What’s Going On With All These Tesla Firings?

Former employees aren’t buying poor performance as the cause. Is there something more to the story?

An estimated 1,200 employees have been let go. 

Guus Schoonewille/AFP/Getty Images

Tesla has been on a pink slip rampage this month, firing between 400 to 700 people from its automotive branch. Its solar panel subsidiary, SolarCity, also plans to let go more than 200 employees by the end of October. Former employees estimate that dismissals at SolarCity and Tesla have affected around 1,200 people in total—Tesla itself refuses to disclose the exact number. If the estimates are correct, though, this would account for around 3.6 percent of its global workforce.

So what’s behind this exodus? Is it simply the case that over a thousand employees haven’t been meeting expectations, or is it perhaps the result of recent flubs with some of the company’s new car models?

Former employees are taking the company to task for its suspicious rationale for the dismissals: poor performance. Six current and former SolarCity employees told CNBC that they were not privy to any performance reviews and had not been able to see the reports upon requesting them.

CNBC’s reporting would seem to bolster the theory that the “poor performance” rationale is a pretense so that the company can categorize the dismissals as “firings” rather than “layoffs.”

According to the WARN Act in California, where many of these dismissals have taken place, employers are supposed to give employees advanced notice of mass layoffs. However, the same warnings are not required for firings. A “fired” employee in fact filed a lawsuit against Tesla on Tuesday alleging that the company violated the WARN Act.

Tesla denied that was the case and gave Slate the following statement:

“Like all companies, Tesla conducts an annual performance review during which a manager and employee discuss the results that were achieved, as well as how those results were achieved, during the performance period. This includes both constructive feedback and recognition of top performers with additional compensation and equity awards, as well as promotions in many cases. As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures. Tesla is continuing to grow and hire new employees around the world.”

The company also told Slate that it would be backfilling most of the positions, and thus the firings are not layoffs. Tesla claims that the combined number of voluntary and involuntary departures this year has been roughly the same as in recent years, though the company declined to provide specific numbers.

According to the California Employment Development Department’s list, Tesla gave 63 of its Roseville, California employees WARN layoff notices from June to October. SolarCity also gave 141 layoff notices at its Roseville site during the same time span. SolarCity and Tesla have been undergoing a merger, which investors approved in November.

Tesla has of late stalled in a few of its endeavors. For example, production has gone awry with the new Model 3, which is its attempt at releasing an affordable car for a broader sales demographic than previous models. The company was supposed to build 1,500 units in the third quarter but only managed 260. Tesla blamed “bottlenecks” in manufacturing for the holdup.

In early October, the company also announced that it would be recalling 11,000 of its Model X units due to problems with the seats locking, which could possibly compound the danger of an accident.

The managing editor of Kelley Blue Book, Michael Harley, suggested to the Mercury News that the massive shift in staffing is likely an attempt to “put the train back on the tracks.” However, Tesla told Slate that there would be no impact on the manufacturing of the Model 3.