Since it came out in mid-October that Tesla Inc. had fired hundreds of its employees, the company has faced backlash from current and former employees who have raised a range of concerns about the dismissal, including that they were targeted for their pro-union stance and that they weren't given proper warning before being dismissed.

This, as the electric automaker has also been hit with allegations of discrimination and is slated to appear before the National Labor Relations Board on Nov. 14 in connection to a restrictive confidentiality policy and allegations that it attempted to prohibit employees from discussing union activities.

With the consequences ranging from continued bad publicity to legal ramifications for not properly handling employee dismissals, could the company have taken a different approach?

The Aftermath

Tesla has maintained the firings were tied to performance reviews. In an Nov. 1 earnings call, Tesla CEO Elon Musk said that while Tesla has extremely high standards when it comes to annual performance reviews, “only 2 percent of people didn't make the grade,” which amounted to roughly 700 employees out of 33,000.

Musk pointed out that former General Electric Co. CEO Jack Welch famously advocated for annually firing the bottom 10 percent of a company's workforce. “If you were to stack Tesla's performance-related releases compared to other companies, the number would be low,” Musk said.

And in a statement to Corporate Counsel, a Tesla spokesperson said the performance review process at the company often leads to positive results, such as promotions and increased compensation. “As with any company, especially one of over 33,000 employees, performance reviews also occasionally result in employee departures,” the spokesperson said.

Current and former employees paint a different picture, however. One Tesla employee who spoke to CNBC on condition of anonymity said it “seems like performance had nothing to do with it,” adding that those “terminated were generally the highest paid in their position.”

Former employee Mike Williams, who was told he was let go for “performance issues” and for being a “negative influence” on his colleagues, has reportedly said he “never had any performance-related complaints.” He did, however, openly support the idea of unionization. “I hate to think I was targeted because of it,” Williams was quoted as saying. “And it's not just me. Hundreds of other people were let go without warning.”

Richard Ortiz also believes he was fired for being a union supporter. In April, Ortiz was among the employees who filed complaints with the NLRB about Tesla's confidentiality agreement. “I do not believe—not for a second—that I was fired for cause,” Ortiz has said in a statement provided to news outlets.

Neither Ortiz nor Williams responded to multiple requests for comment from Corporate Counsel.

These and other allegations that pro-union employees were possibly targeted has led labor union United Automobile Workers to file a complaint with the NLRB alleging that the company retaliated against union supporters. Though Tesla employees are not represented by a union, the UAW began supporting workers this year who were looking to organize at a Tesla plant in Fremont, California.

Two recently terminated employees have also filed a lawsuit in Alameda County Superior Court in California. The complaint, originally filed Oct. 24, seeks class action certification and alleges that Tesla violated the California Worker Adjustment and Retraining Notification Act by failing to give proper notice before the “mass layoff and/or termination.”

Nick Rosenthal, an attorney at Diversity Law Group, who represents the plaintiffs in the lawsuit, called Tesla's claim that the employees were terminated for performance “a half-hearted attempt” to hide layoffs. “It is the height of corporate misbehavior for a company to publicly place the blame on employees for their terminations when in fact the company is aware that the employees have done nothing wrong, all in an effort to avoid the negative attention associated with layoffs,” he said.

One former Tesla employee told Corporate Counsel that the company developed “a new review within weeks [of the firings] and called it supplemental performance review.” This supplemental review was in addition to the regular performance reviews that had long been in place, said the former employee, who was fired in October and wished to remain anonymous to preserve relationships. “They are using this supplemental review so they can fire people.”

Asked to comment specifically on the lawsuit, the Tesla spokesperson pointed to the earlier comment on performance reviews and to Musk's remarks on the earnings call. The spokesperson did not respond to request for comment on the so-called supplemental performance reviews.

A source close to the matter told Corporate Counsel that these dismissals were not layoffs, and that many of the positions will be backfilled, so the WARN Act is not triggered.

Why All the Noise?

It's not necessarily unusual for a large company like Tesla to part ways with a considerable number of people at one time, said Avi Kumin, a partner at Katz, Marshall & Banks, who focuses on employment law matters. And he noted it is “not necessarily remarkable” to consider employee performance factors when deciding who to let go.

“I think what makes this Tesla situation very unusual is for the company to come out and say not only that performance was one thing considered, but that it was the thing considered, the only thing considered,” Kumin said.

That can potentially lead to defamation claims, he explained. For those who have claimed to have received high reviews, there may be a question of whether Tesla has “impugned their work and their performance … and made it more difficult to find a job,” he said.

According to Kumin, another issue to consider is compliance with federal and California WARN Acts, though Kumin said he doesn't know if the circumstances are present to trigger these laws in the Tesla firings. There are some differences between WARN on federal and state levels, such as the number of full-time employees that must be working at the company, but both require written notice 60 days prior to a mass layoff when a specified number of people are laid off.

Performance reviews can and often are lawfully considered as an element of termination, said Kumin, but subjectivity can cause some problems, such as the termination adversely impacting a protected class, Kumin said. “Can you ever feel confident that subjective factors haven't come into the decision in any way, either conscious or unconscious? That's the risk,” he said.

To lessen any uncertainty when managing a reduction of force, “it's really important to look behind the performance evaluations and make sure they are justified,” said Connie Bertram, partner at Proskauer Rose and head of the labor and employment practice in the firm's Washington, D.C., office.

It's critical, for instance, to look at what's changed if an employee was previously highly rated and investigate the situation and make certain the evaluations are fair, she said. Also, keep in mind that managers may rank differently, she said.

Bertram echoed that the Tesla terminations seem atypical. Often, she said, companies will point to economic circumstances or a realignment of strategy as the reason for dismissals.

“It is a little unusual to say, 'Well these people were not performing and therefore we let them go,' particularly in this large of a group,” she said. “Here, you're making a public statement that could potentially impact the former employee's ability to get a job.”

But not all employment attorneys find Tesla's actions unusual. “The reality is that with every company, when they've cut more than a handful of workers at one time, it's almost always based on keeping the stronger performers and letting the weaker performers go,” said John Zavitsanos, a partner at Houston firm Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing. “I applaud [Tesla] for being transparent about it. Other companies try to make it more opaque,” he said, adding that he's not condoning the actual terminations.

Zavitsanos added that he thinks basing terminations solely on performance is “probably the most risk-averse thing a company could do.”

“I think what Tesla is doing, and I'm speculating here, is they want to be as efficient as possible and so they want to present this in a way that's positive to Wall Street and not make it seem as though they are suffering some sort of economic bump in the road,” Zavitsanos said.