Tesla Strategy in EEOC Suit Boosted By State-Federal Turf Fights

The US Equal Employment Opportunity Commission is gearing up for what could be an uphill legal battle against Elon Musk’s Tesla Inc., facing both a CEO with an appetite for litigation and a state civil rights agency doing potentially conflicting work.

The EEOC sued Tesla on Sept. 28, claiming that it created a hostile work environment at its factory in Fremont, Calif. It alleges that Black employees were frequently subjected to racial hostility, slurs, and racist graffiti as well as retaliation for complaining about the harassment and discrimination.

Tesla has faced bias lawsuits over its Fremont factory dating back to 2017, including ongoing litigation by the California Civil Rights Department— formerly the Department of Fair Employment and Housing. But it is the EEOC’s first known suit against a Musk-owned company, drawing public attention to the commission’s lawyers as they square up against the world’s richest person.

“It will be a difficult battle, but the hard battles are often the most worthwhile to fight,” said California Civil Rights Group attorney Larry Organ, who has represented several Black Tesla workers in discrimination suits against the company.

Private plaintiffs have had a track record of some success in bringing discrimination cases against Tesla. One former Fremont factory worker won a $137 million jury verdict, later cut to $3.2 million.

Turf War

But in its own attempt to sue Tesla, the EEOC may find itself facing off not just with the company, but also with California’s civil rights agency. It’s a tension the carmaker could use to its advantage in fighting off both lawsuits.

The federal and state agencies are already clashing over the EEOC’s $18 million consent decree with Activision Blizzard Inc., which the state agency claimed was being used to thwart its own rights to pursue remedies for state violations on Californians’ behalf.

Damages under state litigation are not capped, unlike litigation under Title VII, where the maximum compensatory and punitive damages award is $300,000.

California regulators sued Activision in July 2021, two months before the EEOC said it had reached a settlement with the gaming giant resolving harassment claims following its own investigation. The state civil rights agency subsequently appealed a court decision blocking it from intervening in the settlement.

Tesla’s lawyers have already ripped a page from Activision’s playbook, accusing California in an April 2022 filing of using its own discrimination suit as a tool to advance a “turf war against the EEOC.”

Tesla didn’t respond to a request for comment on litigation against the company.

“So far what we’ve seen from these two agencies is a playbook on what we don’t want to see happen,” said labor and employment attorney David Fortney, co-founder of Fortney & Scott LLC. “The underlying issue is the concern that we have potentially a state and federal agency that are not coordinated, as we would expect them to be.”

Commissioner Charge

Michaela Posner, a labor and employment attorney at Weinberg, Roger & Rosenfeld, who represented an Activision employee, said there is an added complication due to the “legal limbo” that exists about who has the right to interfere when EEOC settles a case based on an internally-initiated “commissioner charge,” such as they did in the Activision case. A right to intervene is not spelled out in statute when a suit derives from this kind of charge, she said.

The litigation brought against Tesla by the EEOC also originated through a commissioner charge, filed by Democratic EEOC Chair Charlotte Burrows. According to the complaint, the agency issued a letter of determination to Tesla in June 2022. Following failed attempts to enter a conciliation agreement with Tesla, the agency sued the company.

“To the extent that Tesla charge is also based on a commissioner charge like Activision, that really makes me worried that we’re setting up for a repeat of the legal dispute that occurred in Activision,” Posner said.

The EEOC filed 29 commissioner charges in fiscal year 2022, a drastic uptick from the three filed the previous year, but the charges are still rare.

John Fox, an employment lawyer at Fox, Wang and Morgan P.C., said the decision to bring a commissioner charge is very unusual.

“This is a very rarefied device,” Fox said. “And so it raises the real question, why would you spend one of your very rare bullets to shoot at a target that’s already being hit by another agency?”

The California agency sued Tesla in February 2022 for ‘pervasive’ racial discrimination at the car company’s Fremont factory.

Its public affairs department in a statement to Bloomberg Law said that the state and federal agencies are on the “same page.”

“The EEOC’s allegations of a pattern and practice of racial discrimination substantiate the state’s case and we welcome their efforts to address these concerns,” it said.

The two agencies instituted a work share agreement in fiscal year 2022 on charge processing, jurisdiction, and data sharing, which was extended through Sept. 30 of this year.

EEOC Communications Director Victor Chen said “the EEOC’s suit brings claims under federal law, specifically Title VII, that are not a part of the CRD’s suit.”

Facing Musk

Employment attorneys said they anticipate that, like Activision, Tesla will push back on the state litigation before finalizing a settlement with the EEOC, avoiding potentially high-dollar claims under the state charges.

“Tesla’s going to do what Activision did, which is trying to pit these two agencies against each other and essentially do a race to the bottom to get the best deal that Tesla can,” Posner said.

In its April 2022 filing, the automaker said the state “ignored its statutory obligations and rushed to file suit against Tesla,” speculating that this was “out of fear that the EEOC would be the first to settle with Tesla.”

Musk’s companies’ past litigation record against government agencies shows a telling willingness to push back, despite the financial costs of duking it out.

Last month, Musk’s SpaceX countersued the US Department of Justice, attempting to stop a hiring discrimination case filed by the DOJ.

The CEO has also had an ongoing legal feud with the Securities and Exchange Commission, stemming from a single August 2018 tweet. The agency has subpoenaed Tesla on several occasions.

Musk has even offered to fund lawsuits by workers who believe they’ve been discriminated against by their employer because of their activity on his social network X, formerly known as Twitter.

Organ, who has sued Tesla several times, said the agencies can expect the company will fight “tooth and nail.”

“The CRD and the EEOC have very broad discovery powers as agents of the state and federal governments,” said Organ. “From my perspective, that’s the enemy of Tesla. Because the more information that is made public, the worse it is for Tesla.”