Tesla struggles with Elon Musk’s strict return-to-office policy

Tesla CEO Elon Musk enacted a strict return-to-office policy this spring, informing employees suddenly by email on May 31 that they would need to “spend a minimum of forty hours in the office per week.” Anything else, he suggested, was “phoning it in.”

Three months since this edict, Tesla still doesn’t have the room or resources to bring all its employees back to the office, according to people who work for the company in the United States and internal documents seen by CNBC. The people declined to be named because they were not authorized to talk to the press on behalf of the company.

The return-to-office policy has also caused a decline in morale, especially among teams that allowed employees to work remotely as needed before Covid-19.

In general, Tesla had been open to remote work among employees in office roles before the pandemic. As the company’s workforce expanded in recent years, the focus was on building out international hubs and a new factory in Texas. It did not build enough new workspaces or acquire enough office equipment at existing facilities in Nevada and California to bring all office employees and long-term contractors in forty hours per week.

According to several current people who work there, Tesla recently wanted to bring its employees in the San Francisco Bay Area to the office for 3 days per week, but a shortage of chairs, desk space, parking spots and other resources proved too much. (Some of this was previously reported by The Information.) Instead, Tesla set staggered in-office schedules back to two days per week.

Even simple supplies like dongles and charging cords have been in short supply. On days where more employees are scheduled to work on-site, crowded conditions send people to take phone calls outdoors, as Tesla never built enough conference rooms and phone booths to accommodate this many employees in attendance at once.

The company is now surveilling employees’ attendance, with Musk receiving detailed weekly reports on absenteeism.

In early September, internal records show, about one-eighth of employees were out on a typical day in Fremont, California, the home of Tesla’s first U.S. vehicle assembly plant. Across all of Tesla, that number was only slightly better, with about one-tenth of employees absent on a typical workday.

The numbers have remained within that range since March 2022, pre-dating Musk’s orders, according to internal reports viewed by CNBC. Absenteeism spikes on weekends and around holidays, as one might expect.

Absenteeism at Tesla is measured using data from workers badging into facilities, with unplanned absences divided by planned time off to tabulate daily totals, according to internal records and people familiar with the reports sent to Musk.

Not all employees are tracked the same way. Direct reports to Elon Musk do not have their badge swipes counted for the internal reports, for example.

The return-to-office policy — murky and informal as it is — has caused a significant decline in morale among some employees, according to internal messages seen by CNBC.

Before COVID-19 restrictions, Tesla managers generally figured out how much remote work was appropriate for their teams. Musk’s hardline policy eliminated that freedom in theory, though some execs may still be able to carve out deals for “exceptional” employees.

In early June 2022, right after Musk mandated 40 hours on site for all, Tesla made steep cuts to its headcount. Employees who were previously designated as remote workers but who could not relocate to be in the office 40 hours a week were given until September 30 to move or take a severance package from Tesla.

About a week after making that offer internally, Tesla HR asked people who lived far away whether they planned to move and work in a Tesla office 40 hours a week. Some of those who said they were not sure if they could relocate, or who said they definitely could not move, were dismissed in June without warning, according to internal correspondence read by CNBC and two people directly familiar with the terminations.

The policy has also depleted some of Tesla’s power to recruit and retain top talent. At least a few well-liked employees quit because they wanted more flexible arrangements, according to internal correspondence and two resignations confirmed by CNBC.

Some workers who lived far from a Tesla office are now living hours away from their families to meet the new requirements, one employee told CNBC.

This employee said they worried most of all about immigrant workers at Tesla, who could lose their visas if the company suddenly decides to terminate their roles over the shifting attendance mandate.

They also worried about how Tesla’s closed-mindedness about remote work could hit the company’s diversity goals.

In its 2022 diversity report, released in July, Meta disclosed that: “US candidates who accepted remote job offers were substantially more likely to be Black, Hispanic, Native American, Alaskan Native, Pacific Islander, veterans and/or people with disabilities,” and “Globally, candidates who accepted remote job offers were more likely to be women.”

In Tesla’s most recent 2021 Impact Report, which it published in May 2022, the company boasted about how it kept employees feeling connected even as they worked from remote offices.

The report said, “During the global pandemic, we focused a great deal on expanding our community engagement and ensuring our employees stayed connected. Specifically, we expanded our Employee Resource Groups (ERGs) and ensured our programming was accessible in a remote work environment…We ensured our employees felt more heard and connected than ever before as they pivoted to virtual events to promote inclusion across different locations, physical boundaries and time zones.”

The company did not break out numbers for how many employees it allowed to work from remote locations before and after the pandemic began, or how that impacted the demographic mix of its workforce.

Tesla did not respond to a request for comment.