Court Rejects Tesla’s Cross-Complaint in Calif. Civil Rights Dept.’s Worker Discrimination Case

On Wednesday, the California Civil Rights Department (CRD), formerly known as Department of Fair Employment and Housing, scored several likely victories over Tesla in its case against the electric and autonomous vehicle maker for discrimination in the workplace. The court’s five-page tentative opinion addressed the CRD’s demurrer to Tesla’s cross-complaint as well as the CRD’s motion to strike parts thereof.

The CRD’s case, now nearing its one year anniversary, alleged that Tesla engaged in race discrimination, harassment, and retaliation. Specifically, the CRD said that Tesla subjected its Black workers to egregious and ongoing discrimination at its Fremont, Calif. factory, including verbal abuse, denial of advancement opportunities, and harsher discipline than colleagues of other races.

Tesla’s immediate response was that the case was premature and procedurally improper, an argument which the Alameda County Superior Court declined to give credence to. Later, the car maker filed a cross-complaint alleging that the CRD improperly adopted and is applying rules, regulations, and procedural standards in violation of the Administrative Procedure Act (APA).

In this week’s opinion the judge overseeing the case expressed frustration that both parties “briefed the issue of whether the CRD has underground regulations without addressing that the CRD has express regulations that cover the same topics as the alleged underground regulations.” The court called the lapse “stunning” as the CRD is “presumably aware of its own regulations and Tesla referenced the regulations [in its cross-complaint].”

Turning to the substance of Tesla’s claim for affirmative relief, Judge Evelio Grillo said it “in large part appears to have no merit.” The court granted leave to amend, with instructions for Tesla to “identify policies or practices of the CRD that are rules of general application that are underground regulations” in pursuit of its claim that the CRD did not comply with its express regulations.

The court struck some but not all allegations made in Tesla’s cross-complaint, granting the motion to strike insofar as the Tesla impermissibly alleged what the CRD did or not do at the conciliation/mediation in February 2022. The court said that “Tesla must limit itself to an allegation that the conciliation/mediation on 2/8/22 was not successful without alleging why it was not successful.”

A discovery-related hearing is scheduled for the end of the month. The CRD is represented by its own counsel and Tesla by Holland & Knight LLP and Reed Smith LLP.