Tesla ordered to pay $137M to ex-worker over racist work culture



A San Francisco federal court ordered Tesla to pay a whopping $137 million to a former contractor who’s black after the Elon Musk-helmed carmaker allowed a racist workplace culture to fester.

The ex-employee, Owen Diaz, a former contractor who was hired through a staffing agency and worked at Tesla’s Fremont plant in 2015 and 2016, faced a racist and hostile work environment, a jury ruled late Monday evening.

Diaz’s lawsuit alleged that employees drew swastikas and left racist graffiti and drawings around the Tesla plant. He also alleged that employees often used the “N-word” and other racist epithets.

“Tesla’s progressive image was a façade papering over its regressive, demeaning treatment of African-American employees,” the lawsuit said.

In court, Diaz testified that he suffered “sleepless nights” and weight loss as he lost his appetite. 

Owen Diaz, a former Tesla contractor
Owen Diaz worked at Tesla’s Fremont plant in 2015 and 2016,

“Some days I would just sit on my stairs and cry,” he told the jury, according to Bloomberg.

The jury awarded Diaz $6.9 million in damages for emotional distress and $130 million in punitive damages, according to his attorney, Lawrence Organ, of the California Civil Rights Law Group.

In court, Tesla’s attorneys argued that it investigated and resolved all incidents reported by Diaz and that it did not intend to disregard the rights and concerns of black workers at the plant.

It’s a rare instance in which Tesla — the world’s most valuable carmaker — has had to publicly defend itself in court against a former worker.

An aerial view of the Tesla Fremont Factory
A jury ruled that Diaz faced a racist and hostile work environment at the Tesla Fremont Factory.
Justin Sullivan/Getty Images

The company has a reputation for using mandatory arbitration to resolve employee disputes behind closed doors.

Private arbitration often lets companies avoid costly damages or commit to major corrective action. Tesla rarely takes a big hit in arbitration, though it did pay a $1 million award in May in a case brought by another ex-contractor that was similar to Diaz’s.

The company has faced pressure from shareholder activists to limit its use of arbitration and be more transparent about diversity and other matters.

One shareholder activist fund, Nia Impact Capital, has voiced concern that the use of mandatory arbitration can enable and hide sexual harassment and racist discrimination.

“The use of mandatory arbitration provisions limits employees’ remedies for wrongdoing, precludes employees from suing in court when discrimination and harassment occur, and can keep underlying facts, misconduct or case outcomes secret and thereby prevent employees from learning about and acting on shared concerns,” the social impact fund said in a recent shareholder proposal.

Proxy advisory firm Institutional Shareholder Services has recommended shareholders vote for Nia’s proposal.

Tesla CEO Elon Musk leaves Manhattan federal court
The carmaker is famously helmed by Elon Musk.
REUTERS/Brendan McDermid/File Photo

Tesla’s vice president of people, Valerie Capers Workman, addressed the ruling in an email to employees Monday evening in which she downplayed the allegations. Tesla later pub lished the email in a blog post after it leaked.

“In addition to Mr. Diaz, three other witnesses (all non-Tesla contract employees) testified at trial that they regularly heard racial slurs (including the n-word) on the Fremont factory floor. While they all agreed that the use of the n-word was not appropriate in the workplace, they also agreed that most of the time they thought the language was used in a ‘friendly’ manner and usually by African-American colleagues,” she wrote.


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