Tesla, Musk Face More Legal Drama as Ex-Workers Claim Layoffs Without Proper Notice


Two former Tesla workers recently filed a federal lawsuit alleging the electric-car manufacturer violated the Worker Adjustment and Retraining Notification (WARN) Act when it failed to provide the required notice to about 500 employees who were laid off from its battery factory in Sparks, Nevada. The case, filed June 19, followed news that Tesla planned to cut hourly workers after CEO Elon Musk initially said that nonexempt workers were not likely to be affected by the layoffs.

The WARN Act requires companies to provide a 60-day notice before any layoff affecting 50 or more employees at a single site. The plaintiffs worked at the plant for approximately five years. One was notified on June 10 that he’d been terminated, effective immediately, and the other was terminated on June 15.

Tesla argues that advanced notice was not required and the case should be thrown out because the terminated workers signed contracts preventing them from participating in class action lawsuits and stipulating that employment disputes would be settled in arbitration. In response, the lawyers representing the Nevada workers laid off in mid-June have filed an emergency motion asking the judge to stop Tesla from compelling workers to sign releases in exchange for one week of severance, which is less than federal law provides.

Musk has called the lawsuit trivial. However, Shannon Liss-Riordan, an attorney representing the workers, told Reuters last month that she prepared the motion to try to block Tesla from trying to get releases from employees in exchange for just one week of severance pay. “While two months’ pay certainly doesn’t matter to him [Musk], it matters a lot to the employees who made his company what it is,” she said.

Tesla, headquartered in Austin, Texas, after a move from California, has grown to about 100,000 employees globally. The company has hired extensively in recent months, and the extensive job cuts caught many by surprise. According to the Los Angeles Times, in early June, Musk told Tesla executives in an email that he had a “super bad feeling” about the direction of the economy and planned to reduce its salaried workforce by 10% and pause hiring. However, in another email, he said the company would increase its overall headcount during 2022.

Widespread layoffs aren’t that unusual for Tesla. The company laid off hundreds of employees in October 2017, reduced its staff by 9 percent in June 2018 and 7 percent in January 2019, and again furloughed workers and cut salaries in April 2020. On July 12, the company laid off 229 data annotation employees who were part of its Autopilot team and closed its San Mateo, Calif., office where they worked. Musk also recently sent a company-wide email stating that, for workers who didn’t report to the office (barring his permission to continue to work from home), “we will assume you have resigned.”

Currently the world’s richest person, Musk has been involved in multiple recent conflicts with his employees. Tesla’s employment practices have also been the subject of repeated legal action:

  • On July 1, 15 Black former or current workers filed a lawsuit in California state court charging Tesla with racial abuse and harassment. The complaint alleges that the workers were routinely subjected to offensive racist comments and behavior by co-workers, managers, and human resource employees at Tesla’s Fremont, California, factory.
  • In June, Black former contract worker Owen Diaz turned down $15 million in damages after he was initially awarded nearly $137 million in a racial harassment lawsuit filed against Tesla. That plaintiff claimed that he regularly heard racial slurs, including the n-word, on the factory floor of the plant where he worked during 2015 and 2016.
  • Former Tesla employee Melvin Berry was awarded a $1 million judgment in May 2021 after an arbitrator found that he had been subjected to racial slurs and other racially hostile conduct by supervisors.

Company shareholders have apparently also lost patience with the way Tesla treats its employees. In early June, an investor filed a lawsuit accusing Musk and the board of directors of neglecting worker complaints and permitting a toxic workplace culture to flourish.

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