Tesla cites performance reviews as it fires SolarCity employees, though workers say reviews never took place

Key Points
  • Mass firings at Tesla included SolarCity offices across the U.S.
  • Ex-SolarCity employees said planned performance reviews never happened, but Tesla cited performance problems as reasons for their dismissals.
  • The company was already in the midst of laying off 205 employees from SolarCity's Roseville, California, office.
Tesla's mass firings spread to SolarCity
Tesla's mass firings spread to SolarCity

Employee dismissals at Tesla are continuing at its SolarCity subsidiary, according to six former and current employees, and are affecting SolarCity offices across the U.S.

Echoing reports from earlier this month, these SolarCity employees say they were surprised to be told they were fired for performance reasons, claiming Tesla had not conducted performance reviews since acquiring the solar energy business. Earlier this month, Tesla began firing hundreds of employees after it announced a recall of 11,000 Model X SUVs.

All the people spoke under condition of anonymity, citing fears of retaliation from Tesla.

Tesla had already announced plans to lay off 205 SolarCity employees at its Roseville, California, office by the end of October this year. However, SolarCity employees across the country have been fired in the last two weeks — not just in California, but also in Nevada, Arizona, Utah and beyond, according to these employees.

Two former employees told CNBC that the Roseville office was being completely shut down. A Tesla spokesperson said the office will remain open with about 50 full-time employees. In March 2015, SolarCity said it employed 450 people at that location and was planning to add 300 more. It is not known whether those new people were ever added.

The total number of dismissals could not be determined. However, former employees estimate around 1,200 people have been fired in the company's wave of dismissals at Tesla including SolarCity. That figure does not include previously announced layoffs.

A spokesperson for Tesla declined to confirm that number or offer an alternative, and pointed back to a previous statement about the companywide dismissals:

"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."

SolarCity, which sells solar energy systems to consumers, was founded by Elon Musk's cousins Lyndon and Peter Rive in 2006. Musk was its chairman and largest shareholder from its early days. When Must first proposed that Tesla buy SolarCity in 2016, critics said it would distract Tesla from making great cars.

Critics also raised corporate governance concerns because of the close relationships between the companies. Now, it operates as a subsidiary of Tesla.

Problematic 'conduct with peers'

Recently dismissed SolarCity employees — including from the company's sales, field energy and customer relations teams across four states — said usually Tesla HR managers fired them in person. Some of the firings came in big group employee meetings.

SolarCity employees (like other Tesla employees) then received separation agreements via email. The documents cited "failure to meet performance expectations" as the reason for their terminations, according to excerpts of the documents shared with CNBC by multiple parties.

The former SolarCity employees all said performance reviews had not been conducted since Tesla acquired the clean energy business for $2.6 billion in November 2016.

Three recently fired SolarCity employees (who worked in disparate city offices, and were contacted separately by CNBC) said they asked HR at Tesla for a copy of their performance reviews. But those never materialized.

In some cases, HR never acknowledged their requests but went ahead and sent them separation agreements. These agreements force ex-employees of Tesla into arbitration if they want severance pay. In other words, they have to sign away the rights to sue the company for two weeks' worth of salary.

Sources said that HR department representatives told staff in one office they were being let go due to problematic "conduct with peers." When questioned, an ex-employee said, HR declined to specify any details about the alleged poor conduct, which had never been previously discussed.

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This story has been updated to reflect the fact that the SolarCity dismissals were part of a broader set of dismissals across Tesla, although they were communicated to affected employees in waves.