Tuesday, 14 May 2019 14:03

Oracle and the Murky World of Sales Commissions

Here’s a debt recovery story with a twist - a sales rep sues his erstwhile employer for unpaid commission, wins, and then discovers that the business unit he worked for has been shut down mid-action, with all its assets transferred to a new legal entity.

The upshot being, a year on from being awarded his claim in court, he is yet to receive a penny.

This is the unfortunate tale of Alaa Al-Naji, a hotshot IT sales rep who worked for Oracle Qatar. In 2014, the global database giant tried to push revised contract terms on Al-Naji which would have done him out of a huge sum in commissions he claimed he was owed. Al-Naji refused the new contract, left the company, and sued Oracle Qatar for upwards of $600,000.

Fast forward four years, the Qatari courts finally rule in favour of the claimant, saying he was indeed owed the full amount in unpaid commission. But when Al-Naji tried to recover his dues, he had a nasty surprise - Oracle Qatar was no more, the parent company, Oracle Systems Ltd, had shut it down in 2015, launching a brand new legal entity to trade in Qatar.

Which meant that the business named in Al-Naji’s lawsuit had no assets out of which to pay the debt.

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Dark arts

This is the latest episode in a troubling pattern of alleged behaviour by Oracle. Another former sales rep based in the US, Marcella Johnson, in 2017 launched a $150m class action lawsuit against the company, accusing it of rigging commission formulas to depress employee compensation. Later court filings in that case alleged that Oracle systematically denies sales reps compensation by retroactively enforcing reduced commission rates in new contracts.

In yet another case, an Oracle sales rep who successfully sued the company in the US for $250,000 in unpaid commission was subsequently sued back by Oracle. The basis of that action was that the rep in question had agreed to revised compensation terms which limited the size of individual payments. Again, this was applied retroactively. But what emerged in that case was that Oracle makes changes to its commission terms nearly every year. As major deals often take several years to come to fruition, sales reps have little choice but to keep signing the contracts if they wish to be paid for work they have already started.

All of this underlines just how opaque the world of commission-based compensation schemes can be. Although in the majority of jurisdictions firms are under the same legal obligations to pay agreed commission as they are regular wages, the contractual complexities leave room for all sorts of dark arts. Independent contractors are even more vulnerable than employees on commission-based remuneration packages.

In the Al-Naji case, he is now looking into whether he can claim his debt from Oracle Systems Ltd in the US, as the parent company of the now-defunct Oracle Qatar. The success of that action will largely depend on the degree of legal separation Oracle’s lawyers are able to demonstrate between its different business units, and whether a US court agrees that it falls under their jurisdiction.

Image "Oracle Logo" in the public domain from Wikimedia Commons.

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