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 Shannon Liss-Riordan, a lawyer for the former employees who filed the lawsuit, did not immediately respond to requests for comment. Liss-Riordan has said that X has refused to pay arbitration fees in hundreds of cases.
Musk fired approximately 6,000 employees after his 2022 acquisition of Twitter, which he rebranded X. Many employees sued over their terminations, and X last month agreed to pay an undisclosed sum to settle a lawsuit in California by ex-workers who said they were owed $500 million in severance pay.
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.
