Latest News

Elon Musk's Tesla says new state rule punishes it for doing business in California

The only large-scale car manufacturer in California argues that doing business in the state is hard enough without a fast-developing labor regulation backed by organizations that want to unionize its Fremont plant.

Elon Musk's Tesla is fighting a rule under development by two state agencies that would require it to be certified as a "fair and responsible workplace" for its customers to be eligible for taxpayer-backed state electric vehicle rebates.

Those rebates are key incentives in Gov. Jerry Brown's plan to put 5 million electric vehicles on California roads by 2030. They take thousands of dollars off the price of buying a new Tesla car, and unions want lawmakers to withhold them from companies they believe have unfair labor practices.

"The goals of a clean environment and a thriving middle class are inseparable for the Labor movement and we are committed to achieving both," wrote Angie Wei, a lobbyist for the Labor Federation, in a letter supporting the rule.

The rule could take effect as early as next month, opening Tesla to additional scrutiny from the Labor and Workforce Development Agency and the California Air Resources Board.

In a 16-page letter fighting the rule, Tesla says the "state is targeting" the company and that other car manufacturers avoid operating here because they view it "as a competitive disadvantage."

The company declined to comment beyond its letter to the air board. Its allies argue the rule will deter other manufacturers from opening here.

The proposed rule "discourages future manufacturing investment in California by effectively holding companies that create manufacturing jobs in California to a different and higher standard," Carl Guardino, president of the Silicon Valley Leadership Group, wrote in a letter supporting Tesla.

California lawmakers called for the rule in a provision they placed in the state budget a year ago, a move that was perceived as giving United Auto Workers and the California Labor Federation a lift in their efforts to unionize Tesla's Fremont plant.

Since then, the state labor agency and the California Air Resources Board have held under-the-radar discussions with car companies, unions and environmental groups.

The state also released a concept paper on May 23 that describes broadly how the agencies might enforce the rule. It would give companies two years to more or less self-certify as "fair and responsible workplaces" before bringing in more oversight. It asks that companies report on workplace injuries, labor complaints and nondiscrimination standards.

The agencies accepted comments on the paper through June 4 and plan to revise the document. Wei said unions plan to ask the Legislature to put the certification process into law after the agencies review feedback and release a revised plan.

If anything, labor organizations want the state to move faster in tying electrical vehicle rebates to the labor practices of car manufacturers. The UAW wrote: "Full certification should commence no later than July 1, 2019" — a year earlier than the agencies are recommending.

The state rule is moving forward as Tesla employees and unions draw attention to what they regard as unsafe or illegal practices at the company.

A Tesla employee in November filed a class action lawsuit in federal court alleging the company has tolerated racist behavior. Others filed similar lawsuits in state court. Marcus Vaughn, the employee behind the federal lawsuit, alleged that he and other black employees were called the n-word on an assembly floor even after complaining about it.

The United Auto Workers also has filed unfair labor practice charges against the company, alleging it inappropriately laid off a group of employees.

"I know in my heart that what they did was wrong, and I look forward to our day in court," Richard Ortiz, a former employee and union supporter, said in an April news release from the UAW about one of its filings.

The UAW wants to represent Tesla's workforce, just as it did for employees of New United Motor Manufacturing Inc. NUMMI, a joint venture by Toyota and General Motors, closed in 2010. Tesla's main manufacturing facility is in the NUMMI plant.

Musk, the billionaire founder of Tesla and Space X, has taken shots at the drive on Twitter.

"I've never stopped a union vote nor removed a union. UAW abandoned this factory. Tesla arrived & gave people back their jobs. They haven't forgotten UAW betrayed them. That's why UAW can't even get people to attend a free BBQ, let alone enough (signatures) for a vote," he wrote on May 23.

The state's concept paper stresses that car companies must be compliant with local, state and national labor laws for their customers to receive rebates that take thousands of dollars off the price of electrical vehicles. Car companies told the air board they want more information about how a company would lose its rebate certification, worrying the state would rescind the benefit over minor infractions.

Representatives from foreign car companies and manufacturers with facilities outside of California said the state would have little authority to investigate their operations.

"There is therefore no legal way that California could deprive a manufacturer from participating in the CVRP based on activities taking place entirely outside the state," wrote lobbyists for Global Automakers, a coalition of foreign car companies that includes Nissan, Subaru and Toyota.

Tesla recently has been touting its economic footprint in California. It commissioned a study released last month that showed the Palo Alto-based company has 20,000 employees in California and supports another 31,000 jobs among its suppliers.

CALSTART, a business-backed clean technology advocacy group, wrote a letter to the air board implying those jobs were at risk as it moves forward with the labor rule.

"By creating an additional bar for companies who both rely on the (rebate) and who are operating in areas that already have higher standards, the approach could encourage (manufacturers) of (zero-emission vehicles) to move to locations with lower standards. Such a policy would give companies a reason to manufacture in places besides California, which could undermine the potential for continuing to build (zero-emission vehicle) manufacturing jobs in the state," the letter reads.