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Tesla stockholder sues over ‘toxic’ workplace environment

A New Jersey stockholder says Tesla, Elon Musk and others fostered a culture of racial discrimination and sexual harassment.

AUSTIN, Texas (CN) — A Tesla stockholder from New Jersey filed a federal lawsuit against the electric car brand, its eccentric CEO Elon Musk and its board of directors for encouraging a discriminatory work environment.

Solomon Chau took to an Austin federal court to say the unsafe, racist and sexist work environment at Tesla constitutes a breach of the fiduciary duty the company owes to its stockholders and violates securities law.

“Although the company has publicly committed to promoting a culture of diversity and inclusion in the workplace, Tesla’s leaders have, for years, permitted the company to engage in systemic and unlawful discriminatory practices on the basis of race and gender by instituting policies and procedures that encouraged harassment and discrimination to continue, while simultaneously discouraging reporting from victims,” reads the 88-page complaint. 

Tesla is headquartered in Austin, employs nearly 100,000 people and, in its impact report published last year, touts that a majority of its U.S. workforce is from a minority group. In addition, the company runs several “employee resource groups” for workers from specific ethnic backgrounds, the LGBTQ community and for women. The company also reports that all new employees receive anti-harassment and discrimination training during their onboarding. 

Chau, in his lawsuit against Tesla and its leaders, cites recent instances in which the company has been found responsible for discrimination against its employees. The complaint points to the current and ongoing discrimination lawsuit filed against Tesla this February by the California Department of Fair Employment and Housing (DFEH). In that case, the civil rights agency sued Tesla for allegedly segregating its workforce in its factory in Freemont, California, and allowing discrimination against Black workers.

According to DFEH, Black employees endured racial slurs daily from fellow workers and supervisors. Moreover, Tesla allegedly punished Black employees for minor infractions at higher rates than their non-Black counterparts. Chau argues that Tesla is responsible for this discrimination through its alleged knowledge of the abuse and racist behavior against its Black employees and its inaction to stop it. 

The company responded to DFEH’s lawsuit, calling it misguided. In a press release, the company claimed it commits to protecting its workers saying, "Tesla has always disciplined and terminated employees who engage in misconduct, including those who use racial slurs or harass others in different ways."

In addition to racial discrimination, the complaint documents seven alleged instances in which female employees working in the Fremont factory faced constant sexual harassment from other male employees and inaction or retaliation from supervisors after reporting the abuse. 

Chau takes direct aim at Elon Musk as well, accusing him of knowing about the discriminatory culture at the Fremont factory since 2017. The plaintiff also argues that Musk’s public statements to Twitter have encouraged a culture of harassment at his facilities. 

Along with his claim of breach of fiduciary duty against Tesla and Musk, Chau argues that the defendants violated Section 14(a) of the Securities Exchange Act by making false and misleading statements about the company’s commitment to a workplace free of discrimination and harassment.

The plaintiff is seeking that the company is directed to take action to reform its workplace culture and improve its internal ability to address instances of abuse going forward. Moreover, Chau has also requested that he be awarded attorney fees for his action. The plaintiff has also requested a trial by jury. 

Tesla or Musk has yet to make a public statement responding to the lawsuit.

Last month, reports surfaced that in 2018, the company SpaceX, which is owned by Musk, paid a $250,000 settlement to a flight attendant who claims the CEO exposed himself to her. Musk maintains that the incident never happened. 

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