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 October 13, 2021

Spotting a Toxic Work Environment: Tesla Lawsuit

Workers dealing with workplace racism. Woman holding sign that reads, Racism is a pandemic too

A former worker is suing Tesla for $137 million.

A San Francisco federal court announced Tesla must pay a former worker $137 million after his claim of enduring racial abuse while working for the company.

Owen Diaz, a former contract worker for Tesla, faced a hostile work environment during his time at Tesla where colleagues would bully and disparage him and other African American workers. For example, he told the court, colleagues left racist graffiti in the restrooms and a racist drawing in his workplace.

While the story is shocking in its own right, even more surprising news has unraveled in the case’s aftermath. Diaz wouldn’t have even been allowed to take the suit to court if he had signed Tesla’s employment contract which stated, “mandatory arbitration.”

What is mandatory arbitration?

Mandatory binding arbitration essentially keeps companies out of court – it requires both parties to settle disagreements privately. Tesla, for example, uses mandatory arbitration to require employees to resolve disputes behind closed doors instead of in a public trial.

If Diaz had signed this contract, he would not have been able to bring this case to public light. This is an excellent example of why reviewing your employee contract for alarming clauses is critical.

Know what to look for in employment contracts.

Signing an employment contract is a big step, whether you’re a short-term contractor or long-term employee. It’s important to understand what you’re signing before committing to the job. Here are five key elements you should review with your lawyer:

  • Job description: While you may be thinking, “I already know what I’m signing up to do,” the devil can often be in the details when it comes to contracts. The description in the agreement should be similar to the language found in the job description. If it’s not, bring it up to your hiring manager.
  • Salary and benefits: Do the salary amount and benefits align with your offer letter? Check how often the payments are made and see if you are eligible for bonuses.
  • Working hours: Make sure the start date listed in the contract is what you have discussed with the hiring manager. If you’re an employee, check the number of working hours required each week and make sure it aligns with your schedule.
  • Holiday pay policy and sick leave: Make sure you understand the policies around taking time off, whether you are required to take your allocated time off between a specific time of year and if there are company-wide holiday days off.
  • Restrictive covenants: Restrictive covenants are typically put in employment contracts to help protect the company, other employees and clients. For example, a non-compete agreement, non-disclosure agreement and non-solicitation agreement are all considered restrictive covenants employees must sign before joining the company.

Talk to your LegalShield provider lawyer about reviewing your contracts.

Whether you’re a contractor or an employee starting a new job, you must understand what you’re signing off on before beginning your work. Your LegalShield provider lawyer can help by reviewing your contracts and helping you understand the more delicate print.

Pre-Paid Legal Services, Inc. d/b/a LegalShield (“LegalShield”) provides access to legal services offered by a network of provider law firms to LegalShield members through membership-based participation. Neither LegalShield nor its officers, employees or sales associates directly or indirectly provide legal services, representation or advice. This is meant to provide general information and is not intended to provide legal advice, render an opinion, or provide any specific recommendations. If you are a LegalShield member, please contact your provider law firm for legal advice or assistance.


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