Tesla Investor Files Lawsuit Against Elon Musk, Board Over Accusation Of 'Toxic' Work Culture

Stockholder Solomon Chau accused Elon Musk and others for breaching fiduciary duty by fostering an environment of discrimination and harassment, exposing Tesla to millions of dollars in liability

Shareholder activists haven’t been successful so far in pushing Tesla’s board to adopt more transparency about its use of arbitration to resolve complaints about sexual harassment and racial discrimination.

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An investor of Tesla Inc charged the officers and directors of the electric-vehicle maker in a lawsuit of allowing a “toxic workplace culture” to fester at the company, Bloomberg has reported.

According to the complaint filed on Thursday by stockholder Solomon Chau in federal court in Austin, Texas, Elon Musk, chief executive officer (CEO) and others who run the world’s largest electric-vehicle maker breached their fiduciary duty by fostering an environment of discrimination and harassment, exposing Tesla to millions of dollars in potential liability.

“This toxic work environment has gestated internally for years, and only recently has the truth about Tesla’s culture emerged, leading to legal action from government regulators and private parties alike,” Chau said in the complaint. “Tesla’s toxic workplace culture has caused financial harm and irreparable damage to the company’s reputation.”

According to the report, Tesla is fighting a lawsuit by California’s Department of Fair Employment and Housing over racial discrimination and harassment, after the agency found a widespread pattern of mistreatment of Black workers at the factory near San Francisco. The company also faces complaints from several female employees that sexual harassment is rampant at the Fremont factory.

Tesla, however, didn’t respond to Bloomberg’s request for comment. It said in a blog post in February that the DFEH complaint is “misguided.”

Chau claimed in his complaint that Musk “either knew, was reckless, or was grossly negligent in disregarding the illegal activity of such substantial magnitude and duration.”

The case is listed as Chau v. Musk, 1:22-cv-00592, US District Court, Western District of Texas (Austin). Chau faulted Tesla’s board for the defeat of shareholder proposals aimed at addressing workplace issues at the company.

Shareholder activists haven’t been successful so far in pushing Tesla’s board to adopt more transparency about its use of arbitration to resolve complaints about sexual harassment and racial discrimination.