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Multimillion Dollar Employment Discrimination Verdict Against Tesla

In California, applicants and employees are protected from discrimination at the workplace based on their race under both state law and Title VII of the Civil Rights Act of 1964. While legislation has been proposed to expand the coverage of Title VII to include independent contractors, they are generally not protected from workplace discrimination under Title VII. However, courts have found that independent contractors are protected against discrimination in the workplace by the Civil Rights Act of 1866. Among the protections included in this law is the right to enter into contracts. Courts have found that this provision prohibits racial discrimination against contract workers.

Recently, a jury handed down a verdict in favor of a Fremont, California man against Tesla. Tesla was ordered to pay the man almost $137 million after it failed to correct a racially hostile work environment. The man, who is Black, was an employee of a staffing agency who was placed at Tesla and filed a lawsuit against the major company under the Civil Rights Act of 1866 instead of Title VII.

Factual Background

Owen Diaz was an elevator operator who worked at Tesla in Fremont, California as a contract worker through a staffing agency from June 2015 to May 2016. His son, Demetric Diaz, also worked at the same Tesla plant. During the entire time when Owen Diaz worked at the plant, he was subjected to daily racial epithets, including the N-word. Other employees at Tesla's Fremont location also posted images of Black people with exaggerated lips and bones in their hair to humiliate Black workers who worked in the plant. These depictions were posted in areas where Black workers would be sure to see them.

Diaz also stated that racist graffiti was all over the walls in the bathroom. In his lawsuit, Diaz said that after witnessing people in the workplace call his son racist epithets and listening to his son speak about experiencing racist abuse at work, he could no longer take it. He claimed that supervisors at Tesla did nothing when Black workers at the facility complained about the rampant racism and the hostile work environment that it had created. Diaz stated he felt he was forced to quit because he could no longer deal with the racist abuse and harassment he had experienced while working at the facility. He also stated that after he had complained about racism, he had been threatened with a demotion.

Diaz filed a hostile work environment and racial harassment lawsuit against Tesla and several staffing agencies that placed workers at the Fremont facility. Since Title VII did not apply because he was a contract worker, he filed his claims under the Civil Rights Act of 1866. This law provides people with protections within the contractual relationship and the privileges associated with contracts.

The case went to trial before a jury. At trial, Tesla tried to argue that Diaz was not an employee and instead had only been paired with a position at its facility by a staffing agency. However, Diaz argued that he did work at Tesla, took direction from Tesla's employees and supervisors, and used its equipment. His pay rate and hours were also determined by the employees of Tesla.

Tesla asked the court to strike an expert witness's testimony and argued throughout the trial that Diaz was not employed by the company and did not have a contract with the company. It also argued that Diaz did not present sufficient evidence to show that the company subjected him to discrimination based on his race. It also argued that even if the allegations Diaz made were true, Diaz would not be able to prove that Tesla violated the prohibitions against race discrimination in the workplace. They argued that he failed to establish that a contractual relationship existed between Tesla and him and had testified that he did not receive anything in writing that he was employed by Tesla at any time.

The jury found that a contractual relationship between Tesla and Diaz did exist and that Tesla had violated Diaz's rights against race discrimination by allowing the creation of a hostile work environment and failing to do anything to stop the ongoing racism within the workplace at its Fremont facility. It returned a verdict in favor of Diaz that consisted of $6.9 million in emotional distress damages and $130 million in punitive damages. It is believed that Tesla will file an appeal.

During the coronavirus pandemic, Tesla has come under fire because of other allegations of discrimination and violations of labor rights. However, the jury's verdict that included $130 million in punitive damages represents a major effort to punish the company for its problematic employment practices and poor working environment for all workers.

Analysis of the Verdict

Plaintiffs in employment discrimination lawsuits have the burden of proving that their employers discriminated against them based on their protected characteristics by a preponderance of the evidence. They can do this by introducing direct or circumstantial evidence.

In McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), the Supreme Court of the United States established a burden-shifting method of proving employment discrimination. The plaintiff will first be required to establish a prima facie case of employment discrimination by presenting evidence to show each of the following elements:

  • The plaintiff is a member of a protected group.
  • The plaintiff met the employer's legitimate expectations for job performance.
  • The plaintiff suffered an adverse employment action.
  • The adverse action occurred in circumstances in which an inference of racial discrimination existed.

Once a plaintiff meets the initial burden of establishing a prima facie case of race discrimination, the burden then shifts to the employer to prove that the adverse action was based on a legitimate reason that was not discriminatory. If the burden is met by the employer, the worker will then have the burden of proving that the employer's stated reason is pretextual and that it was actually discriminatory.

The McDonnell-Douglas burden-shifting method of proving employment discrimination applies when the evidence presented by the plaintiff is circumstantial. Direct evidence of prohibited discrimination would include statements made directly by the employer. It also applies in cases filed under Title VII.

In addition to establishing a prima facie case of race discrimination, an employee can prove that racial harassment created a hostile work environment. To do so, a plaintiff must prove that he or she was intentionally targeted for discrimination based on his or her race, the discriminatory acts were severe or pervasive, the plaintiff's ability to perform his or her job was impacted by the discrimination, and a reasonable person in the same environment would also find it to be detrimental. Courts consider the totality of the circumstances when deciding whether harassment is pervasive or severe enough to create a hostile work environment.

Employers will not always be found liable for hostile work environment harassment based on race. If the environment is created by a supervisor, the employer will be liable when the supervisor engages in an adverse job action against the employee through a termination, demotion, or giving him or her an undesirable assignment. However, when the people creating the hostile work environment are the plaintiff's co-workers, the employer can try to defend against the allegations by presenting evidence that it used reasonable care to end the harassment and that the employee did not take advantage of its safeguards. Employers can be liable for co-worker harassment when the employer fails to discipline, train, or fire the harasser after learning about what is occurring.

Section 1981 of the Civil Rights Act of 1866 is not enforced by the EEOC. The Supreme Court has previously held that this law's contractual provisions protect all people who enter into employment contracts against race discrimination and retaliation based on race.

Employees of staffing agencies that are placed at companies like Tesla are considered to be third-party employees. According to the Equal Employment Opportunity Commission, they can be considered to be employees of the staffing agency, the client company where they work, or both. They do not need to have a direct contract with the client company to be considered to have a contractual relationship with it. Companies that use third-party staffing agencies to place workers are prohibited from discriminating against them based on race or other protected characteristics.

Get Help From an Experienced Employment Discrimination Lawyer

The verdict against Tesla demonstrates that employers cannot try to evade the prohibitions against race discrimination when they use staffing companies to place workers in their facilities. People who have suffered discrimination based on race while working at a company after being placed by a staffing agency should speak to an experienced race discrimination attorney at Steven M. Sweat, APC. Call us today at 866.966.5240 for a free consultation.

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