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Tesla must pay ex-worker $15 million for “disturbing” racist abuse, judge rules - Ars Technica

Aerial view of cars parked in a Tesla factory parking lot. A Tesla logo is painted on the concrete.
Enlarge / Cars parked at the Tesla Fremont Factory in Fremont, California, on February 10, 2022.
Getty Images | Josh Edelson

On Wednesday, a federal judge rejected Tesla's claim that it is not liable for "disturbing" racist abuse suffered by an ex-factory worker. US District Judge William Orrick rejected what he called Tesla's "watered-down revisionism" that cast plaintiff Owen Diaz's suffering as "mild and short-lived."

The judge slashed Diaz's financial award, however. While the jury awarded Diaz $6.9 million in compensatory damages and $130 million in punitive damages, Orrick set the amounts at $1.5 million in compensatory damages and $13.5 million in punitive damages instead. He wrote that the new compensatory amount of $1.5 million is "the highest award supported by the evidence" and that the punitive damages can be nine times that amount based on US law.

"The evidence was disturbing," said Orrick's ruling in the US District Court for the Northern District of California. "The jury heard that the Tesla factory was saturated with racism. Diaz faced frequent racial abuse, including the n-word and other slurs. Other employees harassed him. His supervisors and Tesla's broader management structure did little or nothing to respond. And supervisors even joined in on the abuse, one going so far as to threaten Diaz and draw a racist caricature near his workstation."

Tesla wanted to limit compensatory and punitive damages to $300,000 each.

“Legally sufficient basis to find Tesla liable”

Diaz worked at a Tesla factory in Fremont starting in June 2015 and "was 'separated' from Tesla without prior warning" in May 2016, the ruling said. Diaz's paychecks came from a staffing agency called CitiStaff, but he testified that "all of [his] directions came from Tesla." He received training and certification from Tesla for his job operating a forklift. He sued Tesla in October 2017.

After the trial, Tesla asked the court for a "judgment as a matter of law that it is not liable," or alternatively "for a new trial and to reduce the amount of damages," Orrick noted. Tesla argued that under 42 U.S.C. § 1981—a Reconstruction-era law that prohibits discrimination in the making and enforcement of contracts—it was not liable because "Diaz's contract of employment was with a staffing agency that Tesla contracted with, not with Tesla itself," Orrick wrote.

Orrick denied the motion for a judgment as a matter of law, writing:

[T]he jury had a legally sufficient basis to find Tesla liable on two grounds. First, it found in a special verdict that Tesla qualified as an employer of Diaz under the law, even if not on paper. It could have reasonably found that this employment relationship was governed by an implied-in-fact contract. Second, it could have found that Diaz was an intended beneficiary of the contract between Tesla and the staffing agency. As a result, Diaz was entitled to bring the Section 1981 claim to enforce his rights under that contract. On the remaining issues, Tesla waived its legal challenge to Diaz's state-law negligent supervision claim. And Tesla's motion for a new trial is also denied; the weight of the evidence amply supports the jury's liability findings.

Judge rejects Tesla “revisionism”

Tesla framed Diaz's suffering as "'garden variety' emotional distress that was 'fortunately mild and short-lived,'" Orrick wrote. "The record roundly rejects that watered-down revisionism. It is difficult to see how Tesla reached that interpretation of the evidence other than ignoring it. Tesla's proffered figure of $300,000 is, accordingly, untethered to record evidence. The jury reasonably found that this was a case of severe emotional distress."

Orrick decided that compensatory damages "will be remitted to $1.5 million, the highest award supported by the evidence. The punitive damages award must also be remitted under Supreme Court precedent imposing constitutional limitations on punitive damages. But again, I will not reduce it to the one-to-one ratio to compensatory damages that Tesla urges. I conclude that, on these facts, the Constitution permits a punitive-damages award of $13.5 million—nine times the amount of compensatory damages."

Diaz will have the option of accepting or rejecting the new amounts totaling $15 million. Tesla can then challenge the ruling in a federal appeals court.

Tesla's "motion for a new trial is conditionally denied based on Diaz accepting a remittitur to $1.5 million in compensatory damages and $13.5 million in punitive damages," Orrick wrote. "Diaz shall file a notice on the docket within 30 days stating whether he accepts or rejects the remittitur (and a proposed amended judgment if he accepts it). At that point, I will, as appropriate, either enter an order granting a new trial on damages or enter a final, appealable order denying Tesla's motion and an amended judgment."

Tesla faces more discrimination lawsuits

After the Diaz jury verdict in October 2021, Tesla issued a statement stressing that the trial covered events from 2015 to 2016. Tesla has "come a long way from five years ago. We continue to grow and improve in how we address employee concerns," Tesla said.

In February 2022, the California Department of Fair Employment and Housing sued Tesla, alleging that hundreds of complaints provided "evidence that Tesla's Fremont factory is a racially segregated workplace where Black workers are subjected to racial slurs and discriminated against in job assignments, discipline, pay, and promotion creating a hostile work environment."

Tesla complained that the lawsuit "focused on alleged misconduct by production associates at the Fremont factory that took place between 2015 and 2019," and said the state agency "has never once raised any concern about current workplace practices at Tesla."

Tesla is also facing lawsuits from women who say they were subjected to rampant sexual harassment in Fremont factory facilities. A lawsuit from former employee Jessica Barraza alleged Tesla is like a "frat house" with "frequent groping on the factory floor" said the sexual harassment continued until at least October 2021, shortly before she went on leave.

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