Is Oracle Putting Its Salesforce Into Commissions Debt?

business_ethics_highlights_2How ethical are retroactive employment contract clauses? Here, a former Oracle employee avers that Oracle’s standard salesperson contract permits Oracle to retroactively change commission rates, placing in jeopardy previously earned sales commissions. In the extreme case, these changes in previously earned commissions leave salespeople effectively in debt to the company—having received commissions in excess of what they are owed when the new compensation scheme is applied retroactively to “old” commissions. A plaintiff in an ongoing lawsuit against Oracle, the claimant maintains that these practices violate the California Labor Code, in part, because they seem constructively to be a kind of kickback arrangement.

One quick thought on retroactively applied rules and standards: In public law, theorists of what is called “the rule of law” insist that one of the ideal features of a well-functioning legal system is that newly-made law be prospective in its application. When newly-made law is applied retrospectively, it means that the people subject to the newly-made law were not able to guide their conduct by law—and thus law fails to fulfill its action-guiding function for those who are subject to it. Is the same true of private law (of which contract law is a part)? >>>

LINK: Oracle ‘systematically stiffed its salesforce’ claims new sueball (by Simon Sharwood for The Register)

A new lawsuit filed by a former Oracle employee alleges the software giant “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 and retroactively imposing inferior – i.e. less remunerative – numeric terms.”

Claimant Marcella Johnson, an Oracle employee during 2013 and 2014, goes on to claim that when Big Red offers its sales representatives a new compensation plan, they’re given 24 hours to either accept it or forego earned-but-as-yet-unpaid commissions. The filing also claims that Oracle’s changes mean that retrospective changes to commissions sometimes see employees deemed to have been over-paid. Those workers are then deemed to have a “negative commission” debt to Oracle, which is recovered by not paying new commissions. If an employee considers leaving, the filing says Oracle points out it can recover the debt in court.

The filing concedes that Oracle workers sign up for this: their contracts state that Oracle can change compensation plans at its pleasure. But the suit argues the practice tips over into illegal territory by violating several sections of the California Labor Code, especially Sections 221, 223 and 2751.

Big Red’s Deborah Hellinger told The Register: “Oracle categorically denies the allegations and we will vigorously defend against them.” …

What do you think?

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One comment

  1. Neil Rothenberg

    Maybe legal, from an ethical point of view it depends on which ethical principle the practice is viewed from, the practices and procedures regarding how the policy is implemented and the employee awareness of the policy and practice. For example a company may institute a rolling system of commissions, in which employees are expected to maintain a certain level of sales over time and a significant drop in sales within a period can serve to reduce previous earned commissions based on certain thresholds. If this system was clearly articulated to employees who accept it as part of their working arrangements, while I am not sure I would want to work there, it is difficult to ascertain how such a system would be unethical.

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