Tesla Wants Former Workers’ Illegal Termination Claims Axed or Arbitrated, Filing Says

Two Tesla employees who sued after they were abruptly laid off from a Sparks, Nevada factory are now hearing the company’s response: the claims must be arbitrated because the employees agreed to binding individual arbitration agreements. Tesla’s motion opposes the plaintiffs’ Worker Adjustment Retraining Notification (WARN) Act suit, which alleged that the company’s well-publicized layoffs qualified as a mass termination event that required Tesla to provide 60-day written notice.

The class action filed in Austin, Texas asserted that two workers were terminated, effective immediately, after CEO Elon Musk warned that the workforce would be cut. Under the WARN Act, the plaintiffs, on behalf of themselves and a class of nationwide Tesla workers, sought compensation and benefits for the 60 days. 

Now, the electric vehicle maker has moved to dismiss and compel the plaintiffs’ claims to individual arbitration under Federal Rule of Civil Procedure 12(b)(1) or 12(b)(3). The filing features screenshots of the two plaintiffs’ signed agreements and argues that the contractual provisions are valid, enforceable, and fall within the scope of the agreement, which covers all employment-related claims.

In seeking to compel individual arbitration, Tesla also urges the court to strike the plaintiffs’ class claims both because they waived the right to bring their lawsuit as a class action and because all putative class members signed a contract containing the same or a similar arbitration provision.

The company says it will prove that the plaintiffs’ WARN Act claims are baseless in arbitration. The filing explains that Tesla engages in a “bi-annual process of right-sizing its workforce and discharging low performing employees—like Plaintiffs.” The company says that it always ensures WARN Act compliance and that layoffs the plaintiffs complain of are not a statute-triggering event.

Lastly, Tesla asks that the court deny the plaintiffs’ emergency motion for a protective order that sought to enjoin Tesla from sending more separation agreements to its employees and invalidating extant ones. Tesla says that not only will the motion be moot after the court compels the claims to arbitration, but also that it would be “wholly improper and unprecedented” for the court to enjoin Tesla’s alleged acts on a class-wide basis where there is “no likelihood” that a class will eventually be certified.

The employees are represented by Herrmann Law PLLC and Lichten & Liss-Riordan P.C. Tesla is represented by Morgan, Lewis & Bockius LLP.