A U.S. district court has ordered Tesla to notify employees of a lawsuit alleging the automaker violated federal and state law by requiring workers to sign separation agreements.
Two former Tesla employees filed suit in July, alleging the company forced them to sign releases in exchange for less severance pay than federal and California state law. Lawyers asked the U.S. District Court for the Western District of Texas to stop the automaker from asking laid-off workers to sign releases in exchange for just one week of severance instead of the eight required by law.
More than 500 other employees have been laid off from Tesla’s Gigafactory 2 in Sparks, Nevada, following CEO Elon Musk’s announcement that a coming economic downturn will force the company to lay off 10% of its workforce employees. The court order issued on Friday protects workers laid off as of June 19.
The lawsuit — brought by two employees fired in June from Tesla’s Gigafactory 2 in Sparks, Nevada, and another from Tesla’s Palo Alto store — claims the company violated California Labor Code Section 1400, as well as federal regulations on worker adjustment and retraining. Notification Act by firing workers without 60 days notice.
“Plaintiffs allege that the separation agreements signed after this lawsuit was filed are coercive, abusive and misleading because Tesla does not inform terminated employees/potential class members of “the pending litigation and the rights ‘they potentially give up,'” according to the court order.
Tesla filed a motion in August to dismiss the claims. On Friday, the court ruled that the company must continue to notify its employees of the lawsuit “until the merits of the plaintiffs’ claims are resolved in federal court or in arbitration proceedings.”
The Court denied the plaintiffs’ compensation and benefits claim for the 60-day notice period.