Tesla settles race bias claims by Black former worker after $3 million verdict

Daniel Wiessner
Fri, March 15, 2024 a

(Reuters) -Tesla has settled a long running lawsuit by a Black former factory worker who claimed he was subjected to severe racial harassment, according to a court filing on Friday, as the electric carmaker faces a series of other discrimination lawsuits.

Tesla and lawyers for Owen Diaz, a former elevator operator at the company's Fremont, California assembly plant, did not disclose details of the settlement in the filing in San Francisco federal court.

The agreement ends appeals that both sides were pursuing after a jury last year awarded Diaz $3.2 million in damages. Tesla claimed it was not liable for the alleged discrimination and Diaz had argued that the company's lawyers engaged in misconduct warranting a new trial.

A different jury in 2021 had awarded Diaz $137 million, one of the largest verdicts ever in a discrimination case involving a single worker. But a judge found that the verdict was excessive and ordered a second trial after Diaz refused a lowered award of $15 million.

Diaz, who first sued Tesla in 2017, claimed that when he worked at the Fremont plant he was subjected on a daily basis to racial slurs, scrawled swastikas and other racist conduct, and that Tesla ignored his complaints.

Tesla and lawyers for Diaz did not immediately respond to requests for comment. The company has said it does not tolerate discrimination and has fired employees accused of racist conduct.

Tesla faces similar claims of tolerating race bias at the Fremont plant in a pending class action on behalf of 6,000 workers, separate cases from California and U.S. anti-bias agencies, and multiple lawsuits involving individual employees. The company has denied wrongdoing in those cases.

(Reporting by Daniel Wiessner in Albany, New YorkEditing by Chris Reese, David Gregorio and Alexia Garamfalvi)

Leaked SpaceX documents show company forbids employees to sell stock if it deems they've misbehaved

Aria Alamalhodaei
Updated Mon, March 18, 2024 

Image Credits: TechCrunch

SpaceX requires employees to agree to some unusual terms related to their stock awards, which have a chilling effect on staff, according to sources and internal documents viewed by TechCrunch.

That includes a provision that allows SpaceX the right to purchase back vested shares within a six-month period following an employee leaving the company for any reason. SpaceX also gives itself the right to ban past and present employees from participating in tender offers if they are deemed to have committed “an act of dishonesty against the company” or to have violated written company policies, among other reasons.

Employees often aren’t aware of the “dishonesty” condition when they initially sign up on the equity compensation management platform, one former employee said.

If SpaceX bars an employee from selling stock in the tender offers, the person would have to wait until SpaceX goes public to realize cash from the shares — and it’s unclear when that will happen, if it ever does.

SpaceX did not respond to multiple requests for comment.
Employees pay taxes on their shares

Like most tech companies, SpaceX includes stock options and restricted stock units (RSUs) as part of its compensation package to attract top talent. No doubt this has paid off: SpaceX's 13,000-strong workforce is helping to push the limits of what was thought possible in aerospace, including delivering crew to and from the International Space Station and building out the largest satellite constellation in history.

Unlike stock in public companies, stock in private companies cannot be sold without the company’s permission. So employees can only turn that part of their pay into cash when their employer allows such transactions. SpaceX is known for generally holding buyback events twice a year — meaning SpaceX will buy the shares back from employees; this schedule, which has been fairly reliable in recent years, means that employees have biannual opportunities to liquidate assets that have likely appreciated since the vesting date.

It’s not uncommon for additional terms to be attached to employee stock compensation at startups, and employees who stay with the company long enough to vest stock may have acquired stock under various stock plans with various conditions. Yet no employee at startups and private companies is entitled to sell their stock without their employer's approval.

Indeed, at SpaceX, if an employee was fired “for cause,” the company stated it can repurchase their stock for a price of $0 per share, according to documents viewed by TechCrunch.


“It sounds unusual to have [a] cause type exclusion provision in a tender offer agreement,” attorney and stock options expert Mary Russell told TechCrunch. She said it is also unusual for a traditional venture-based startup to have repurchase rights for vested shares that are unrelated to a bad-actor-type “for cause” termination.

These terms “keep everyone under their control, even if they have left the company,” one former employee said, because employees don’t want to be forced to return their valuable SpaceX stock for no compensation. “And since there is no urgency by SpaceX to go public, being banned from tender offers effectively zeros out your shares, at least for a long time. Even though you paid thousands to cover the taxes.”

“They also try and force a non-disparagement agreement on you when you leave, either with a carrot, or a stick if they have one,” the person said.
SpaceX names Elon Musk actions as a "risk factor"

As recently as 2020, SpaceX was also providing to employees a separate document outlining the risks of investing in the company’s securities. It reads similar to an S-1 registration statement that public companies must file; given that SpaceX is private, it is a unique disclosure into the company’s risk profile.

To a large extent, such documents are written to minimize the company’s legal liability. The SpaceX document rightly points out that equity investments are inherently risky, because participants are trading a highly liquid asset — cash — for highly illiquid shares. As such, they exhaustively list various material risk factors, no matter how unlikely — for example, in its risk document, seen by TechCrunch, SpaceX includes that Hawthorne, California, which is home to its headquarters, is a “seismically active region.”

The company also includes a number of risk factors related to Elon Musk, its CEO and founder.

“To date, the Company has been highly dependent on the leadership provided by the Company’s founder, Chief Executive Officer and Chief Technical Officer, Elon Musk,” the document reads. “SpaceX, Mr. Musk, and other companies Mr. Musk is affiliated with, frequently receive an immense amount of media attention. As such, Mr. Musk’s actions or public statements could also potentially have a positive or negative impact on the market capitalization of SpaceX.”

The document also calls out a $40 million settlement between Musk and the SEC, which came about after he tweeted in August 2018 that he was considering taking Tesla private. Even though that tweet did not relate to SpaceX, “the settlement has implications for SpaceX,” the document says.

“If there is a lack of compliance with the settlement, additional enforcement actions or other legal proceedings could be instituted against Mr. Musk, which could have adverse consequences for SpaceX. Most notably, the SEC could deny SpaceX the right to rely on Regulation D, which is an exemption from registration under the Securities Act of 1933 for private financing transactions. A denial of future reliance on Regulation D could potentially make it more difficult for the Company to raise capital in the future.”

While Tesla’s recent securities statements do call out the SEC settlement, they do not address potential media attention in the same direct manner.

The document also states that there is a risk that there may never be a public market for the company’s common stock — an issue should an employee ever be barred from tender events.

SpaceX is one of the most valuable private companies in the world, with the valuation topping out at $180 billion as of last December. Like other private companies, its stock is split into preferred and common stock. Employees are awarded the latter, while preferred stock is generally owned by institutional investors and entities affiliated with Musk. Preferred stock has some superior rights attached to it, including liquidation preferences and dividends.

The common stock is split into three stock classes: Class A, B and C. According to an equity incentive plan approved by the SpaceX board in March 2015, and which has a termination date in 2025, employees receive Class C stock, a non-voting stock.