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Tesla fails to push racial discrimination lawsuit into arbitration

Plaintiff was offered direct employment with an arbitration agreement, but never signed the letter

Tesla's attempt to force a racial discrimination lawsuit into arbitration has failed potentially clearing the way for a class-action lawsuit brought by Black workers from the EV maker's Fremont, California, factory. 

A California state appeals court said [PDF] yesterday that an arbitration clause in employment letters that workers Monica Chatman and Evie Hall signed in August 2017 did not cover anything that occurred before those letters were signed. Lead plaintiff Marcus Vaughn Vaughn never signed the offer letter Tesla sent him that contained the arbitration agreement, the panel noted in the order.

At issue was Tesla's assertion that workers hired through staffing companies (who aren't bound by Tesla's mandatory arbitration contract clause) later hired on as permanent employees still needed to take their complaints into arbitration. 

The lawsuit [PDF] being challenged was filed in 2017 and accused Tesla of fostering a racially hostile work environment and alleging discrimination targeted at Black workers from their coworkers and managers. 

In 2021, Alameda County Superior Court decided in the case that Tesla had no right to force arbitration for incidents that happened before the temp workers hired on permanently, and the decision handed down by a California's First Appellate District panel this week reaffirmed the lower court's decision.

With that out of the way, the plaintiffs attorney Bryan Schwartz told Courthouse News, a class action can proceed along with a request for public injunction under California's Fair Employment and Housing Act (FEHA).

"This case has been pending for more than five years, and they stalled the majority of that time by making frivolous arguments about arbitration agreements instead of confronting head on that racial epithets are widely heard throughout the Fremont factory."

Not Tesla's first race bias case

This lawsuit isn't the first time an Elon Musk-owned company has been accused of discrimination in its facilities. 

One well-recorded incident from 2017 saw Tesla employee DeWitt Lambert bring a case claiming he was called racist epithets, threatened with physical harm, had coworkers press a drill gun into his buttocks and that leadership did nothing to address the issue after his complaints.

Lambert ultimately lost his attempt to have his case heard at trial because of the aforementioned arbitration clause. According to Bloomberg Law, Lambert lost in arbitration because "had used a variation of the n-word himself with Black friends." 

While Lambert lost, his lawyer Larry Organ didn't abandon his representation of Tesla employees. Bloomberg Law reports that he's one of the lawyers representing plaintiffs in this latest suit, which should have Tesla concerned: He won a previous jury trial that awarded a Tesla employee $15 million (reduced from $137m) that ended up being heard under similar circumstances.

Owen Diaz, the plaintiff in the $15 million case, was also a contract employee at Tesla, and Organ argued the case into a San Francisco federal court on the basis of the absence of an arbitration agreement and claiming that Tesla was a joint employer with the agency Diaz was contracted through.

Tesla argued in that case that Diaz wasn't its employee, and that he made written complaints about non-Tesla supervisors that stopped "after he was not hired full-time by Tesla – and after he hired an attorney." Tesla also argued, as it did in the Lambert case, that racist language was actually being used in a friendly manner "and usually by African-American colleagues."

While the outcome of this case is undecided, Organ has scored that $15 million win as well as another $1 million arbitration victory against Tesla in a discrimination case.

"We can now start to litigate the real issues at stake in this case, which are whether this mega corporation can permit rampant racial harassment unchecked at its factory … It's time for Tesla to face the music," said Schwartz. ®

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