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Tesla Worker Must Arbitrate Job Discrimination, Labor Claims (1)

June 28, 2022, 4:00 PMUpdated: June 29, 2022, 4:17 PM

Tesla Inc. can require an employee to arbitrate claims that he faced race harassment, lost out on promotions because he is Black, and was constructively discharged by the auto maker after appearing in an Audi Super Bowl ad, a Los Angeles federal judge ruled Tuesday.

Naymon Frank must also arbitrate his meal break, rest break, and other claims under California labor law as well as his fraud claims, the US District Court for the Central District of California said. Frank, who was formerly associated with the Green Bay Packers, signed a job offer letter that contained Tesla’s standard employment arbitration agreement when he was hired as an owner adviser in July 2016 and he didn’t show the agreement was unenforceable, the court said.

That’s so even though the pact contains some degree of both procedural and substantive unconscionability, in that Tesla didn’t provide Frank with the applicable arbitration rules when he accepted the agreement. The pact also includes a one-sided carve-out for confidentiality and intellectual property claims that unfairly favors the company, Judge Maame Ewusi-Mensah Frimpong said.

The procedural unconscionability resulting from the failure to give Frank the arbitration organization’s rules was minimal because Frank, in opposing the company’s motion to compel arbitration, didn’t take issue with the rules themselves, the judge said. There is thus “little concern that the failure to attach the rules” to the arbitration agreement “contributed to oppression or surprise,” Frimpong said.

The carve-out allows both sides to pursue claims arising under a separate proprietary information and inventions agreement in court. That provision is unfairly one-sided because it’s “disproportionately more likely” that Tesla would bring such claims, the court said.

But the carve-out can be severed and the rest of the arbitration agreement can be enforced, the court said. That approach is proper because there’s only a limited degree of unconscionability in the arbitration pact, the court said.

Frimpong largely rejected Franks’ contentions that the pact was an unenforceable contract of adhesion because it was presented to him on a take-it-or-leave-it basis. Franks also missed the mark in arguing that the agreement was substantively unconscionable because it doesn’t allow for the full discovery available in court proceedings, the judge said.

Take-it-or-leave-it arbitration pacts aren’t automatically unconscionable and the agreement here actually places no limits on discovery, Frimpong said.

Bohm Wildish & Matsen LLP represented Franks. In-house counsel represented Tesla.

The case is Frank v. Tesla, Inc., C.D. Cal., No. 2:22-cv-01590, 6/28/22.

(Updates June 28 story with additional information about Frank's football career in the second paragraph.)

To contact the reporter on this story: Patrick Dorrian in Washington at pdorrian@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com