Judge William H. Orrick of the US District Court of Northern California Wednesday reduced damages Tesla owed in a workplace racial harassment suit from $137 million to $15 million.
Last October, worker Owen Diaz sued Tesla for violating California state law and 42 USC §1981, which guarantees non-discrimination in the making of contracts. During his employment between 2015 and 2016 at Tesla’s Fremont factory, Diaz faced frequent racial abuse, such as racist slurs and graffiti, from coworkers and even supervisors.
The constant exposure to this hostile work environment over several months made Diaz, earlier a jovial, engaged and outgoing man, withdrawn and moody. It also detrimentally affected his diet and sleep. Diaz sought damages for solely emotional injury.
Ruling that Tesla failed to take “all reasonable steps necessary” to prevent such harassment, the jury awarded Diaz $130 million in punitive damages, $4.5 in past compensatory damages and $2.4 million in future compensatory damages. Tesla then brought two motions against this verdict. One was for judgment as a matter of law that it was not liable under §1981 since Diaz’s contract was with a staffing agency and not itself, and, alternatively, one was for a new trial and for a remittitur—a reduction in damages—to $600,000.
Orrick denied the motions for judgment and a new trial. He stated that, although Diaz did not have a direct contract with Tesla, Tesla still qualified as his employer by way of an implied contract. However, he granted the remittitur in part. While he found Diaz was entitled to a relatively high compensatory award given the debilitating psychological effects he suffered, the award was excessive considering Diaz was only employed at Tesla for nine months and he did not face physical injury. He reduced compensatory damages to $1.5 million.
Orrick found the $130 million punitive damages award “unconstitutionally large” and prohibited by the Supreme Court. While he found Tesla’s actions met the reprehensibility requirement, the award was unjustified given the high ratio of punitive to compensatory damages and in comparison to other cases. Following a 9:1 ratio of punitive to compensatory damages, he reduced punitive damages to $13.5 million.
Tesla’s Fremont factory, which employs over 15,000 workers, is the only major US automotive plant to remain non-union. The California Department of Fair Employment and Housing sued Tesla in February, alleging violations of the Fair Employment and Housing Act and other laws with regard to Black employees.
If Diaz does not accept the award within 30 days, Orrick stated, Tesla’s motion for a new trial will be granted.
