Alexis Keenan
·Reporter
Wed, October 6, 2021
FREMONT, CA - SEPTEMBER 29: Tesla CEO Elon Musk speaks during an event to launch the new Tesla Model X Crossover SUV on September 29, 2015 in Fremont, California. (Photo by Justin Sullivan/Getty Images)
A California jury’s $137 million verdict against Tesla (TSLA) in a racial discrimination case brought by a Black contract worker is notable for its size and because it was a rare employment grievance that played out in public court rather than in a closed-doors arbitration.
“The verdict is designed to do what punitive damages are supposed to do: deter and punish Tesla,” veteran discrimination attorney Nancy Erika Smith told Yahoo Finance.
The award, which the judge could reduce, came down Monday for Owen Diaz, a former elevator operator at Tesla’s Fremont factory who said he was subjected to racially offensive taunts and graffiti. Diaz, a contractor paid by two staffing agencies rather than Tesla itself, said on a daily basis that Tesla employees directed racial epithets at him and other Black workers, including telling him to "Go back to Africa."
$1 million isn't punishment for Tesla
The case is an unlikely one to see the light of public litigation due to Tesla’s policy — common among large U.S. corporations — requiring workers to agree to arbitrate workplace disputes. Diaz, unlike the vast majority of other Tesla plant workers, could go to trial because he never signed the arbitration agreement.
Virtually everyone who works at Tesla's Fremont factory has a binding arbitration, J. Bernard Alexander, one of Diaz's attorneys, told Yahoo Finance. These types of agreements "allow companies to litigate and have their dirty laundry stay in the dark," Alexander said, noting the irony of racist conduct occurring at a company with headquarters in liberal Silicon Valley.
"That's why this case was so important," Alexander said. "So there would be a light shined on it through the justice system."
Arbitration is controversial. Those who favor it, largely employers, argue that arbitration is more flexible and efficient than litigation. However, critics say arbitration is opaque, can't be appealed, and tends to offer smaller awards than those granted by juries — something that Diaz’s case suggests could be true.
A similar dispute brought by former Tesla materials handler Melvin Berry was handled through mandatory arbitration. In August, Bloomberg reported that an arbitrator ordered Tesla to pay $1 million for harassment by company supervisors who called him the “N-word.” Smith, the veteran discrimination attorney, suggested that $1 million is a minor amount for a company like Tesla.
“Tesla is not punished by a $1 million verdict. Tesla is punished by a $137 million verdict,” Smith said.
Tesla could 'tie this up in court for years'
The large verdict is unlikely to stick. Tesla could ask the judge to overturn the verdict or reduce the award, and the electric car giant could also appeal the case to a higher court. David Miklas, an employer-side attorney said the size of the award "absolutely is noteworthy," meaning Tesla will likely appeal.
"Tesla could appeal this and tie this up in court for years," Miklas said, adding that some appeals can span as long as a decade.
Tesla could also offer to settle with Diaz for a lower amount, which Smith said could be the most strategic path given that Tesla's public debate over workplace discrimination isn’t going away just yet.
On Oct. 7, during Tesla's annual shareholders’ meeting, shareholders are expected to vote on a proposal from activist shareholder Nia Impact Capital that would require Tesla to report on the impact of its use of mandatory arbitration. Tesla’s board has discouraged shareholders from voting in favor of the measure.
Smith suspects that any changes to Tesla's mandatory arbitration policy depend on several factors.
“It depends on how much power the board has, and how much power the activist investors are going to have, and whether it really affects whether people buy Teslas,” she said.
Tesla's Valerie Capers Workman, Tesla’s vice president for people, issued a statement Monday saying that the company believes the facts do not justify the verdict in the Diaz case. However, she suggested that the company has improved since Diaz worked there in 2015 and 2016.
"[W]e do recognize that in 2015 and 2016 we were not perfect. We’re still not perfect. But we have come a long way from 5 years ago. We continue to grow and improve in how we address employee concerns. Occasionally, we’ll get it wrong, and when that happens we should be held accountable.”
Yahoo Finance reached out to Tesla for comment and will update this post with any response we receive.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
Tesla would face tough road in any bid to slash $137 million racial bias verdict in U.S
Daniel Wiessner
Wed, October 6, 2021
(Reuters) - Tesla Inc will likely seek to slash a $137 million jury award for a Black worker who accused the automaker of racial discrimination, but could have difficulty reducing the verdict amid claims that the company tolerated widespread harassment, legal experts said.
A federal jury in San Francisco on Monday ordered Tesla to pay $130 million in punitive damages to Owen Diaz, a contract worker who was employed as an elevator operator at the company's factory in Fremont, California, according to a court filing.
Daniel Wiessner
Wed, October 6, 2021
(Reuters) - Tesla Inc will likely seek to slash a $137 million jury award for a Black worker who accused the automaker of racial discrimination, but could have difficulty reducing the verdict amid claims that the company tolerated widespread harassment, legal experts said.
A federal jury in San Francisco on Monday ordered Tesla to pay $130 million in punitive damages to Owen Diaz, a contract worker who was employed as an elevator operator at the company's factory in Fremont, California, according to a court filing.
https://www.reuters.com/technology/tesla-ordered-pay-over-130-mln-black-former-worker-over-racism-wsj-2021-10-05
The jury found that Tesla failed to take steps to prevent race-based harassment of factory workers, including the use of racial slurs and racist graffiti in bathrooms. Tesla also was ordered to pay Diaz $6.9 million in compensatory damages.
Punitive damages are designed to punish and to deter future unlawful conduct, while compensatory damages are intended to pay victims for their actual losses.
The U.S. Supreme Court has said
"The jury was asking itself, 'what would sting Tesla and make sure they don't treat this as just another cost of doing business?'" Lopez said.
(Reporting by Daniel Wiessner; Additional reporting by Hyunjoo Jin; Editing by Rebekah Mintzer, Noeleen Walder and Grant McCool)
The jury found that Tesla failed to take steps to prevent race-based harassment of factory workers, including the use of racial slurs and racist graffiti in bathrooms. Tesla also was ordered to pay Diaz $6.9 million in compensatory damages.
Punitive damages are designed to punish and to deter future unlawful conduct, while compensatory damages are intended to pay victims for their actual losses.
The U.S. Supreme Court has said
punitive damages should generally not exceed 10 times the amount of compensatory damages, and that even a ratio greater than 4:1 might be excessive. As a result, large awards handed down by impassioned juries are commonly reduced by trial judges or appeals courts at the behest of defendants.
If Tesla challenges Monday's verdict, the company will likely point to the fact that the amount of punitive damages is nearly 19 times the compensatory damages, legal experts not involved in the case said. Tesla could also claim the verdict was not supported by evidence, and attempt to settle with Diaz to stave off further litigation over the size of the jury award, the experts said.
The Supreme Court guidelines can go out the window if misconduct has a widespread impact on workers and is found to be highly offensive or reprehensible, according to Catherine Sharkey, a professor at New York University School of Law.
Since the jury found that Tesla had created a hostile work environment based on race, it follows that allegations that the company tolerated racist speech and graffiti affected other workers and could justify the massive award, she said.
"The idea is that making an employer pay for that widespread harm could lead them to put in place measures to avoid future harm," she said.
In a memo to employees on Monday, Tesla Vice President Valerie Workman said the company believed the facts of the case did not warrant the large award, and that Tesla took immediate action each of the three times that Diaz complained about racist conduct.
Tesla did not responded to requests for comment on a potential appeal.
Lawrence Organ, a lawyer for Diaz, said the case was unusual because of evidence of widespread use of the "N word" at the Fremont plant and Tesla's failure to address it.
"We would argue that ... the jury got it right, particularly in light of Tesla's financial condition as one of the wealthiest corporations in the world," Organ said.
Several legal experts said the award for Diaz was among the largest in a U.S. discrimination case involving a single plaintiff.
A federal jury in 2014 awarded $186 million to a former AutoZone Stores Inc manager in a pregnancy bias case, which at the time was widely reported in the media to be the largest verdict of its kind. AutoZone moved for a new trial but settled with the plaintiff on undisclosed terms before the motion was decided.
The nine-figure award for Diaz is "pretty unheard of," and sends a message to employers that tolerating discrimination can be costly, said David Lopez, a professor at Rutgers Law School in New Jersey who was general counsel of the U.S. Equal Employment Opportunity Commission during the Obama administration.
Tesla has been accused of tolerating race-based harassment at the Fremont plant in several lawsuits aside from Diaz's, including a pending class action in California state court. The company has denied the claims and says it has adopted policies to better address complaints about racially-charged incidents.
Lopez said the jurors in Tesla's case likely took into account the pervasiveness of the conduct alleged by Diaz and the company's value and high profile, which could also come into play if the company seeks to lower the jury award.
Tesla's market value has reached nearly $800 billion, making it the world's most valuable automaker.
If Tesla challenges Monday's verdict, the company will likely point to the fact that the amount of punitive damages is nearly 19 times the compensatory damages, legal experts not involved in the case said. Tesla could also claim the verdict was not supported by evidence, and attempt to settle with Diaz to stave off further litigation over the size of the jury award, the experts said.
The Supreme Court guidelines can go out the window if misconduct has a widespread impact on workers and is found to be highly offensive or reprehensible, according to Catherine Sharkey, a professor at New York University School of Law.
Since the jury found that Tesla had created a hostile work environment based on race, it follows that allegations that the company tolerated racist speech and graffiti affected other workers and could justify the massive award, she said.
"The idea is that making an employer pay for that widespread harm could lead them to put in place measures to avoid future harm," she said.
In a memo to employees on Monday, Tesla Vice President Valerie Workman said the company believed the facts of the case did not warrant the large award, and that Tesla took immediate action each of the three times that Diaz complained about racist conduct.
Tesla did not responded to requests for comment on a potential appeal.
Lawrence Organ, a lawyer for Diaz, said the case was unusual because of evidence of widespread use of the "N word" at the Fremont plant and Tesla's failure to address it.
"We would argue that ... the jury got it right, particularly in light of Tesla's financial condition as one of the wealthiest corporations in the world," Organ said.
Several legal experts said the award for Diaz was among the largest in a U.S. discrimination case involving a single plaintiff.
A federal jury in 2014 awarded $186 million to a former AutoZone Stores Inc manager in a pregnancy bias case, which at the time was widely reported in the media to be the largest verdict of its kind. AutoZone moved for a new trial but settled with the plaintiff on undisclosed terms before the motion was decided.
The nine-figure award for Diaz is "pretty unheard of," and sends a message to employers that tolerating discrimination can be costly, said David Lopez, a professor at Rutgers Law School in New Jersey who was general counsel of the U.S. Equal Employment Opportunity Commission during the Obama administration.
Tesla has been accused of tolerating race-based harassment at the Fremont plant in several lawsuits aside from Diaz's, including a pending class action in California state court. The company has denied the claims and says it has adopted policies to better address complaints about racially-charged incidents.
Lopez said the jurors in Tesla's case likely took into account the pervasiveness of the conduct alleged by Diaz and the company's value and high profile, which could also come into play if the company seeks to lower the jury award.
Tesla's market value has reached nearly $800 billion, making it the world's most valuable automaker.
"The jury was asking itself, 'what would sting Tesla and make sure they don't treat this as just another cost of doing business?'" Lopez said.
(Reporting by Daniel Wiessner; Additional reporting by Hyunjoo Jin; Editing by Rebekah Mintzer, Noeleen Walder and Grant McCool)
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