$136.9M judgment vs. Tesla underscores rising costs of joint employer relationships

After less than four hours of deliberation, a jury in a California federal court recently awarded $136.9 million to a former Tesla subcontractor after finding he had been subjected to a racially hostile work environment at the company’s factory in the northern part of the state. The huge damages award demonstrates the potential dangers underlying joint employer relationships.

Facts

Owen Diaz testified he and his son suffered near-daily racial epithets (including the use of the N-word, swastikas, and racial graffiti and drawings) from coworkers and supervisors. He said his complaints to management failed to end the harassment.

Diaz had been subcontracted to Tesla and placed in the facility by a staffing agency. Nevertheless, the court found the automaker was a joint employer and responsible for its subcontractors’ environment, leading to a $130 million punitive damages award and a $6.9 million emotional damages award. Historically, Tesla has required employees to arbitrate similar claims, but contractors weren’t bound by the same agreements.

At trial, Tesla’s HR administrator testified about the company’s antiharassment policies, training, and complaints and investigation procedures, noting its staffing agencies were expected to train subcontractors on the policies and investigate when they were involved in complaints. In fact, the company had no written procedure for investigations involving contractors’ complaints and lacked any formal training for supervisors on how to conduct harassment probes.

How 4th Circuit, West Virginia courts handle joint employment