Tesla faces investor test after grand jury prize on racism

SAN FRANCISCO / BOSTON, Oct.6 (Reuters) – A contractor won a $ 137 million jury prize for workplace racism against Tesla Inc (TSLA.O), increasing pressure on the electric vehicle maker whose shareholders will vote Thursday on a proposal to look at how it handles similar complaints for full-time employees.

The non-binding shareholder resolution asks Tesla’s board of directors to study the impact of the company’s current use of compulsory arbitration to resolve complaints of harassment and discrimination in its workplace. Tesla opposes the plan.

On Monday, a federal jury in San Francisco awarded the award to former Tesla employee Owen Diaz. “The verdict sends a message to US businesses that you need to make sure there is no racist behavior,” Lawrence Organ, his lawyer, told Reuters.

Diaz was able to face a public trial because the contract workers were not subject to Tesla’s compulsory arbitration, which requires employees to resolve disputes out of court.

Tesla advised against the resolution because, he said, arbitration “benefits both parties with a fair resolution and a faster return to their respective priorities without bogging them down in lengthy litigation.”

Some tech companies have reduced or eliminated compulsory arbitration. Uber and Lyft no longer require mandatory arbitration in sexual harassment cases. Google ended compulsory arbitration in 2019. In April, nearly half of the shareholders of Goldman Sachs Group Inc voted in favor of reviewing the bank’s use of compulsory arbitration.

Imre Szalai, a law professor at Loyola University in New Orleans, said such a verdict against Tesla would create “shame and awareness” of the company’s problems.

“The public is realizing that Tesla needs to change and is increasing the pressure on the company, as opposed to a confidential arbitration award that doesn’t get as much publicity,” he said.

Tesla’s arbitration agreements with employees and customers prevent them from publicly fighting in legal disputes over compensation, sexual harassment, race, disability and other types of discrimination, as well as product defects .

There are about 100 cases in US federal and state courts where Tesla has sought to require arbitration, including lawsuits against the company over employment, personal injury and contract issues, according to the Reuters review of Westlaw case data.

Kristin Hull, CEO of Nia Impact Capital who filed the resolution, said Monday’s jury verdict could help build support. A similar measure last year garnered a 27% share of the votes cast. Musk owns 23.1% of Tesla’s shares.

“It will be alarming,” she told Reuters after the verdict. “It’s a huge brand risk for Tesla to have these cases.”

Tesla’s credentials in clean transportation have made it a popular investment for environmental, social and governance investors. “It has surprised many environmental investors and they are not happy,” she said.

Nia Impact Capital has attempted to influence main shareholder BlackRock Inc (BLK.N), whose funds voted against the resolution last year. BlackRock declined to comment.

Tesla said that in the years since Diaz worked at the company, he has added employees to investigate complaints and promote equal opportunity.

In a blog post after the jury verdict, Tesla Vice President Valerie Capers Workman wrote that “we will continue to remind everyone who enters Tesla’s workplace that any discriminatory slurs – no matter what. intention or who uses them – will not be tolerated.

Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis have both recommended investors support the proposal, as they did last year for a similar proposal.

Reporting by Hyunjoo Jin and Ross Kerber and Rick Linsk; Editing by Peter Henderson and David Gregorio

Our Standards: Thomson Reuters Trust Principles.

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