Tesla was slapped with a $137 million fine for its hostile and racist work environment

Content Warning: Descriptions of Racial Harassment in the Workplace

A federal court in San Francisco, California, decided that the tech giant Tesla must pay its former worker Owen Diaz approximately $137 million after he endured racist abuse working for the company. The jury awarded Diaz $130 million in punitive damages and $6.9 million for emotional distress, which is more than attorneys asked for their client. The case was only able to move forward as he had not signed one of Tesla's mandatory arbitration agreements, Diaz's lawyers claimed. Another similar case in the same state alleges that Tesla is rife with racist discrimination and harassment, CNBC reports.

Diaz was hired to work at Tesla through a staffing agency in 2015. He claimed he faced racial abuse while employed at Elon Musk's electronic vehicle company. According to the former employee, colleagues used epithets to denigrate him as well as other Black workers; told him to “go back to Africa”; painted racist graffiti in the washrooms; and left a racist drawing in his workspace. His attorneys, J. Bernard Alexander with Alexander Morrison + Fehr LLP in Los Angeles and Larry Organ with the California Civil Rights Law Group in San Anselmo, claimed his case was admissable in court as he had not signed one of the company's mandatory arbitration agreements. Tesla utilizes mandatory arbitration in order to force employees to resolve issues "behind closed doors" rather than through a public trial.

As a result, like many another firms that use mandatory arbitration, Tesla rarely faces significant damages or takes deep corrective actions after arbitrators settle a dispute. Nonetheless, this case has disrupted a pattern of exploitation. In the past, the tech company was required pay $1 million to another former worker, Melvin Berry, who also endured a racist and hostile work environment at the firm. This was due to an arbitration agreement. A similar case is now awaiting litigation in Alameda County in California. The class-action lawsuit, Vaughn v. Tesla Inc., also alleges that the work culture at the company is racist and hostile.

Alexander said in an interview with CNBC following the win, "We were able to put the jury in the shoes of our client. When Tesla came to court and tried to say they were zero tolerance and they were fulfilling their duty? The jury was just offended by that because it was actually zero responsibility." Now, shareholders at Tesla are urging the company to act. Nia Impact Capital, a shareholder activist, has demanded that the company's board study the effects of mandatory arbitration on their own employees and culture. The social impact fund is particularly worried that Tesla will enable and hide sexual harassment and racist discrimination from its stakeholders. This, ultimately, will harm employees, kill morale and productivity, and weigh heavily on the bottom line.

Nia Impact Capital writes in a recent shareholder proposal, "The use of mandatory arbitration provisions limits employees’ remedies for wrongdoing, precludes employees from suing in court when discrimination and harassment occur, and can keep underlying facts, misconduct or case outcomes secret and thereby prevent employees from learning about and acting on shared concerns." This is the second year in a row that the shareholder has made such a proposal. Institutional Shareholder Services, the proxy advisory firm, recommended shareholders vote for Nia’s proposal. However, Tesla advised shareholders to vote against reporting on the impacts of mandatory arbitration on employees. The last annual shareholder meeting took place on October 7 at Tesla’s new vehicle assembly plant under construction outside of Austin, Texas.