Tesla settles $1 million lawsuit with its salespeople over compensation, says advisors can make over $150k

Tesla has been pushing a different automotive sales strategy by owning all its own retail locations instead of using third-party dealers.

Like in other departments at the automaker, the company is very demanding of its sales employees and it led to a lawsuit, which the company has now settled for a $1 million with its salespeople.

The settlement was first reported by the clickbait-website Jalopnik:

“Last month, Tesla agreed to settle a federal class-action lawsuit brought by three current and former Owner Advisors—the job title ascribed to one segment of salespeople—for $1 million. The lawsuit accused Tesla of failing to pay sales staff a minimum wage, overtime, as well as provide proper meal and rest breaks under California law. (Under the settlement terms, Tesla denied any wrongdoing, and each of the 253 members in the class will each receive an average of $2,200.)”

The nature of the lawsuit challenged the “exempt” status of Tesla’s owner advisors under California Law.

Unlike most car salespeople, Tesla salespeople’s pay includes a significant base salary, but they could potentially make more through commissions and bonuses, which could result in an exemption status for state-mandated overtime and breaks.

But in January, before agreeing to the aforementioned settlement, Tesla agreed to transition their owner advisors to non-exempt status.

A Tesla spokesperson sent us the following statement:

“There’s a reason most people think buying a car at a traditional auto dealership is worse than getting a root canal: the focus is on selling cars at all costs rather than actually doing what is right for the customer. Tesla has a fundamentally different approach, and customers actually enjoy the experience. In part, this is because we train our owner advisors to spend as much time as necessary to educate our customers about our technology and we never pressure anyone to buy. We also structure compensation for our owner advisors in a way that’s consistent with these principles. Unlike traditional auto dealers, who pay their salespeople almost entirely on commission, thus incentivizing them to pressure customers, Tesla’s owner advisors receive a significant portion of their compensation as guaranteed base pay, meaning that they can focus on patient customer education. Last quarter, the vast majority of owner advisors achieved their sales targets, and owner advisors can earn cash comp of over $150,000 per year. Furthermore, all of our owner advisors receive equity in the company upon hire, with the opportunity to earn additional equity over time. This further aligns their interest with the customer since Tesla’s sales are entirely driven by word of mouth.”

On top of the equity, commission and quarterly bonuses, Tesla’s owner advisors have a base salary of $30,000-$40,000.

Electrek’s Take

It’s not news that Tesla is pushing their employees pretty hard. With this said, of course, Tesla has to respect the laws in terms of compensation and working conditions.

It looks like they did the right thing by transitioning the owner advisors to non-exempt status. If Tesla wants to have a different experience from car dealers and have greater salaries for its salespeople, they have to deal with the employee status that comes with it.

As for the “cash comp of over $150,000 per year” for owners advisors, I have actually heard of advisors earning over $100,000. It’s not exactly unusual from what I heard, but I have never heard of $150,000 per year – though it doesn’t sound impossible.

To be fair, it’s not a salary unheard of at car dealerships either, but incomes have come down in the industry.

What do you think of Tesla’s in-store experience and your owner advisor? Let us know in the comment section below.