CEO Parag Agrawal and other top executives may press ahead with their claims, saying Musk fired them just as the deal was closing.

Elon Musk has faced a significant legal setback in his efforts to avoid severance payments to former Twitter executives who were terminated during a 2022 takeover of the company. On Friday, a judge ruled that former CEO Parag Agrawal and other Twitter executives top can press ahead with their claims, saying Musk fired them as the deal was closing to avoid paying agreed-upon severance packages.

In a lawsuit filed in March, the executives alleged that Musk deliberately terminated them before they could formally resign, thereby denying them the compensation they were entitled to. The lawsuit references a statement Musk made to biographer Walter Isaacson in which he expressed his urgency to close the deal to avoid a “$200 million gap in the cookie jar” between closing the deal that evening and the next morning.

Joining Agrawal in the legal battle are former legal chief Vijaya Gadde, former CFO Ned Segal and former general counsel Sean Edgett. All four executives claim they are owed a year’s salary, along with unvested shares valued at the purchase price.

This isn’t Musk’s first run-in with legal issues surrounding workers’ compensation. After acquiring Twitter, now rebranded as X Corp., Musk laid off thousands of employees as part of a major restructuring initiative. Many of those affected have filed claims for unpaid compensation, claiming that Musk did not honor the terms of the promised compensation.

In July, Musk and X Corp. won a class-action lawsuit brought by laid-off employees seeking $500 million in severance pay under the Employee Retirement Income Security Act. However, in September a former employee was awarded unpaid severance pay in a private arbitration hearing, which could set a precedent for similar cases in the future.

U.S. District Judge Maxine Chesney, who is overseeing the executives’ case, also rejected Musk’s request to dismiss a similar claim filed by Nicholas Caldwell, a former “core technology” CEO seeking compensation of 20 millions of dollars in lost compensation.

As these legal challenges unfold, Musk continues to face scrutiny of his management practices and treatment of former employees, highlighting the complexities of corporate governance during periods of significant transition.

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