"Tesla Race Bias Case Not Going To Arbitration"
Law360, June 5, 2018

By Braden Campbell

A California state judge has denied Tesla's bid to send to arbitration a proposed class suit alleging it tolerated harassment toward black workers at its Alameda, California, plant, ruling the electric-car maker can't enforce a contract the accuser never signed.

Alameda County Superior Court Judge Robert McGuiness on Friday denied Tesla's motion to make former worker Marcus Vaughn arbitrate his claims under the doctrine of equitable estoppel, which holds that a defendant that hasn't signed an arbitration agreement can make a plaintiff that has signed one arbitrate legal claims that are "intimately … intertwined" with the underlying contract.

Tesla had argued it could make Vaughn abide by an unsigned job offer letter that included an arbitration agreement because his claims were based in their employment relationship, which it argued was in turn based in the letter. But this is not the case, Judge McGuiness said.

"Tesla is correct that [Vaughn] alleges an employment relationship with Tesla ... but that does not mean that [Vaughn] alleges an employment relationship based on the offer letter," the judge said. "The offer letter was apparently intended to supersede some other contractual relationship."

Vaughn, a contract worker who says he was placed at Tesla through a staffing agency, worked there last year from April 23 until Oct. 31, according to the order. Tesla gave Vaughn an offer letter that included an arbitration agreement in mid-October, but he didn't take it, the order said.

Judge McGuiness said Friday that the court "expresses no opinion on the existence, terms, or effect of whatever [contract] governed the relationship between Tesla and" Vaughn during the period he worked there.

Vaughn sued Tesla shortly after leaving the company, alleging its factory is a "hotbed for racist behavior" toward African-Americans that includes the frequent use of racial epithets, and that company leadership, including CEO Elon Musk, ignored repeated complaints. He also claimed he was fired for "not having a positive attitude."

Vaughn's attorney, Bryan Schwartz, told Law360 on Monday the ruling runs counter to the notion that "arbitration is second only to God in its power and might in our civilization," alluding to the recent U.S. Supreme Court ruling affirming the validity of arbitration agreements that include provisions waiving workers' rights to file class action suits.

"Apparently it does have some limits, in that it cannot be absorbed by osmosis, or as an airborne virus," Schwartz said. "You have to agree to it still."

He added it's important the case remains in court so the public can see "this big company that touts itself as in institution of ... progressive ideals" is "tolerating 19th-century bigotry within its walls."

Tesla fired back at Vaughn in a blog post days after he filed his suit, claiming it investigated complaints of race-based harassment and fired three workers. It also claimed Vaughn was not fired but rather not brought back after his temporary work contract ended, and that he emailed Musk about "his commute and Tesla's shuttles," not about discrimination.