Tesla employees detail how they were fired, claim dismissals were not performance related

Key Points
  • Several current and former employees told CNBC that Tesla's recent round of firings was not targeted at low-performing employees, but appeared to be a cost-cutting measure.
  • Some fired employees were given no warning, and told via email or a phone call not to come into the office the next day.
  • One fired employee says direct performance reviews were thrown out and rewritten by upper management.
Tesla employees detail how they were fired
Tesla employees detail how they were fired

Tesla is trying to disguise layoffs by calling the widespread terminations performance related, allege several current and former employees.

On Friday, the San Jose Mercury News first reported that Tesla had dismissed an estimated 400 to 700 employees. That number represents between 1 and 2 percent of its entire workforce.

But one former employee, citing internal information shared by a manager, said the total number fired is higher than 700 at this point.

Most of the people let go from Tesla so far have been from its motors business, said people familiar with the matter. They were not from other initiatives like Tesla Powerwall, which is helping restore electricity to the residents of Puerto Rico now.

Tesla fires hundreds of employees while trying to ramp up vehicle production
Tesla fires hundreds of employees while trying to ramp up vehicle production

The mass firings, which affected Tesla employees across the U.S., had begun by the weekend of Oct. 7 and continued even after the initial news report, sources said.

Among those whose jobs were terminated in this phase, some were given severance packages quickly while others are still waiting on separation agreements. Some terminated employees told CNBC they were informed via email or a phone call "without warning," and told not to come into work the next day.

The company also dismissed other employees without specifying a given performance issue, according to these people.

"Seems like performance has nothing to do with it," one Tesla employee told CNBC under the condition of anonymity. "Those terminated were generally the highest paid in their position," this person said, suggesting that the firings were driven by cost-cutting.

That assessment was echoed by several others, including three employees fired from Tesla during this latest wave.

Tesla rates employees on a scale from 1 to 5. Two laid-off employees had achieved scores at or above 4 in past performance reviews with their managers, they said.

During the performance review period before the mass firings, former employees said Tesla's general manager of services and operations, Karim Bousta, sent out a notice saying reviews had been delayed so employees could focus on ensuring a successful rollout of the Model 3.

Tesla had no comment on these claims, but pointed to its previous statement on the firings, reiterating that they were performance related. Here's that 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 automaker, which has a market cap of $59 billion, is notoriously secretive.

For example, Tesla forces new employees to sign confidentiality agreements to limit what they can say about the company's strategy and working conditions there. Some employees are challenging those accords in arbitration.

These agreements can make it challenging for workers to air and resolve their grievances with Tesla, according to a prior complaint that the U.S. Labor Board filed against the company.

As Goldman Sachs analysts and others have noted, Tesla has missed its targets for producing Model 3s. Analysts are concerned about the company's ability to make safe, high-quality Model 3s profitably.

An employment attorney with prior experience suing Tesla, Therese Lawless, said: "You wonder, if they had all these bad employees making cars, do you really want to buy a Tesla now? It's very unusual to have a massive termination based on performance."

Lawless represented AJ Vandermeyden, a woman and engineer who sued Tesla alleging sexual harassment and gender discrimination, who was soon thereafter fired by the company.

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