Posted February 15th, 2017.
SAN FRANCISCO (CN) – A former sales representative for Oracle brought a class action against the technology giant saying it rigged commission formulas to depress employee compensation and increase its own profits.
Marcella Johnson, a former saleswoman at the company, sued Oracle in federal court on Tuesday, saying Oracle reneged on a contractually agreed compensation formula, pressured sales staff to agree to formulas against their economic interest and would then change those formulas even if the staff did not agree to changes.
Johnson seeks $150 million in damages.
“Oracle has systematically stiffed its salesforce of earned commission wages for many years, by scrapping contractual compensation plans when they yield commission earnings that are higher than Oracle would prefer to pay and retroactively imposing inferior – i.e. less remunerative – numeric terms,” Johnson says in her 17-page complaint.
Johnson says what makes Oracle’s practice particularly egregious is that the company would alter the compensation formulas after a particular salesperson sold enough to merit payment of a certain amount.
The company also forces salespeople to accept the change in formulas through coercion, Johnson says, adding that even employees bold enough to decline the formula changes find the changes made anyway.
“Led by the finance department and supported by sales operations and compensation department employees, Oracle reduces commissions through systematic processes designed to align commissions with financial forecasts and bottom line goals,” Johnson says. “Over the years, Oracle has taken millions of dollars from commission wages to add to its bottom line.”
Oracle spokeswoman Deborah Hellinger denied the class claims in an email Tuesday.
“Oracle categorically denies the allegations and we will vigorously defend against them,” Hellinger wrote.
Johnson says she joined the company in the fall of 2013 and made a certain number of sales, after which she was “re-planned” under a different compensation plan – meaning she suddenly owed Oracle nearly $20,000. Oracle told her she had no choice but to make up the difference and would sue her if she failed to pay, essentially meaning she had no choice but to work for the company for months without making commissions.
The practice was standard at the company and affected many salespeople in late 2013 to early 2014, Johnson says.
Oracle, headquartered in Redwood Shores, California, is a Fortune 100 company that specializes in selling computer technology, including cloud-based systems and its own database management systems.
The company also devises and sells various software platforms that manage supply chains, customer relations and other aspects of business.
Its founder and current CEO Larry Ellison ranks as one of the richest men in the world.
The latest lawsuit is not the first time Oracle’s sales practice have come under scrutiny. In 1990, the company landed in hot water for overreporting its earnings because its salespeople engaged in an up-front marketing strategy to encourage clients to purchase all of their software needs at once.
When salespeople began to count the value of future license sales to their accounts, it created an accounting snafu that Ellison called “an incredible business mistake.”
Along with the $150 million in damages, Johnson seeks an injunction that barring Oracle from continuing to manipulate commissions.
She is represented by Xinying Valerian of Sanford Heisler in San Francisco.