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Oracle Hit With $150M Suit Over Retroactive Commission Cuts
Law360, New York (February 14, 2017, 7:02 PM EST) -- Oracle America Inc. was slapped Tuesday with a $150 million putative class action in California federal court alleging the computer technology giant stiffs its salesforce of earned wages by retroactively changing contracts to reduce commissions on past sales, sometimes taking back money already paid.
In her suit, former Oracle sales representative Marcella Johnson claims the company told her that she had a negative commission balance of approximately $20,000 after it “re-planned” how much she would be paid for sales she made in 2013. Johnson was notified of the change after receiving commissions in November and December 2013 under a previously stated “comp plan,” but Oracle applied the new rate retroactively to June 2013, she states.
“Oracle’s Compensation Department informed plaintiff that pursuant to the T&C [Terms and Conditions of Incentive Compensation], if she stopped working for Oracle, Oracle would have the right to collect the negative balance from her, including through a lawsuit,” Johnson’s complaint states.
The plaintiff quit months later, as soon as she had racked up enough commission earnings to pay off the company-stated debt.
“Plaintiff could not afford to repay Oracle,” Johnson states in her suit. “As a result, plaintiff felt she had no choice but to continue working for Oracle for months without being paid any commissions. The new commissions she earned were levied by Oracle to offset the ‘negative commission balance’ resulting fromretroactive imposition of the inferior commission rate.”
Oracle coerces employees into accepting re-plans by giving them only 24 hours to accept the new commission terms and threatening to withhold paid pending commissions, according to the complaint.
“Even if a bold employee refuses to agree to an inferior replan, Oracle barrels ahead anyway, applying the re-plan terms to both past and future sales,” Johnson states.
Through the practice, Oracle has held back millions of dollars in due commission wages, according to the suit. The commissions are reduced to align the employee pay with the company’s “financial forecasts and bottom line goals.”
Oracle's commission contracts contain identical clauses authorizing reductions to commissions — the agreements are provided electronically with employees asked to click “accept” for the T&C as well as their “comp plan.” Revised plans subsequently issued are presented to employees with the same procedure.
"California law does not allow a company to point to fine print that supposedly allows it to reduce commissions after the fact," said an attorney for the plaintiff, Xinying Valerian of Sanford Heisler LLP. "We think all employers should honor the commission formulas that they have provided sales employees and be held accountable for paying employees the commission they have earned."
The suit alleges causes of action for failure to pay commission wages in breach of California labor code and contract, failure to pay wages upon separation, and unfair competition. Johnson is seeking certification of the claims as a class action, restitution, statutory penalties, an award of damages in excess of $150 million, and attorneys' fees and costs.
Oracle spokesperson Deborah Hellinger told Law360 that the company “categorically denies the allegations and we will vigorously defend against them.”
David Sanford, chairman of Sanford Heisler and counsel for plaintiff and the class, said that while Oracle says it treats its employees 'fairly and with dignity,' a California jury will determine whether the company "betrays" those ideals.
Last month, Oracle was also hit with a U.S. Department of Labor lawsuit claiming the company discriminates against women and minorities by paying them less than their counterparts and also discriminates against qualified non-Asian applicants in favor of Asian candidates for certain roles. The complaint, filed in the DOL’s Office of Administrative Law Judges, is based on findings of a 2014 routine compliance review at Oracle’s headquarters in Redwood Shores, California.
Plaintiff Marcella Johnson and the proposed class are represented by David Sanford, Xinying Valerian and Felicia Medina of Sanford Heisler LLP and Eric C. Kastner and Daniel H. Qualls of Katner Kim LLP.
Counsel information for Oracle was not immediately available Tuesday.
The case is Marcella Johnson v. Oracle America Inc., number 3:17-cv-00725, in the U.S. District Court, Northern District of California.
--Editing by Philip Shea.