Judge finds Tesla ignored racist abuse, but slashes penalty from $137 million to $15 million

Tesla's factory in Freemont, California
Owen Diaz, who was subjected to a hostile environment, will appeal the decision. Photo credit: Getty Images

A federal judge said on Wednesday, local time, Tesla was liable to a Black elevator operator who said the electric car company ignored racial abuse at the factory where he worked, but reduced a nearly US$137 million (NZ$200 million)  jury award to US$15 million (NZ$22 million).

US District Judge William Orrick in San Francisco ruled after jurors last October found that Tesla subjected Owen Diaz to a hostile environment at Tesla's factory in Fremont, California by allowing and failing to stop the racism he faced.

Diaz, who worked at the plant for nine months in 2015 and 2016, said other employees used racist slurs when speaking to him, and scrawled swastikas and slurs including the 'N-word' on bathroom walls.

He also said one supervisor drew a racist caricature near his workstation.

In a 43-page decision, Orrick said the evidence amply supported the jury's finding Tesla liable for the "profound" emotional harm Diaz suffered and the "often inadequate" disciplinary steps the company took.

But the judge reduced Diaz's compensatory damages to US$1.5 million from the "excessive" US$6.9 million that the jury awarded, and lowered punitive damages to US$13.5 million from the "unconstitutionally large" US$130 million jury award.

Bernard Alexander, a lawyer for Diaz, in an interview said his client plans to appeal the lowered damages award.

"We're pleased that the court upheld the jury's finding that Tesla's conduct was absolutely reprehensible," Alexander said.

"The award of US$15 million is substantial but does not come close to reflecting the harm caused to Mr Diaz, or the reprehensibility of Tesla's conduct," he added.

Tesla and its lawyers did not immediately respond to requests for comment. The company had sought to limit compensatory and punitive damages to $300,000 each.

Led by billionaire Elon Musk, Tesla faces similar claims in other lawsuits.

In one such case, California's Department of Fair Employment and Housing alleged in February that Black workers at the Fremont plant endured constant harassment, but saw their complaints ignored.

Tesla previously called that lawsuit misguided, and said it has adopted policies to prevent and punish racist conduct.

Compensatory damages are meant to cover actual losses, while punitive damages are meant to punish and deter violations.

Under US Supreme Court precedent, punitive damages typically should be less than 10 times compensatory damages.

Legal experts had called Diaz's original US$137 million award one of the largest for a single plaintiff alleging workplace discrimination.

The case is Diaz v Tesla Inc et al, U.S. District Court, Northern District of California, No. 17-06748.