Tesla’s Arbitration Clauses Draw Congressional Attention

In a significant escalation of their disagreements with Tesla and CEO Elon Musk, seven senators have penned a letter expressing concerns about the handling of worker and customer complaints by the electric vehicle manufacturer.

The senators, who have previously voiced their dissent towards Tesla, allege that the company is employing forced arbitration as a means to conceal information from the public.

The issue at hand centers around Tesla’s utilization of non-disclosure agreements and arbitration clauses. These clauses allow a company to mandate individuals to agree to enter into arbitration in the event of a dispute, bypassing the traditional legal system.

The presence of arbitration clauses allows Tesla to initiate lawsuits against former employees and publicize allegations against them, subsequently compelling them to settle the matter privately rather than through the court system. This means that former employees are unable to publicly defend themselves.

The senators’ letter highlights that forced arbitration is not a novel practice within major American corporations. While technically a signatory can appeal an arbitration clause to a public judge, they are often bound by the private system. In Tesla’s case, these arbitration clauses are present in employment and consumer contracts.

Beyond maintaining the confidentiality of employee and consumer complaints, the senators argue that this system of forced arbitration has concealed instances of sexual harassment, racial discrimination, and consumer safety concerns within Tesla. Citing evidence, the senators point out that Tesla’s Fremont facility has faced five times the average number of lawsuits filed by employees, including recent cases involving racial discrimination and sexual harassment.

The letter, signed by Senators Richard Blumenthal (D, CT), Sherrod Brown (D, OH), Dick Durbin (D, IL), Ed Markey (D, MA), Jeff Merkley (D, OR), Bernie Sanders (I, VT), and Elizabeth Warren (D, MA), urges Tesla to eliminate these arbitration clauses.