Oracle, which requires salespeople to agree to binding arbitration to avoid costly disputes in court, is unhappy that an arbitrator ruled against it. So it is suing one of its own employees, applications account manager Felicia Wilson, in a New York court to undo the arbitrator's $257,335.79 award.
That's the amount Oracle withheld from Wilson's $616,302.31 commission payment for the company's fiscal 2014. It would have been $873,638.10 but for Oracle's insistence that Wilson's Individualized Compensation Plan limits commission sales credits from any single customer in excess of 250 per cent of the salesperson's quota in a given year.
This Single Customer Provision was introduced in Oracle's 2014 compensation agreement [PDF]. According a person familiar with the company's practices, Oracle requires salespeople to accept its compensation agreement, a document that changes every year. Those who decline to sign the new contract – a lengthy affair that must be dealt with in a very short period of time – do not continue as salespeople and do not get compensated for deals that have been worked on but not completed.
Given that enterprise software deals may take several years to consummate, Oracle sales personnel have little choice but to sign if they wish to be paid when the deal eventually closes.
Wilson's quota in 2014 was $2,969,480, according to court documents. Sales up to that amount would earn a commission of about 4.7 per cent. Sales beyond that, up to $3,711,850, would earn a commission of about 7 per cent. At higher sales revenue, Wilson would earn about 9.4 per cent.
During Oracle's fiscal 2014 (which ended May 31, 2014), Wilson sold Oracle enterprise software to media and education company Pearson, resulting in $10,456,055.14 in revenue. At that point in time, she had been working on the Pearson sale for more than two years.
The Single Customer Provision specifies that commissions from a single customer in excess of 250 per cent of quota will be calculated at 0.2 times the lowest commission percentage. So rather than earning a top-tier sales commission of 9.4 per cent, salespeople who surpass their targets by 250 per cent or more earn a commission of about 0.94 per cent.
For Wilson, that meant $3,032,355 of the Pearson revenue was subject to the rate reduction, bringing an amount that could have been several hundred thousand dollars in additional commission payment, depending on the rate tier applied, down to $28,592.87, according to an Oracle court filing.
Wilson's contribution to the $38.275 billion Oracle earned in fiscal 2014, about $9.4 billion of which came from the sale of new software licenses, may not be massive. But it's nonetheless a significant amount of business for the company.
How Oracle screwed me out of 200 grand
Part of the basis of Wilson's claim is that Pearson does not represent a single customer because something like a hundred Pearson subsidiaries around the globe are using the Oracle software she and her colleagues sold. That claim, however, was not considered by the arbitrator. Had it been, it would complicate commission calculations because multiple sales tend to fall under the lowest commission tier.
In a statement submitted to the arbitrator, Wilson said she had been assured by her supervisors at Oracle that the commission limitations would not apply for the Pearson sale.
And when they were, Wilson – "singled out by Oracle at sales conferences and company meetings as an outstanding example of skill, dedication and productivity" – appealed internally through a Commission Exemption Request.
According to Wilson's statement, her request for the balance of her commission was supported and approved through seven successive levels of management, only to be subsequently reduced by half, and then later denied entirely at the top level of the company.
"That arbitrary disapproval was attributed cryptically to a conversation between a senior vice president Rich Geraffo and Oracle's co-chief executive officer Mark Hurd 'around the 250 per cent policy'," Wilson's statement contends.
In Oracle's fiscal 2014, Hurd was paid $37.5 million, down from $44 million in fiscal 2013, and $51 million in 2012.
Wilson's attorney sought to depose Geraffo and Hurd and to obtain their email message related to Wilson's compensation. The arbitrator declined the request but ended up awarding Wilson the balance of her withheld commission in October last year.
This is not the first time Wilson has had to challenge Oracle for compensation. According to a person familiar with her circumstances, Wilson previously pursued arbitration with Oracle and received payment from the company as a result.
The Register asked Oracle to comment on the litigation and to confirm various details about the case, but the company declined to respond.
On Wednesday, Oracle filed a complaint against Wilson in the Southern District of New York to vacate the arbitrator's award.
Oracle argues that the arbitrator failed to afford the company "even minimal due process," and claims the arbitrator voided the contractually defined quota limitation because she considered it to be "draconian" and "manifestly unfair."
The arbitrator, Betty Weinberg Ellerin, happens to be a well-respected jurist, with considerable experience hearing contract disputes. As her biography notes, she was the first woman appointed as Associate Justice of the Appellate Division of the Supreme Court of the State of New York (First Department).
Ellerin had this to say about her decision: "That [Wilson's] application was ultimately rejected at the highest management level, I find to be incomprehensible and contrary to rational business practices. It essentially punishes rather than rewards extraordinary performance."
Oracle doesn't want to pursue the case in open court. Rather it's asking to have the case re-arbitrated, with a different arbitrator.
Wilson's attorney, Alan Goldston, declined to comment. ®