A new lawsuit seeking class-action status claims that Tesla broke federal law by abruptly firing thousands of workers and denying them two months’ pay. The legal action is the latest in a flurry of allegations to hit the electric car maker as it navigates what could be a rough patch amid supply chain issues and other economic woes.
Former Tesla employees John Lynch and Daxton Hartsfield allege they were among thousands of workers fired recently amid company-wide cuts. CEO Elon Musk earlier this month emailed executives saying he had a “super bad feeling” about the economy and that Tesla would cut 10% of salaried workers, Reuters reported.
The lawsuit filed Sunday in federal court in Texas, where Musk’s electric car firm is headquartered after moving from Palo Alto late last year, alleges the terminations violated federal WARN Act requirements that workers receive 60 days’ written notice before being let go in a mass layoff. Also, because the workers allegedly received no such notice, they are also owed 60 days’ pay by Tesla, the suit claimed.
The U.S. WARN Act applies to businesses with 100 or more full-time employees or 100 or more employees who collectively work at least 4,000 hours per week excluding overtime. Like the California WARN Act, which covers businesses with 75 or more employees, it is intended to give workers advance notice that they will lose their job in a mass layoff or plant closure.
“Tesla has not acted in good faith nor with reasonable grounds to believe their acts and omissions were not a violation of the WARN Act,” the suit alleged.
Affected workers suffered “devastating economic impact,” the suit claimed.
Tesla did not immediately respond to questions about the lawsuit’s claims and which facilities may be seeing job losses. The company, by far the nation’s biggest electric vehicle producer, runs a large plant in Fremont that Musk said in April may be significantly expanded.
The legal action by Lynch and Hartsfield follows a blizzard of lawsuits in recent years over working conditions at Tesla facilities. California’s civil rights regulator is suing the company, alleging Black workers at Tesla’s Fremont factory were paid less than White workers, denied advancements and faced daily racist abuse. Tesla has called the suit the “misguided” result of a “bare bones investigation” and said the carmaker “strongly opposes all forms of discrimination and harassment.” Last week, Tesla shareholder Solomon Chau filed suit against the company, citing a dozen worker lawsuits and alleging Tesla has “a toxic workplace culture grounded in racist and sexist abuse and discrimination against its own employees,” which allegedly has exposed Tesla to hundreds of millions of dollars in potential liability for violations of state and federal law.” Tesla did not immediately respond to a request for comment on that lawsuit.
Lynch and Hartsfield worked at Tesla’s Nevada battery plant, where they were among more than 500 workers turfed, according to the suit. Lynch was let go June 10, Hartsfield was laid off June 15, and they and the other fired workers were notified that their terminations were “effective immediately,” the suit claimed.
The plaintiffs are seeking to bring thousands of allegedly laid off Tesla workers into the suit via class-action certification, and they want each worker to receive 60 calendar days worth of pay, commissions, bonuses and benefits from Tesla, along with any medical costs incurred in the 60 days after they were let go that would have been paid under their company health plans.
A confluence of economic problems from inflation to COVID are afflicting Bay Area businesses including Tesla. Technology companies in the region axed 3,300 jobs in May — 1,400 in the San Francisco-San Mateo region, 1,000 in Santa Clara County and 700 in the East Bay, according to Beacon Economics. In April, payments firm PayPal laid off 83 workers in San Jose. San Francisco online fashion and styling company Stitch Fix announced this month it would shed 330 jobs.
For Tesla, COVID lockdowns in China where it operates a major manufacturing facility have been a “gut punch,” said Wedbush Securities analyst Dan Ives.
For Tesla investors, the lawsuit by Lynch and Hartsfield “just adds more noise to a noisy situation,” Ives added.