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Jury orders Tesla to pay more than $130 million in discrimination suit, which alleged racist epithets and hostile work environment

The verdict was handed down Monday in federal court in California

The Tesla logo on one of its electric-vehicle charging stations in Fremont, Calif. A jury ordered the company to pay nearly $137 million to a former employee over racial harassment. (Nina Riggio/Bloomberg News)

SAN FRANCISCO — A jury on Monday ordered Tesla to pay nearly $137 million in damages in a case that alleged an employee encountered racist abuse, discrimination and harassment at the company’s plant in Fremont, Calif.

Owen Diaz, an elevator operator who worked for the company between June 2015 and May 2016, sued Tesla, alleging a hostile work environment and racial harassment, and said “daily racist epithets” such as the n-word were used in the factory, where his son, Demetric, also worked. The initial suit by Diaz, who is Black, alleged that workers encountered a scene “straight from the Jim Crow era,” where workers were subjected to frequent racist harassment and supervisors took no action.

“Tesla’s progressive image was a facade papering over its regressive, demeaning treatment of African-American employees,” the suit said.

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Attorney Lawrence A. Organ of the California Civil Rights Law Group confirmed the verdict Monday, saying the jury awarded $6.9 million in damages for emotional distress and $130 million in punitive damages.

Tesla is likely to appeal the ruling. A message left with an attorney for the company, Tracey Kennedy of the Los Angeles-based firm Sheppard Mullin, was not immediately returned.

According to court filings, Tesla fiercely defended itself against the allegations, moving to strike the testimony of an expert witness and articulating its stance that Diaz was not technically employed by the company. Diaz, Tesla argued, “failed to provide the jury with evidence conclusively demonstrating that Tesla subjected Plaintiff to race discrimination.”

“Without such evidence, the jurors must answer no to the verdict form question asking whether Plaintiff was subjected to a racially hostile work environment by Tesla,” it said.

The company argued that even if the allegations were true — an argument it made as a hypothetical — Diaz could not prove he was subjected to a “race discrimination violation” by Tesla.

“Plaintiff has not presented any evidence of a contractual relationship between him and Tesla,” the company argued. “Plaintiff testified that he never got any written document from Tesla saying that he was a Tesla employee at any point in time.”

Diaz’s lawsuit was a hostile work environment and racial harassment case brought under the Civil Rights Act of 1866, with its relevant provisions on contractual relationships and the privileges of a contract, according to Organ. The defendants in the case included Tesla and several staffing corporations that sent workers to client sites. Attorneys for Tesla had attempted to argue that Diaz was not an employee of Tesla, but rather someone who had been paired with a job in its facilities. Organ said Diaz was working at Tesla, using equipment from the company and taking direction from its workers, who determined his hours and rate of pay.

“We’re just gratified that the jury saw the truth and they awarded an amount that hopefully will push Tesla to correct what people testified about in terms of this widespread racist conduct,” Organ said. “It’s gratifying to know that a jury’s willing to hold Tesla accountable. One of the world’s largest, richest corporations finally is told, ‘You can’t let this kind of thing happen at your factory.’ ”

Tesla gave workers permission to stay home rather than risk getting covid-19. Then it sent termination notices.

Tesla’s work environment has previously come under scrutiny over allegations of workplace discrimination, labor rights violations and poor treatment of workers during the coronavirus pandemic.

Monday’s ruling, however, marked a major punitive action taken against the company for its treatment of workers.

In the suit, Diaz said workers were frequently subjected to racist language and caricatures and imagery, including drawings accompanied by captions that confirmed their racist intent.

“These drawings typically featured images of dark-skinned individuals with big lips and bones in their hair,” the lawsuit said. “Features which are erroneously, and stereotypically, associated with African-American individuals.”

The drawings, said Diaz, were placed in factory locations where Black workers were certain to see them. Diaz felt “demeaned, disrespected, and devalued” by what he saw, the suit said, and he was “demeaned and offended” by workers referring to him using the n-word.

“However, what truly broke Owen down was witnessing these racist epithets directed at his son, and hearing his son tell him about the racism he was experiencing at work,” the suit said.

Valerie Capers Workman, Tesla’s vice president of people, echoed the company’s argument in a statement to workers posted on Tesla’s website.

“Mr. Diaz never worked for Tesla,” she wrote. “He was a contract employee who worked” for staffing agencies, she said.

She said the company responded timely to instances of harassment alleged by Diaz. And she pointed to witness testimony regarding the use of racist slurs, in her characterization of the matter.

“While they all agreed that the use of the n-word was not appropriate in the workplace, they also agreed that most of the time they thought the language was used in a ‘friendly’ manner and usually by African-American colleagues,” she wrote. “They also told the jury about racist graffiti in the bathrooms, which was removed by our janitorial staff,” she wrote.

She noted the company is in the midst of an ongoing process of improving its workplace culture, having added Employee Relations and Diversity, Equity and Inclusion teams.

“While we strongly believe that these facts don’t justify the verdict reached by the jury in San Francisco,” she wrote of Tesla’s argument against Diaz’s allegations, “we do recognize that in 2015 and 2016 we were not perfect. We’re still not perfect.”

Diaz left Tesla in May 2016, the lawsuit said, because he could no longer bear the abuse and harassment at Tesla, which had “repeatedly refused to investigate the racist behavior.” He said he had been threatened with a demotion and worried the situation would only get worse.