A Glimpse Inside Tesla’s $137 Million Discrimination Lawsuit

Earlier this month, Tesla lost a discrimination lawsuit filed by a former employee to the tune of $137 million.

The case includes a hostile work environment and racial harassment lawsuit brought under the Civil Rights Act of 1866, according to an article in The Washington Post. “Tesla’s progressive image was a facade papering over its regressive, demeaning treatment of African-American employees,” the suit stated.

Employers should note how this case illustrates the dangers of performative diversity, equity, and inclusion (DEI) measures on workplace culture. Failure to implement ongoing goals in a DEI plan comes at a steep price. Below we outline the details of the lawsuit, as well as provide a concrete strategy to help organizations not only protect their finances and reputations but more importantly do the right thing.

Tesla’s costly DEI missteps

Former contract elevator operator Owen Diaz alleged that he and others experienced racial discrimination while working in Tesla’s factory in Fremont, California from 2015 to 2016. According to Diaz, supervisors took no action against harassment involving racial slurs and drawings. 

On October 4, 2021, a federal jury in San Francisco awarded Diaz $6.9 million in damages for emotional distress and $130 million in punitive damages, the largest award in a racial harassment case involving a single plaintiff in U.S. history, according to Lawrence A. Organ, one of the plaintiff’s attorneys who works with the California Civil Rights Law Group.

Tesla is appealing the rulings, having denied the allegations in court on the basis that as a contractor, Diaz was not technically employed by the company and could not prove that Tesla subjected him to race discrimination.

This is not the first time Tesla’s work environment has been under fire. It also faced other allegations of workplace discrimination, labor rights violations, and poor treatment of workers in the past.

Following the Diaz lawsuit ruling, the vehicle manufacturer reinforced its position in a statement on its website – but also admitted to having areas of opportunity for improving workplace culture and DEI.

In December 2020, Tesla released its first-ever DEI impact report, laying out its guiding principles and a roadmap for the future. The report provides transparency into the company’s workforce demographics, showing high representation of racially diverse groups, but room for growth in other areas. 

Notably, the company aims to foster an environment “where every employee feels like they can bring their whole self to work and where our culture is systematically safe, respectful, fair and inclusive of everyone.”

It remains to be seen what impact Tesla’s plan will have in the long run. Facilitating a DEI-centered work environment requires a long-term commitment – it’s a cultural shift that doesn’t happen overnight.

Advancing equity under a lens of proactive and continuous improvement

Employers in today’s world are increasingly being held accountable to how they treat their workers by investors, stakeholders, and customers. The last couple years in particular have ushered a collective turning point for organizations when it comes to advancing equity in their workplaces. 

Other corporations show that Tesla can rectify its mistakes with ongoing commitment. Restaurant chain Denny’s is one example of a company that turned a new leaf, going from defendant in a discrimination lawsuit in the 1990s to a dynamic leader in corporate DEI today.

Other corporations among the likes of McDonald’s and American biotech company Genentech are also setting the tone moving forward as they rewrite their DEI policies and procedures. Common themes include diversifying boards and workforces; training staff in DEI; conducting ongoing pay equity audits; and enhancing pay and workforce transparency, all under the crucial lens of proactive and continuous improvement.

Partnering with an expert in DEI will help simplify the complex and guide your organization in its journey. Trusaic’s PayParity solution provides professional consulting services and DEI software to do just that. Our proactive auditing and ongoing monitoring tools will help your organization follow through with its commitments in the long haul.

To learn more about cultivating DEI in your workplace, read our research report, Creating a Culture of Diversity, Equity, and Inclusion, conducted by Harvard Business Review Analytic Services.