Tesla Race Discrimination Case Skipped by Top State Court

Tesla Race Discrimination Case Skipped by Top State Court

Joyce E. Cutler
Staff Correspondent

• California high court refuses to consider appellate ruling
• Second loss this month for Tesla defending race claims

Tesla Inc.’s bid to force two Black workers to arbitrate their discrimination claims was spurned Wednesday by the California Supreme Court.

The court’s seven justices, during their weekly conference, declined without comment the automaker’s request to review an appellate ruling that the workers also can pursue a public injunction against the company under the California Fair Employment and Housing Act.

The California Court of Appeal, First District, in January held the arbitration agreements Monica Chatman and Evie Hall signed when they became direct employees of Tesla, and which obligated them to arbitrate claims arising out of their employment, don’t extend to claims of prior workplace race bias they experienced while working for the company through a staffing agency.

Chatman and Hall seek to represent a subclass of workers who worked for staffing agencies for a portion of the time they worked at Tesla’s factory. They seek to enjoin Tesla from failing to prevent race discrimination and harassment against Black and/or African-American workers, to implement effective policies to prevent and correct harassment, and require mandatory training.

The women had joined a state court race discrimination lawsuit filed by co-worker Marcus Vaughn in 2017 alleging Tesla is a hotbed of racism. Workers at Tesla’s Fremont, Calif., plant claim Black employees are subjected to a racially hostile environment, including regular racial slurs by supervisors and other co-workers.

The appeals court held the Federal Arbitration Act, as interpreted in Viking River Cruises Inc. v. Moriana, doesn’t preempt the California rule prohibiting waiver of the right to seek public injunctions. Such injunctions request relief primarily for the general public and are distinguished from private injunctions, which primarily benefit the party or parties seeking it, the court said.

The denial of review “has great practical significance for the class action claims of race harassment, because those claims can proceed more expeditiously, and on behalf of far more Black employees, in a class action than in arbitration,” said Michael Rubin, an Altshuler Berzon LLP partner who is co-counsel for the women.

New Injunction

“The real significance of the decision, though, is that it establishes for the first time that plaintiffs may seek a “public injunction” under FEHA,” Rubin said in an email. Previously, public injunctive relief had been limited to unfair competition law or False Advertising Act types of claims.

The court’s “denial of Tesla’s latest attempt to stall the prosecution against the company for its despicable race discrimination and harassment against Black workers has – once again – failed,” plaintiffs’ co-counsel Bryan Schwartz said in an email. “We are excited to finally certify our class on behalf of, we believe, thousands of Black workers and move forward without further delay.”

Counsel for Tesla didn’t immediately respond to emails seeking comment.

A federal jury April 3 awarded a former Tesla contract worker $3.2 million on his claims that he experienced racial taunts and threats at the electric car-maker’s plant. It was a retrial of plaintiff Owen Diaz’s claims after a judge ordered the reduction of a $137 million verdict, one of the largest jury awards in US history in a discrimination lawsuit by an individual.

Separately, Tesla is fighting California Civil Rights Department claims that hundreds of African American workers at its suburban San Francisco Bay Area factory were subject to mistreatment, including harassment, unequal pay, and retaliation.

The California Court of Appeal on Tuesday ruled that a female Tesla employee can pursue in court claims that she was subjected to sexual harassment.

Bryan Schwartz Law, P.C., California Civil Rights Law Group, and Altshuler Berzon LLP represent the workers. Gibson, Dunn & Crutcher LLP, Holland & Knight LLP, and Reed Smith LLP represent Tesla.

The case is Vaughn v. Tesla, Inc., Cal., No. S278613, review denied 4/12/23.

(Added comments from plaintiffs’ co-counsel in ninth paragraph. )

To contact the reporter on this story: Joyce E. Cutler in San Francisco at jcutler@bloombergindustry.com

To contact the editors responsible for this story: Carmen Castro-Pagán at ccastro-pagan@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

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