A Veritas salesman had £275,000 in "windfall" commission withheld after helping land "the largest ever deal in Veritas's history" – and a judge found a clause in his employment contract which made it lawful to do that.
Danny Johnston failed to prove that Veritas Technologies (UK) had unlawfully deducted the whopping sum from his February 2020 paycheque – meaning he was left with a mere £232,000 with which to console himself.
Despite showing Employment Judge Jim Young a copy of an email from Veritas's UK managing director praising him for being part of its "HSBC team that last year signed the largest ever deal in Veritas's history," Johnston failed to prove that he was legally entitled to the £275k commission, over and above the £232k the company did pay him.
Having joined Veritas's UK operations in 2017 as an "enterprise customer success manager 4 grade SO6," Johnston enjoyed a base salary of £125,718. His contract said his on-target commission was £80,000, additional to his salary, while he was entitled to the usual percentage cut of any big deals he landed.
So when Johnston played a significant role in landing $12.6m of business for Veritas's UK operation, as part of a three-way UK-US-Asia deal, he was delighted – and when Veritas's internal systems showed him "compensation data" including £505,564.78 in commission you can imagine he was over the moon.
But it was not to be. Johnston fell partial victim to what a judge in another case described as a "safety net" clause, and inside Veritas was known as a "windfall". The half-million payout was more than 250 per cent of Johnston's usual commission and that triggered an internal review.
Veritas's Incentive Compensation General Terms and Conditions said:
A "windfall" is defined as a situation where a participant's earnings far exceeds the Participant's annual On Target Commission (OTC) due to unanticipated large transaction(s) not included in quota setting, or a large transaction(s) during a plan year which requires unusual or significant management involvement...
Louise Ford, Veritas UK's senior director of sales ops, along with international sales veep Mark Nutt, duly decided to do that thing, having considered how much of a role Johnston played in landing the sale. An internal grievance process merely upheld their decision.
While finding that the HSBC deal was not "unanticipated" because it was a renewal of an existing three-year contract, and that Veritas's management had failed to properly follow internal processes for examining windfalls, Judge Young said the controversial clause wasn't relevant at all.
Instead, he found, another part of the sales compensation plan about quotas explicitly allowed Veritas to decrease quotas after a sale in situations where they "were not set to reflect sales not anticipated or where sales were not reasonably certain at the time sales quotas are established or where errors are made in quota setting."
The ruling also quoted this clause as being relevant:
The company reserves the right to adjust quotas at any time (prospectively or retroactively) at the company's sole discretion with or without prior notice, subject to applicable local law...
Veritas had pleaded that Johnston's quota was mistakenly set too low for FY20 and, despite all the legal arguments about windfall clauses, Judge Young said this clause on its own was enough to justify the company's actions.
"Notwithstanding that reliance was not placed upon this paragraph by the respondent as matters with the claimant developed, I did not consider that was a bar to consideration of its terms," said the judge in his written decision, published early last week.
Johnston's claim for unlawful deduction from wages failed. ®