Court Denies Tesla’s Efforts to Force Worker into Arbitration 

Court Denies Tesla’s Efforts to Force Worker into Arbitration 

Workers won an important victory when Alameda Superior Court Judge Stephen Kaus denied Tesla’s motion to compel arbitration in a sexual harassment case brought by Tesla worker, Jessica Barraza. “Basically, she was ambushed,” Judge Stephen Kaus wrote in the decision issued on May 23, 2022. 

In her court complaint, Barraza described the Tesla factory where she worked as a workplace rife with sexual harassment, citing incidents so unbearable that the conditions led some of her coworkers to quit.  After facing constant harassment in the workplace, Barraza suffered from post-traumatic stress disorder and took medical leave. While on leave, she bravely sued Tesla with the help of her attorneys, Rudy Exelrod Zieff & Lowe. Tesla responded with a motion to compel arbitration in hopes that its employment agreement could be used to bury Barraza’s complaint in secret, private arbitration.

Prior to signing the agreement, Barraza had already quit her previous job, after accepting Tesla’s employment offer. She received the employment agreement only subsequent to receiving an email from a Tesla supervisor stating that Barraza had completed “all employment steps,” and asked when she could start work. Upon clicking through the employee agreement, Barraza was not aware that the arbitration provision would effectively waive her right to sue in court, and a right to a jury trial. Barraza was also not aware that she would soon face what she would describe as “nightmarish conditions” at the Fremont Tesla Factory.

It is no secret that arbitration cases rarely favor workers. A recent study revealed that only 1.6% of employees won in arbitration cases against employers in 2021. Mandatory arbitration is most common in low-wage workplaces that disproportionately consist of workers who are people of color and women, leaving marginalized communities at a further disadvantage in the workplace. Arbitration agreements are typically enforceable, but Barraza now has a shot at justice after successfully defeating Tesla’s motion to compel.

California’s Supreme Court has directed courts to be especially conscious of oppression and overreaching in employment cases. Generally, courts may find that a contract or clause in an agreement is unconscionable if it contains both procedural and substantive unconscionability. 

Procedural unconscionability is characterized by an absence of choice on behalf of the signatory.  The Barraza decision drew upon the five circumstances relevant to oppression in  Oto, L.L.C v. Kho to prove procedural unconscionability: (1) the amount of time given to consider the contract; (2) the amount and type of pressure on the party to sign the contract; (3) the length and complexity of the proposed contract; (4) the education and experience of the party; and (5) whether the party’s review of the contract was aided by an attorney. Barraza argued that she met procedural unconscionability because she was already hired and, relying on the Tesla job offer and her acceptance, she had quit her prior job before being asked to sign the agreement, such that the pressure on her was very high to sign the agreement as presented. Barraza, who was unrepresented at the time, clicked through the employment agreement with the arbitration clause, and showed that her high school education and lack of experience with arbitration did not prepare her to understand the terms of the complex agreement. The court found procedural unconscionability, explaining, “Tesla either orchestrated this sequence of events on purpose or was unacceptably indifferent to the situation in which this placed Barraza.”

Substantive unconscionability refers to terms of the agreement that are so obviously one-sided so as to shock the conscience of the court. The court found three items that proved substantive unconscionability in Barraza’s agreement: lack of mutuality, a requirement of confidentiality, and the ban on representative actions. The agreement allowed Tesla to sue in court over violations of laws designed to protect the corporation, for example, regarding its intellectual property, even while it would have required Barraza to arbitrate her employment claims. Meanwhile, the confidentiality clause in the agreement would seemingly shroud Barraza’s sexual harassment allegations in secrecy, even while allowing Tesla to access previous arbitration material unavailable her, thus making the confidentiality clause unfair to Barraza. Furthermore, as to the ban on representative actions, under the California Private Attorneys General Act (PAGA), Barraza possessed unwaivable rights to prosecute on behalf of the State on behalf of aggrieved workers, despite the Tesla agreement seemingly prohibiting her from doing so.

This is not the first time Tesla has attempted to use its arbitration agreements to bury public policy-driven litigation. Bryan Schwartz Law, P.C. and co-counsel have been fighting since 2017 against pervasive, despicable racism at Tesla’s Fremont factory, in a racial harassment and discrimination lawsuit involving thousands of Tesla workers. The Superior Court and Court of Appeal denied Tesla’s motion to compel arbitration in the case previously, but Tesla has tied up the case in repeated appeals over its arbitration clause, trying to stall litigation of these serious claims on their merits.

The Barraza court decision to deny Tesla’s motion to compel arbitration could provide a roadmap for challenges to unfair arbitration. If you have California employment law claims and your employer is trying to force you into arbitration unfairly, contact Bryan Schwartz Law, P.C.