Oracle Claw-Back Violation of California Labor Laws

San Francisco, CAOracle America Inc. has been sued in federal court by a former sales employee claiming violations of the California labor laws and unfair business practice laws.

In her lawsuit, Marcella Johnson claims that Oracle has a “retroactive re-plan” that reduced her earned commissions. The company retroactively increases quotas or decreases commission rates on past sales so that sales employees are paid less than what their existing compensation plans required. In other words, Oracle allegedly systematically decides to change commission formulas to reduce the commission payments—long after they have been earned and sometimes even after the cheque is signed.

Often, sales employees rely on their commissions as their wages, not as a bonus. In Johnson’s case, she received her commission fees as per the rate in her contract. She was hired in March 2013 to sell human resources and personnel management software and was paid the specified commission fees in November and December. But she was then given a reduced rate that was made retroactive as of June 2013. Consequently, Johnson’s commission balance was negative $20,000, and she had to work until June 2014 to repay the amount.

This isn’t the first time that Oracle has been sued for labor law violations. Just last month the US Department of Labor filed a discrimination suit claiming the Redwood Shores-based company pays white men more than women and minorities working in the same jobs, and favors Asian workers in recruiting and hiring, according to bizjournals.com. Furthermore, it hasn’t complied with the Office of Federal Contract Compliance requests for employment data and records…

The lawsuit says that Oracle engages in a “claw back” scheme (the recovery of money already dispersed) so that it aligns with financial forecasts and bottom-line targets. (According to Silicon Valley Business Journal, Oracle plans to shed 441 jobs in Santa Clara during the first quarter of 2017.)

The California Labor Code requires that all California employees paid by in whole, or in part, commission must be provided a signed written contract stating how the commissions will be calculated and paid. Specifically regarding claw-backs, the California labor code states the following:

• ‘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.

Johnson is seeking to certify the lawsuit as a class action on behalf of all Oracle commission-sales employees since 2013. The suit seeks $150 million in financial damages.