A group of mostly Democratic senators is putting the pressure on Tesla CEO Elon Musk will end the company’s use of forced arbitration clauses in employee and customer contracts in a letter Monday.
Like most large companies, Tesla requires workers to sign an arbitration agreement upon employment where legal. This means that in order to speak freely in court, where their speech will become part of the public record, workers must first obtain an exception to the arbitration agreement from a judge.
The senators wrote that such clauses allowed workers’ complaints about racial discrimination and other poor working conditions to remain hidden from public view. The group included Sens. Richard Blumenthal, D-Conn., Sherrod Brown, D-Ohio, Dick Durbin, D-Ill., Ed Markey, D-Mass., Jeff Merkley, D-Ore., Bernie Sanders, I-Vt. and Elizabeth Warren, D-Mass.
The letter references details from discrimination lawsuits against Tesla, in which black workers say they regularly face racial discrimination on the job, and women who work at Tesla report blatant objectification and harassment by male co-workers, with little or no management support. The EEOC, a federal agency responsible for enforcing civil rights laws against discrimination in the workplace, had previously issued a finding against Tesla, the company disclosed last June.
The senators wrote that workers at Tesla’s factory in Fremont, Calif., appear to have filed at least five times as many discrimination lawsuits last year as workers at comparable plants operated by other companies.
“However, only a few of these cases have survived in court, with most being forced out of court following Tesla’s demands to compel arbitration,” the lawmakers wrote. “The details alleged in these cases — some of which we noted above — raise serious concerns about not only the complicity and involvement of Tesla management in the discriminatory terms, but also the countless other complaints that remain confidential.”
Forced arbitration clauses in consumer contracts similarly hid important details about Tesla’s vehicle safety and business practices from the public, the lawmakers wrote.
“The public deserves the full slate of complaints about the safety of Tesla’s vehicles,” they said, adding that while clauses in customer contracts could theoretically allow customers to opt out of forced arbitration, they rarely do, making the distinction largely moot. .
Of particular concern to the senators were consumer complaints about phantom brakes appearing in Tesla vehicles.
“In addition to faulty design choices, Tesla vehicles appear to be plagued by a myriad of hardware and software problems: Two Tesla vehicles have had their steering wheels fall off during operation due to a missing retaining bolt, which NHTSA recently opened an investigation into, while another vehicle appears to have spontaneously burned,” they wrote. “But because Tesla drivers are, as a practical reality, subject to confidential arbitration agreements, we and the public—including prospective buyers—have no visibility into what complaints may have already been made and what other potential safety issues the Tesla vehicles can come into existence.”
In addition to asking Tesla to commit to ending arbitration clauses in employee and consumer contracts and to stop filing motions to compel arbitration in court, the lawmakers asked Tesla for detailed information about its arbitration practices.
For example, the senators asked how many complaints of racial harassment, discrimination and retaliation Tesla has received from workers since 2012, and how many of those have been settled or gone to arbitration. They requested the same details about sexual harassment complaints from Tesla workers.
They also requested more information about when Tesla added the option for consumers to opt out of forced arbitration and how many of them have actually been able to do so historically.
The senators also sought detailed information on the types of vehicle-related complaints they received from customers, what hardware and software were involved in those complaints, how many were settled before arbitration and how many that went to arbitration were found for the benefit of the user.
Mandatory arbitration is a common practice among new and used car dealers, says Paul Bland, executive director of Public Justice, a consumer advocacy group. However, Tesla makes and sells its cars directly to consumers, so its forced arbitration clauses cover more than the norm when it comes to car sales.
Bland said, “It makes a lot of sense to me for the senators to focus on this. Tesla is using arbitration clauses as a tactic to steer people into a forum that is heavily biased toward the corporation.”
The longtime consumer advocate views arbitration as a secretive system that makes it harder for consumers to find out what happened to people in previous related cases. Bland also said arbitration makes it difficult for consumers to form class action lawsuits or even make informed choices about where they want to take their business.
Read the full letter here.
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