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Tesla says a planned rule would punish it for doing business in California

Tesla says a planned rule would punish it for doing business in California
A worker is reflected in a computer screen as he and others assemble cars on Tesla's factory in Fremont, Calif., in 2015. (David Butow / For The Times)

Elon Musk's Tesla Inc., 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.

Tesla is fighting a rule under development by two California agencies that would require it to be certified as a “fair and responsible workplace” if it wants its customers to be eligible for taxpayer-backed state electric-vehicle rebates.

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Those rebates are key incentives in Gov. Jerry Brown's plan to put 5 million electric vehicles on California roads by 2030. The rebates take thousands of dollars off the cost 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,” Angie Wei, a lobbyist for the Labor Federation, said 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 — which is based in Palo Alto, Calif. — says that the “state is targeting” the automaker and that other car manufacturers avoid operating in California because they view it “as a competitive disadvantage.”

Tesla declined to comment beyond its letter to the air board. Its allies argue that the rule would deter other manufacturers from opening in the state.

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, said 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 plant in Fremont, north of San Jose.

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 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 non-discrimination 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 have 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 accusations against Tesla, alleging that the company inappropriately laid off a group of employees.

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“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.

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

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

“I've never stopped a union vote nor removed a union,” he wrote on Twitter on May 23. “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.”

The state's concept paper emphasizes 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 electric vehicles. Car companies told the air board they want more information about how a company would lose its rebate certification, worrying that the state would rescind the benefit over minor infractions.

Representatives from foreign car companies and manufacturers with facilities outside 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 [rebate program] 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 company has 20,000 employees in California and supports an additional 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 the state 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,” Calstart’s letter says.

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