Tesla Motors CEO Elon Musk speaks at an event in Australia in September 2017. Mark Brake, Getty Images

UPDATED: Tesla Responds to Racism Claims

A fired African-American employee claims Tesla's factory is "pre-Civil Rights era" in terms of race discrimination, while Musk has said targets of harassment should have thick skin. Tesla has responded.

UPDATE: Tesla has reached out with a link to a blog rebutting the claims of Marcus Vaughn. Please read it here: https://www.tesla.com/blog/hotbed-misinformation

Just a few days before the long-anticipated –and twice delayed – reveal of the Tesla Semi Truck, the electric carmaker is making news for all the wrong reasons. A lawsuit filed on behalf of a recently terminated African-American employee Marcus Vaughn, alleges supervisors at the Fremont factory regularly use racial epithets and that the factory floor is a "hotbed for racist behavior."

Here are the facts according to the lawsuit, as reported by Bloomberg:

  • Marcus Vaughn worked at the Fremont factory from April 23 to Oct. 31.
  • Vaughn notified HR and CEO Elon Musk in writing of the use of offensive language used by supervisors around him and other black employees.
  • Vaughn was fired for "not having a positive attitude."
  • The lawsuit was filed Nov. 13 California's Alameda County Superior Court.
  • Along with the use of racial slurs, Vaughn claims: "Although Tesla stands out as a groundbreaking company at the forefront of the electric car revolution, its standard operating procedure at the Tesla factory is pre-Civil Rights era race discrimination."

Tesla has responded with a strongly worded blog:

Regarding yesterday’s lawsuit, several months ago we had already investigated disappointing behavior involving a group of individuals who worked on or near Marcus Vaughn’s team. At the time, our investigation identified a number of conflicting accusations and counter-accusations between several African-American and Hispanic individuals, alleging use of racial language, including the "n-word" and "w-word," towards each other and a threat of violence. After a thorough investigation, immediate action was taken, which included terminating the employment of three of the individuals.

It also summarily destroyed many of the lawsuit's points:

  • There is only one actual plaintiff (Marcus Vaughn), not 100. The reference to 100 is a complete fabrication with no basis in fact at all.
  • The plaintiff was employed by a temp agency, not by Tesla as claimed in the lawsuit.
  • Marcus was not fired, he was on a six month temp contract that simply ended as contracted.
  • His email to Elon was about his commute and Tesla’s shuttles, which was addressed as he requested. There was no mention of racial discrimination whatsoever.
  • The trial lawyer who filed this lawsuit has a long track record of extorting money for meritless claims and using the threat of media attacks and expensive trial costs to get companies to settle. At Tesla, we would rather pay ten times the settlement demand in legal fees and fight to the ends of the Earth than give in to extortion and allow this abuse of the legal system.
  • We would also like to clear up the description of Elon’s prior email to employees. It is dedicated to ensuring that Tesla employees always try to do the right thing, that being a jerk is not allowed, that everyone should be contributing to an atmosphere where people look forward to coming to work in the morning and that no one should feel excluded, uncomfortable, or unfairly treated. As one of many points in that email, Elon also explained that if someone makes an offensive or hurtful statement on a single occasion, but subsequently offers a sincere apology, then we believe that apology should be accepted. The counterpoint would be that a single careless comment should ruin a person’s life and career, even if they truly regret their action and do their best to make amends. That would be a cold world with no forgiveness and no heart.

This comes on the heels of extremely negative press for Tesla, which does not spend any money on advertising, so all press needs to be good press.

First off, production on the Model 3 is severely lagging. There are about 500,000 pre-orders, and because of supposed supplier issues, they won't hit 5,000 per week until at best the end of the year. Even at that pace, they won't fulfill all current orders until 2019.

Concurrently, the UAW has accused Tesla of union busting for months. And in October, Vaughn and about 700 other employees, or 2% of Tesla's workforce, were terminated.

Alone, any of these events would be troubling, especially to investors. But they may be part of a bigger story happening in Fremont. In an effort to create a bright new environmentally-friendly, socially conscious world, Musk is driving his employees into the ground.

"Production Hell" is a phrase Musk often uses to describe the difficult early stages of getting his new models out to consumers. Recently he even tweeted about it referring to the new Nevada Gigafactory,which will make Tesla's supply of lithium ion batteries.

 

Sleeping on a roof to make sure leadership is onsite to ensure goals are met? From the outside, that looks super impressive, the big billionaire boss roughing it for the company good. Please note Darth Vader did the same thing with the second Death Star.

And also note what Musk said earlier this month to Fortune after letting those 700 employees go based on performance evals:

"You have two boxes of equal ability, and one's much smaller, the big guy's going to crush the little guy, obviously, so the little guy better have a heck of a lot more skill or he's going to get clobbered. So that is why our standards are high. They're not high because we believe in being mean to people. They're high because if they're not high, we will die."

There's a right way and wrong way to motivate, and what "being mean" is. As a former sailor on a submarine that went from the bottom to the top of the fleet in terms of performance in about a year's time, I can tell you success requires a sacrifice of buckets of sweat and even more sleep. I thought the officers and chiefs onboard were often quite mean, as I consider any authority figure who doesn't grant me absolute autonomy. At no time in my presence, in one of the most anti-PC environments on Earth, did a supervisor think it appropriate to negatively bring race in a conversation.

That's relevant here because of Musk's apparent response and the most evident example of cracks in the tech superhero's seemingly impervious armor. This is from an email Musk sent out to Fremont employees on May 31, mentioned in the lawsuit:

"Part of not being a huge jerk is considering how someone might feel who is part of [a] historically less represented group. Sometimes these things happen unintentionally, in which case you should apologize. In fairness, if someone is a jerk to you, but sincerely apologizes, it is important to be thick-skinned and accept that apology."

Now here's the entire email provided by Tesla.

Tesla

Even if this email wasn't directly written in a response to allegations of racism, it can be interpreted as a callous response to an African-American, especially when the author is a white man who grew up in Apartheid South Africa. That's not at all to suggest Musk is racist, who we at NED have the utmost respect for.

It just looks bad. And it came two months after an African-American assembly line worker sued due to racial harassment. People can put two and two together.

And it conceivably could have even emboldened lower management to prey on the suspected thin-skinned employees, or anyone who doesn't like to be judged by the color of it. If someone calls you a racial slur, but your CEO says turn the other cheek or you're not a team player, that's an unfair position.

There's no evidence that this happened, but there is evidence it emboldened one ex-employee to take advantage of the cracks in the culture by filing this lawsuit.

Every big action he's taken is to make a better world, and explore new ones, for the good of all of humanity. So his justification for pushing his employees to their limits is understandable, even commendable if you're into that greater good stuff.

But if that is true, and Tesla is the underdog fighting off competitors and needs everyone's best, why would it ever subscribe to a policy of hiring less qualified candidates? Musk admits that.

And if you do use that in a treatise on how not to be a jerk, don’t be a jerk by tacking on that some diversity hires (that didn’t deserve the job) took advantage of the opportunity to sue for millions when they didn’t get as much as they wanted. It may be 100% true, but maybe don’t juxtapose the two together. That, Elon, is obviously not cool.

But consider Musk, as admitted in Vogue, was bullied endlessly as a kid:

"There were a couple of gangs that were pretty evil, and they picked their victims and I was one of them. I think part of what set them off was that I ended up sticking up for this one kid who they were relentless on. And that made me a target."

Being bullied as a kid informs your decisions as an adult. Sure, you may be more likely to stand up for the little guy, but you also might not want to negotiate with bullies. People like Vaughn's lawyer seem to be like that. Really, six separate grocery store employees deserved an average of $5 million for being sexually harassed? Any lawyer who brags about that might just be a piece of garbage or a bully.

The true crime here is what this kerfuffle does to Tesla's employees a few days before such a possibly huge moment for the company and the supply chain. We should be talking how the batteries will work, and what this means for the future of logistics, not a bunch of identity politics B.S.

But maybe this is a good lesson for Musk, one he can use to innovate a new kind of workplace that balances fairness and efficiency, and prevents people from gaming the system while not dismissing actual transgressions. That's the aim companies should shoot for, not reluctantly filling a quota to appear "woke.'

And here's one last thing for Musk, and other A-type manufacturing leaders to remember in their quest to create nothing short of a grand utopia. You can't manufacture a perfect society by breaking the backs and spirits of the people building it for you. That didn't work in the 19th century, and it won't in the 21st — on Earth, Mars, or anywhere. And just like any good product, getting that right starts on the factory floor.

 

SpaceX

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