Tesla Inc (NASDAQ:TSLA) shares fell 3% overnight after the electric car manufacturer was sued by the state of California's civil rights agency over allegations of racial discrimination at its Freemont factory over a number of years.
The state’s Department of Fair Employment and Housing (DFEH) said it had filed a lawsuit that alleged the company operated a “racially segregated workplace”.
A statement from the DFEH confirmed that a civil action had been filed in Alameda Superior Court against Tesla for violations of the Fair Employment and Housing Act and the California Equal Pay Act.
The lawsuit alleges that black workers are subjected to racial slurs by managers and supervisors, that they are "segregated to the lowest levels of the workforce", and are "severely under-represented" among executives and managers.
The lawsuit followed complaints made by production line staff from 2015 to 2019, according to reports from Wall Street Journal and Bloomberg.
In addition to race-based segregation in the terms and conditions of employment, DFEH also alleged that Tesla “turned a blind eye to years of complaints from Black workers protesting the near-constant use of racial slurs and derogatory language in the workplace, and the presence of racist writing and graffiti in common areas of the workplace, including swastikas and other hate symbols”.
DFEH director Kevin Kish said in the statement: “After receiving hundreds of complaints from workers, DFEH found evidence that Tesla’s Fremont factory is a racially segregated workplace where black workers are subjected to racial slurs and discriminated against in job assignments, discipline, pay, and promotion creating a hostile work environment.”
The DFEH said Tesla’s brand highlights “a socially conscious future [that] masks the reality of a company that profits from an army of production workers, many of whom are people of color, working under egregious conditions”.
The Fremont factory is the only non-unionised major American automotive plant in the country, the DFEH noted.
In a blog post, Tesla said the lawsuit was “misguided” and that it would ask the court to pause the case.
“Attacking a company like Tesla that has done so much good for California should not be the overriding aim of a state agency with prosecutorial authority," the post said.
“The interests of workers and fundamental fairness must come first. Tesla strongly opposes all forms of discrimination and harassment and has a dedicated employee relations team that responds to and investigates all complaints.”