Musk's X Corp wins spat with former employees over arbitration fees

By opting to go through arbitration, the workers forfeited the ability to have federal courts resolve any disputes over fees, the court said.

X Corp cannot be forced to cover the upfront fees of arbitrating a series of legal disputes by former employees who lost their jobs after Elon Musk acquired the social media company, a US appeals court ruled on Tuesday.

Musk fired approximately 6,000 employees after his 2022 acquisition of Twitter, which he rebranded X. (Pool via REUTERS/ File Photo)

A panel of the New York-based 2nd US Circuit Court of Appeals said an arbitration firm must decide if X should pay the fees or the company can split them with the seven former workers who claim X is attempting to derail their cases.

By opting to go through arbitration, the workers forfeited the ability to have federal courts resolve any disputes over fees, the court said.

"It is hard to see how the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation, would be served by a district court’s intervention into such procedural disputes," Circuit Judge Gerard Lynch wrote for the court.

X and lawyers at class action law firm Outten & Golden, who represent the plaintiffs in the lawsuit, did not immediately respond to requests for comment.

An agreement signed by most Twitter employees required them to bring legal disputes with the company to the private arbitration firm JAMS rather than to court.

JAMS rules say that employers who require workers to sign arbitration agreements must cover initial fees of roughly $1,500 before an arbitrator is assigned to a case.

X refused to pay, claiming it did not require arbitration because workers had the chance to opt out of it when they were hired.

Reversing a Manhattan federal judge who had ruled for the workers, the 2nd Circuit on Tuesday said it had no power to resolve the issue because the arbitration agreements reserve procedural disputes for JAMS.