A California appellate court delivered a victory to plaintiffs seeking injunctions to stop discriminatory employer conduct this week in Bryan Schwartz Law, P.C. and the California Civil Rights Law Group’s long-running class action against Tesla. One of defendant Tesla’s endless delay tactics has resulted in an important new precedent, barring employers from trying to eliminate workers’ rights through arbitration agreements.
The new Court of Appeal decision arose after Tesla appealed a commonsense trial court decision, in an effort to stall a class action brought originally in 2017 on behalf of Black employees suffering racial discrimination and harassment at the company’s Fremont plant. The trial court held that employees who signed an arbitration agreement when they were hired by Tesla had not agreed to arbitrate claims against Tesla that arose before Tesla hired them, when they worked at the Tesla factory through staffing agencies. Following argument on behalf of the workers by Michael Rubin of Altshuler Berzon, the appellate court rejected Tesla’s appeal, and affirmed the trial court, explaining for the first time in a published California decision that employees have a right under the Fair Employment and Housing Act (FEHA) to seek public injunctions, and that this substantive right cannot be waived in an arbitration agreement.
The case, Vaughn v. Tesla, Inc. started because Black workers at Tesla’s Fremont factory experienced severe, pervasive harassment based on their race. Strikingly, among other abuses, these workers’ co-workers and supervisors regularly call them the N-word, “boy,” “monkey,” and other overt racial slurs, and the workers see racist graffiti throughout the factory, including Nazi swastikas, lynching nooses, and other horrific images. Marcus Vaughn, one such Black worker, filed a class action in Alameda County Superior Court on behalf of himself and other Black workers at the plant. Tesla first tried to compel Vaughn to arbitration, but the Superior Court and Court of Appeal rejected Tesla’s ploy because he never agreed to arbitrate, and arbitration is a matter of choice, not coercion.
In 2020-2021, Tesla sought to kill Vaughn’s class claims on the basis that, although he never signed an arbitration agreement, some Black workers signed arbitration agreements when they were hired by Tesla, often after working at Tesla’s factory previously as contractors. The court again refused to end the class action, instead ordering Vaughn to file an amended complaint identifying different subclasses, and he did so, adding Plaintiffs Monica Chatman and Evie Hall, also Black workers in Fremont. Chatman and Hall worked for Tesla as staffing agency hires before Tesla hired them directly for their “first day of employment…August 2, 2017,” according to their employment agreements. Those agreements also stated that any claims or disputes “arising from or relating to your employment” are subject to mandatory arbitration.
Tesla moved to force Chatman and Hall’s claims into arbitration, arguing that their agreement to arbitrate claims applied to the earlier time when they worked at the Fremont plant through staffing agencies – saying that this earlier time “related to” the time after they signed the agreement. The trial court disagreed, and the appellate court affirmed. Before August 2, 2017, Tesla was Chatman and Hall’s “employer” for FEHA purposes even when they worked for staffing agencies: FEHA barred Tesla from racially discriminating against, or harassing, the workers at its Fremont plant whether Tesla hired them directly or employed them through staffing agencies. But they became direct Tesla employees only when Tesla hired them, and the arbitration agreement expressly applies only to disputes relating to or arising during that time. Therefore, Chatman and Hall’s discrimination and harassment claims from before August 2, 2017, can proceed in the class action.
The Superior Court also agreed with Plaintiffs that their claim seeking a public injunction under FEHA against Tesla’s racist policies, practices, and procedures could not be stripped by an arbitration agreement. The employment agreement Chatman and Hall signed provides that in arbitration, the arbitrator cannot “award relief to a group or class of employees in one arbitration proceeding.” Plaintiffs said that this would improperly bar them from seeking a FEHA public injunction anywhere, so the provision is invalid, and they can pursue this claim in court.
Tesla appealed, saying both that FEHA does not allow public injunctions, and that the recent U.S. Supreme Court decision in Viking River Cruises means that FEHA is preempted under the Federal Arbitration Act (FAA) if it allows public injunctions despite an arbitration agreement prohibiting them. Then, at oral argument, Tesla argued that Chatman and Hall could be forced to arbitrate their claims for a public injunction, though the provision purported to prevent them from seeking a public injunction in any forum.
The Court of Appeal’s decision has important implications for plaintiffs trying to stop workplace discrimination: namely, after this decision, it is clear that FEHA permits workers to seek injunctive relief for the benefit of the public at large, against an employer who has discriminated against them. Moreover, employers cannot force employees to waive their right under FEHA to seek a public injunction. Finally, the FAA does not preempt California law on the question of whether employers can force employees to give up their right to seek a public injunction.
In considering whether FEHA permits plaintiffs to seek a public injunctions against Tesla, the court examined whether a public injunction under FEHA would benefit the general public, and whether FEHA’s purpose in prohibiting racial discrimination and harassment inures to the benefit of the public at large. The answer to both questions is yes. The court also addressed whether the arbitration agreement here purported to bar Chatman and Hall from seeking a public injunction, a provision which would be invalid under California law. Tesla argued, among other things, that because only an aggrieved person has standing to bring a FEHA suit, and Chatman and Hall’s claims could not have been brought by a member of the general public, that the claims here were not truly public injunctions. The court rejected this argument, and found that Chatman and Hall hold a non-waivable right to seek a public injunction in court.
In reaching its conclusion, the appellate court considered prior court cases that examined the sex discrimination and sexual harassment provisions of FEHA, and, quoting Rojo v. Kliger (1990) 52 Cal.3d 65, 90 observed that “[n]o extensive discussion is needed to establish the fundamental public interest in a workplace free from the pernicious influence of sexism. So long as it exists, we are all demeaned.” The court readily found that this logic applied to FEHA’s proscriptions against racial discrimination and harassment, observing that “[a]n injunction against further employment discrimination by Defendant [Tesla] would inure to the benefit of not only current Tesla employees, but to the benefit of their families and their communities, as well as to the benefit of future Tesla applicants and employees.” Therefore, the court concluded, FEHA provides relief in the form of public injunctions against employers such as Tesla, and Chatman and Hall may proceed on their pre- and post-employment agreement claims for public injunction in court.
Finally, the court addressed Tesla’s argument that the FAA preempts California law on public injunctions, requiring arbitration under Chatman and Hall’s agreement. Whether an arbitration agreement is enforceable is a question of state contract law. Tesla’s arguments failed because California contract law provides that parties cannot write a contract that contravenes a law that exists for the public good, under Civil Code section 3513. The FAA does not require courts to enforce a provision that violates generally applicable state contract law, and does not preempt California law on public injunctions.
Employers regularly attempt to force their employees into arbitration, which is bad for employees and the public. Arbitration offers comparatively poor results for employees, as opposed to public court; the use of mandatory arbitration agreements is rampant in situations where the parties have unequal bargaining power, such as low-wage workplaces; and such agreements have a disproportionate impact on people of color and women. Arbitration also allows employers to hide their misdeeds, a particularly pernicious practice in a case like this, where Tesla’s nationwide brand rests on marketing that focuses on the future. The public, who may reconsider investment or purchase of Tesla cars, should know what happens at Tesla factories and consider whether Tesla’s conduct comports with a desirable future. More generally, mandatory arbitration harms the public because jurors and citizens are prevented from making decisions based on evidence. For further discussion of how mandatory arbitration agreements hurt employees, consumers, and the public, see the Bryan Schwartz Law, P.C. blog posts here, here, here, here, here, here, here, and here.
This decision expressly reaffirms that workers can fight for the public good under FEHA when an employer discriminates against and harasses its workers, like Tesla does. The public suffers when employer discrimination and harassment go unchecked. California law ensures that workers can seek the public good through injunctive relief, even if other types of claims are subject to mandatory individual arbitration.
If you’re a worker facing discrimination in the workplace, or if you have questions about an arbitration agreement, please contact Bryan Schwartz Law, P.C.
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