15 Feb 2017

Oracle faces $150m lawsuit over 'clawed back' sales commissions

A former employee claims that Oracle 'has systematically stiffed its sales force of earned commission wages by axing employees' commission plans once they start to yield strong results.

The lawsuit, lodged with the US District Court in San Francisco, alleges that the company ‘re-plans’ its employees by retroactively imposing lower commission rates and higher quotas backdated to a time of the company’s choosing, and in doing so robs sales staff of earned commissions. Re-planned employees, the lawsuit claims, are also required to ‘pay back’ the company the difference on any higher-rate commissions that have already been paid out, effectively allowing Oracle to claw back commissions from employees by withholding future payments. The plaintiff in the lawsuit – a former Oracle employee – believes that the claw backs are a systematic scheme designed by Oracle to align commissions with financial forecasts and bottom-line targets.

Labour law violations

The lawsuit concedes that Oracle workers knowingly up to this scheme when they sign contracts with the company. However, it argues that the practice of clawing back commission violates several sections of the California Labor Code – in particular:

  • Section 221, which states: ‘It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee.’
  • Section 223, which prohibits employers from ‘secretly [paying] a lower wage while purporting to pay the wage designated by statute or by contract.’
  • Section 2751, which stipulates that contracts must be shown in writing to employees, with the imputation that Oracle cannot change its compensation plans without presenting sales employees with new contracts.

Oracle has promised to vigorously defend the lawsuit, which seeks $150m worth of damages inflicted against Oracle sales employees in the state of California over the last four years. Counsel for the Plaintiff and the class David Sanford commented: ‘Oracle proudly touts itself as “treating each employee… fairly and with dignity.” We look forward to having a California jury determine whether Oracle lives up to its ideals, or, in fact, betrays them.’

Sources: The Register; Silicon Valley Daily