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Lawsuit: Tesla broke US law by not providing 60-day notice before mass layoff

Aerial view of cars parked in a Tesla factory parking lot. A Tesla logo is painted on the concrete.
Enlarge / Cars parked at the Tesla Fremont Factory in Fremont, California, on February 10, 2022.

Getty Images | Josh Edelson

A lawsuit filed by laid-off Tesla workers accused the company of violating federal law by failing to provide notice before the layoffs and said the former employees are entitled to 60 days of pay and benefits. Tesla’s actions violated the Worker Adjustment and Retraining Notification (WARN) Act, claimed the lawsuit filed Sunday in US District Court for the Western District of Texas.

“Pursuant to the WARN Act, Tesla is required to provide Plaintiffs and Class Members with the required sixty (60) days advance written notice of a mass layoff,” the lawsuit said. “However, in connection with the recent mass layoffs… Tesla has failed to give Plaintiffs and the Class Members any advance written notice of their terminations.”

“Instead, Tesla has simply notified the employees that their terminations would be effective immediately,” the lawsuit continued.

The WARN Act was enacted in 1988. It requires companies with 100 or more employees “to provide at least 60 calendar days advance written notice of a plant closing and mass layoff affecting 50 or more employees at a single site of employment,” according to the US Department of Labor. The law “makes certain exceptions to the requirements when layoffs occur due to unforeseeable business circumstances, faltering companies, and natural disasters.”

The WARN Act’s notice requirement covers managers, supervisors, hourly workers, and salaried workers, excluding “those who have worked less than six months in the last 12 months and those who work an average of less than 20 hours a week,” the DOL says. The law’s text says that laid-off employees who don’t receive required notice can sue to obtain 60 days’ worth of back pay and benefits.

Tesla Gigafactory layoffs

Lead plaintiffs John Lynch and Daxton Hartsfield worked at a Tesla Gigafactory in Sparks, Nevada. The lawsuit seeks class action status on behalf of all former Tesla employees nationwide who were laid off in May or June 2022 without the required notice.

Class members should receive “damages in the amount of sixty (60) days’ compensation and benefits for each of them by reason of Tesla’s violation of their rights under the WARN Act,” the lawsuit said. That includes “their respective wages, salary, commissions, bonuses, and accrued pay for vacation and personal days,” plus fringe benefits and medical expenses, the lawsuit said.

The lawsuit said that “Tesla terminated more than 500 employees alone at its Gigafactory 2 plant in Sparks, Nevada,” and has laid off thousands of other employees worldwide. The 500 number is important because, under the WARN Act, a layoff of 50 to 499 employees at a single site is only considered a mass layoff if at least 33 percent of all workers at the site are laid off. When 500 or more employees are laid off at a single site, no specific percentage is necessary to trigger WARN Act obligations.

Tesla CEO Elon Musk in early June revealed a plan to cut 10 percent of jobs at the electric carmaker, which had over 99,000 employees at the end of 2021.

Musk: Lawsuit is “trivial”

Musk dismissed the lawsuit as “trivial,” according to a Reuters article. “Let’s not read too much into a pre-emptive lawsuit that has no standing,” Musk said at Bloomberg’s Qatar Economic Forum. Musk further called it “a small lawsuit of minor consequence,” according to a CNBC article.

“I find it very concerning that the richest man in the world considers it ‘trivial’ that his company is blatantly violating federal labor law [enacted] to protect workers,” the plaintiffs’ attorney, Shannon Liss-Riordan, told WRAL TechWire. “While two months [of] pay certainly doesn’t matter to him, it matters a lot to the employees who made his company what it is.”

According to Reuters, Liss-Riordan said that “Tesla is offering some employees only one week of severance, adding that she is preparing an emergency motion with a court to try to block Tesla from trying to get releases from employees in exchange for just one week of severance.”

“There is a reason we have worker protection laws in this country—because billionaires and company heads will not do right by their workers when left to their own devices,” Liss-Riordan said, according to WRAL TechWire.

Tesla separately faces seven lawsuits from women who allege the company failed to stop rampant sexual harassment at factory facilities in Fremont, California, and service centers in the Los Angeles area. Tesla was also recently ordered by a judge to pay an ex-worker $15 million for the “disturbing” racist abuse he experienced.

Musk predicts higher head count in one year

Musk clarified Tesla’s layoff plans at the Bloomberg forum. “Musk said Tesla would reduce its salaried workforce by 10 percent in the next three months, while at the same time growing the number of hourly employees,” CNBC wrote.

Musk said the layoffs will affect about 3.5 percent of Tesla’s overall workforce but that “a year from now, I think our head count will be higher in both salaried and obviously in hourly,” according to CNBC.

Tesla is reportedly laying off both hourly and salaried workers. A Friday report by Electrek citing anonymous sources said: “Tesla started another wave of layoffs yesterday that included many hourly employees in its sales and delivery teams across North America.”

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