Tesla Motors Lawsuit: Car Manufacturer Faces Lawsuit From 48 Former Employees For Breach Of Contract

Tesla Motors, the electric car giant co-founded by Elon Musk, finds itself at the forefront of a lawsuit brought against the company by 48 of its former employees who are alleging that the car company breached a contractual agreement that promised stock options to the employees involved.

The lawsuit, which begins tomorrow, March 1, 2016, at the San Mateo Superior Court in San Mateo, California, states that Tesla Motors backed out of a promise of stock options that it made to 48 former employees upon their hiring, in lieu of an “industry-competitive base salary.” A press release sent out by the plaintiffs alleges that when Telsa Motors hired these employees, the fledgling company could not afford to offer base salaries “sufficient to attract the talent it needed to succeed,” and so instead offered more than 57,000 shares of stock options, in order to secure these employees, many of whom left other jobs in order to join Tesla Motors.

“The complaint alleges that Tesla contractually committed itself to providing substantial stock options in lieu of industry-competitive base salary, as part of the compensation package it offered to new hires in an attempt to secure top caliber talent — something it would have otherwise struggled to do when it was a scrappy start-up with a shaky future.”

The plaintiffs’ press release goes on to state the the car company demanded long hours and “extreme dedication” from these early employees, who, under the impression that their hard work would gain them the promised stock options, obliged. When all 48 employees parted ways with Tesla, the company defaulted on their contractual commitment of more than 57,000 stock options, the lawsuit alleges.

Elon Musk, Co-Founder and CEO of Tesla Motors [Photo by Justin Sullivan/Getty Images]

Yosef Peretz, lawyer for the 48 former Tesla employees, stated in the press release that he is honored to provide these former employees “their proverbial ‘day in court.'”

“I have had the distinct pleasure of representing very talented and capable former employees of Tesla Motors. The efforts of these remarkable men and women played an important role in the enormous success that Tesla enjoys today. Their sacrifice and dedication enabled Tesla to beat the odds in blossoming from a tiny start-up with shaky prospects to a respected industry leader.”

According to Autoblog, Peretz also represented another former Tesla employee, David Vespremi, in a five-year-long lawsuit against Tesla for the same reason — Tesla reneged on promised stock options.

Vespremi’s lawsuit against Tesla Motors began in 2007, when the former director of communications was abruptly fired from the company — along with 25 other employees, a mass firing that one-time Tesla co-founder Martin Eberhard called a “stealth bloodbath” — and was also refused his agreed upon stock options upon his exit from the company. In early 2007, Vespremi was hired by Tesla, but was fired in December of that same year, despite alleging that he was an “extremely effective and well-evaluated spokesman for Tesla.” In his lawsuit against Tesla, David alleged the company said defamatory things about him, and though he attempted to sue for defamation, the courts allowed him only to proceed with his lawsuit for the promised stock options.

In 2012, Judge Marie S. Weiner of the San Mateo Superior Court — the same judge who is presiding over the current Tesla lawsuit — ruled against Tesla Motors, in favor of David Vespremi, awarding him $207,000 — the equivalent of his promised 10,000 shares of stock at the time of his employment with the company.

The lawsuit against Tesla Motors — which began pre-trial preparations in 2012, and is set to officially begin tomorrow — is not the first of its kind against the automaker, and it’s unlikely to be the last, given the large-scale layoffs and firings the company is prone to.

[Photo by Joe Raedle/Getty Images]