Posted February 14th, 2017.
REDWOOD CITY — Salespeople at Oracle earned commissions but then had to pay money back under threat of legal action after the firm retroactively lowered their compensation, a $150 million lawsuit filed Tuesday claimed.
Marcella Johnson of Modesto, who sold software for the Bay Area tech giant for 16 months, alleged in the lawsuit that she worked for months without receiving commissions she’d earned, because Oracle had forced her to give back commission money she had already received.
A lawyer representing Johnson said an estimated 1,000 to 2,000 salespeople at the company were also affected by what Oracle calls “re-planning.” Johnson is seeking class-action certification and more than $150 million in damages for herself and other current and former employees.
Oracle declined to comment on the suit, filed in U.S. District Court in San Francisco.
In re-planning, sales staff would earn commissions, then Oracle would require them to sign a new commission agreement that lowered the amount they received, according to the lawsuit. When earned commissions had not yet been paid, they were adjusted down, and when they’d been paid already, Oracle demanded staffers give the amount of “overpayment” back, the suit said.
“Oracle has systematically stiffed its sales force 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,” the lawsuit said.
“Oracle routinely decides to change commission formulas so as to reduce commission payments on past sales, well after the commissions have been earned and even sometimes after they have been paid,” according to the suit.
Johnson spent the last six months of her time at Oracle earning commissions but not receiving them, in order to satisfy the debt her employer said she owed, said her lawyer Xinying Valerian of law firm Sanford Heisler.
To “coerce” employees into accepting the reduced commissions, Oracle threatened to deny payment of commissions they had already earned, the suit said.
“If employees cannot afford to fork over substantial sums, employees are left with a … choice: pay off the supposed debt by continuing to work for Oracle without being paid commissions or be threatened with a collections lawsuit if they leave before completely paying off their negative commission balance,” the suit said.
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Salespeople were essentially powerless to fight back against the clawbacks, Valerian said. “Employees don’t really have the leverage to do much more than just to gripe about it to their managers, for example.”
Johnson, who had to pay back around $20,000 to Oracle, complained to her manager and got nowhere, Valerian said.
“She was told that nothing could be done. She was simply informed that she had been re-planned. She was pointed to a policy that described Oracle supposedly having the power to clawback commission payments,” Valerian said.
For many affected employees, commissions could make up half their total compensation, Valerian said.
Even if Oracle has a clause in its employee contract that allows for retroactive adjustments to commissions, California law contains rules on compensation that supersede contract law, said Orly Lobel, an employment law professor at the University of San Diego School of Law.
“Likely the plaintiffs are correct — if there has been a representation by Oracle to this class of employees about their commissions payment and then it opportunistically changes the terms just before or even after the fruits of their labor are materialized, this may be deemed against California policy,” Lobel said.
Johnson, who worked at Oracle from March 2013 to July 2014, quit the firm as soon as she’d made her last repayment, Valerian said. Johnson is now a sales director for Chicago-based EPAY Systems.
The lawsuit, intended to cover commissioned salespeople working at Oracle during the past four years, alleged that the company reduced the commissions to meet its financial targets.
“Over the years, Oracle has taken millions of dollars from commission wages to add to its bottom line,” the suit said.