the company. Layoffs continued into 2023, reportedly bringing the company’s headcount under 2,000.

Musk this month announced that his company, Tesla Inc., would slash its global headcount by more than 10%, as the carmaker struggles with slowing demand for electric vehicles. He issued a statement last week saying some of the severance packages sent to former Tesla employees were too low.

Musk and other Tesla leaders this month won the dismissal of a lawsuit brought by Tesla investors alleging they fostered a toxic workplace culture.

Lichten & Liss-Riordan PC represents the petitioners. Morgan, Lewis & Bockius LLP represents X.

The case is Ma v. Twitter Inc., N.D. Cal., No. 23-cv-03301, 4/22/24.