A California state appeals court on Jan. 4 denied Telsa Inc.’s motion to compel arbitration of workplace race discrimination claims asserted by two workers from its factory in Fremont, California. At issue was Tesla’s assertion that workers hired through staffing companies (who aren’t bound by Tesla’s mandatory arbitration contract clause) later hired on as Tesla employees still needed to take their complaints into arbitration.

The plaintiffs, Monica Chatman and Evie Hall, initially worked for the electric vehicle maker through staffing firms before signing employment letters prepared by Tesla in July 2017. Their complaint alleged the discrimination occurred both before and after the letters were signed.

“We determine the trial court properly relied on the language in an arbitration provision contained in the letters to exclude from arbitration those claims based on conduct occurring during periods plaintiffs were employed by staffing agencies rather than directly by defendant,” the court’s opinion stated. “We also conclude the trial court properly declined to mandate arbitration of Plaintiffs’ request for a public injunction.”

The lawsuit being challenged was first filed in 2017 by lead plaintiff, Marcus Vaughn. It accused Tesla of fostering a racially hostile work environment and alleged discrimination targeted at Black workers from their coworkers and managers. The appeals court’s ruling noted that Vaughn never signed the offer letter Tesla sent him that contained the arbitration agreement.

Joining Vaughn’s complaint in 2017, Chatman and Hall seek to represent a subclass of workers who worked through staffing firms for a portion of the time they worked at the company’s factory, seeking relief for discrimination claims, Courthouse News reported.

Bryan Schwartz, the plaintiffs’ attorney, said the decision makes clear that Tesla cannot compel individuals to arbitrate claims not covered by arbitration agreements and protects them from having their statutory rights stripped through an “overbroad arbitration agreement,” according to Courthouse News.

“We can now start to litigate the real issues at stake in this case, which are whether this mega corporation can permit rampant racial harassment unchecked at its factory,” Schwartz said. “Tesla for years has sought to avoid responsibility for their egregious, widespread and despicable racism at the Fremont factory. This case has been pending for more than five years, and they stalled the majority of that time by making frivolous arguments about arbitration agreements instead of confronting head on that racial epithets are widely heard throughout the Fremont factory.”

Separately, a new trial for damages will be held in a racial harassment case against Tesla that initially included $130 million in punitive damages. In that case, plaintiff Owen Diaz, who also worked through a staffing firm, claimed he was subjected to severe racial harassment at Tesla’s Fremont facility. In October 2021, Diaz was awarded $136.9 million in damages by a federal jury in San Francisco. However, the amount was reduced to $15 million in April 2022 after it was deemed too large. Diaz refused the offer in June and opted for a new trial for damages. Tesla’s bid for a full retrial was rejected by a federal judge in December 2022. The new trial for damages is scheduled to take place March 27.