Diaz v. Tesla: The $137M Verdict, Retrial, and 2024 Settlement

The case of Diaz v. Tesla began with a $137 million jury verdict in October 2021 for racial harassment at Tesla’s Fremont, California, factory, then moved through a judge-ordered reduction to $15 million, a damages retrial that produced roughly $3.2 million, and finally a confidential settlement in March 2024.¹ The plaintiff, Owen Diaz, was a Black contract elevator operator who sued under 42 U.S.C. § 1981, a Reconstruction-era civil rights statute that, unlike Title VII, does not cap damages.

Who Owen Diaz Was and What He Alleged

Diaz started at Tesla’s Fremont plant in June 2015 through a staffing agency called CitiStaff, with Nextsource Inc. acting as an intermediary. He worked there about nine months.²³

He testified that supervisors and coworkers called him the N-word routinely and told him to “go back to Africa.”⁴⁵⁶ Judge William H. Orrick, who presided over the case, later described the factory as “saturated with racism.”

Diaz said he reported the harassment within his first two months on the job and got no meaningful response.⁵ Tesla later said it had fired two contractors and suspended a third after complaints. Its then vice president of people, Valerie Capers Workman, acknowledged the company “was not perfect” in 2015 and 2016 and argued at trial that the N-word was sometimes used in a “friendly” way on the factory floor.⁴

How a Contractor Was Able to Sue Tesla Directly

Tesla’s first defense was structural: Diaz worked for a staffing agency, not for Tesla, and Tesla’s employment contracts require arbitration rather than court trials. The court found otherwise. Applying the federal common-law joint employment doctrine, Judge Orrick ruled that Tesla qualified as Diaz’s employer because it exercised day-to-day control over his work, provided his safety equipment and forklift certification, and directed him through Tesla personnel.⁶

That ruling had two effects. It let Diaz proceed under § 1981, which has no damages cap for large employers, and it let him bypass the arbitration clause that bound direct Tesla employees.⁷ The result was something rare in modern employment litigation against a large tech employer: a full federal jury trial.

The $137 Million Verdict

The trial ran from September 27 to October 4, 2021, in the U.S. District Court for the Northern District of California.⁶⁴⁸ Diaz described what he lived through as “a scene straight from the Jim Crow era.” It was among the largest racial harassment verdicts ever awarded to a single plaintiff in the United States.

Why the Judge Cut It to $15 Million

Tesla asked for a new trial and for judgment as a matter of law. On April 13, 2022, Judge Orrick denied both, writing that the “weight of the evidence amply supports the jury’s liability findings.”⁶ But he granted a remittitur, the judicial reduction of an award a court considers excessive.

The compensatory portion fell from $6.9 million to $1.5 million, which the judge called “the highest award supported by the evidence,” noting Diaz’s nine-month tenure and the absence of any physical injury.⁹ For punitive damages, the court applied Supreme Court precedent on constitutional ratios. Tesla wanted a one-to-one ratio to compensatory damages; the judge set it at nine-to-one, reducing punitive damages to $13.5 million. The new total was $15 million.⁶

The 2023 Damages Retrial

Diaz rejected the reduced figure and exercised his right to a new trial on damages. It took place in April 2023 in San Francisco. Tesla’s attorney, Alex Spiro, argued Diaz had exaggerated his claims and failed to prove psychological damage justifying a large award. Diaz’s lawyers said Tesla had made a “conscious decision not to protect African American employees” and described the factory culture as a “plantation mentality.”⁹

The second jury awarded far less: $175,000 in compensatory damages and $3 million in punitive damages, about $3.2 million total.¹

The March 2024 Settlement

Neither side accepted the retrial number. In November 2023, Diaz filed a notice of appeal and Tesla filed a cross-appeal.¹⁰¹¹¹

Why the Case Still Matters

Two rulings in Diaz v. Tesla outlived the settlement. The joint employment finding gave contract workers a path to sue a host company under § 1981, even when their nominal employer is a staffing agency, and to do so in court rather than in arbitration. Legal commentary noted that Tesla faced roughly 90 employment-related arbitration complaints between 2016 and 2021 and lost only one, a record critics cited as evidence of how arbitration insulates large employers.⁷

The remittitur ruling has also been cited as a benchmark for how federal courts apply constitutional limits on punitive damages. Judge Orrick’s nine-to-one ratio was generous by recent standards but a fraction of the jury’s roughly nineteen-to-one ratio, and shows how substantially juries and judges can differ on the appropriate price of workplace racism.

Related Race Cases Against Tesla

Diaz’s suit was not the only race discrimination action against the Fremont factory.

The California Civil Rights Department, formerly the Department of Fair Employment and Housing, sued Tesla in February 2022 after a nearly three-year investigation, alleging a “racially segregated workplace” with slurs, discriminatory assignments, unequal pay, and retaliation. In May 2026, an Alameda County Superior Court denied Tesla’s motion to dismiss, clearing the way for a July 2026 trial. Pay data in the litigation showed Black workers’ monthly compensation was $1,533 lower than white workers’ between June 2018 and June 2024.¹²¹³
The U.S. Equal Employment Opportunity Commission sued Tesla in September 2023, alleging a hostile work environment for Black employees “since at least 2015 to the present,” including slurs, nooses, swastikas, and retaliation.¹⁴
A separate private suit, Berry v. Tesla, produced a race harassment verdict of about $1 million.⁵

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CNBC. Tesla Settles Racial Discrimination Lawsuit
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CaseMine. Di-Az v. Tesla, Inc., Summary Judgment Order
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ABC News. Tesla Worker Speaks After Winning $137 Million Lawsuit
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NPR. Tesla Racial Discrimination Lawsuit
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California Civil Rights Law Group. Diaz v. Tesla Race Harassment
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vLex. Diaz v. Tesla, Inc., 598 F.Supp.3d 809
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University of Miami Law Review. Diaz v. Tesla: Straight From the Jim Crow Era
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Bloomberg. Tesla Ordered to Pay $137 Million for Harboring Workplace Racism
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Al Jazeera. Tesla Faces New Race Bias Trial on $137M Verdict That Was Cut
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The Guardian. Tesla Settles Racial Discrimination Claims
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NY1/AP. Former Tesla Worker Settles Discrimination Case
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California Civil Rights Department. CRD Sues Tesla for Race Discrimination and Harassment
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EEOC. EEOC Sues Tesla for Racial Harassment and Retaliation