New Settlement: $15.5M Commission Wage Warning for HR Leaders

Commission-based compensation is a powerful driver of performance, but when not carefully managed, it can expose organizations to significant legal and financial risk. Case in point:

A lawsuit involving commission wages at tech company Oracle has been tentatively settled, with the employer agreeing to pay $15.5 million to end the long-running dispute.

The suit, which was filed in 2015 in a California state court, accused Oracle of making several missteps concerning the proper payment of commission wages under state law.

Attorneys at three firms teamed up to file the suit under the Private Attorneys General Act, also known as PAGA, a California state law allowing employees to sue their employers on the state’s behalf for alleged violations of state labor law. As this case shows, it also provides for potentially significant penalties. 

Dispute Over Commission Wages

When the complaint was initially filed in September 2015, the suit named a single plaintiff who worked as a sales representative and sued on behalf of all similarly situated employees. In February 2018, a second named plaintiff was added.

The suit presented a litany of alleged violations of the California Labor Code, which regulates employment practices. More specifically, the suit said Oracle:

• Did not provide employees who earned commission wages with a written commission contract at the start of employment, and failed to provide a signed commission contract to those employees in a timely manner
• Did not explain in its commission contracts how commission wages would be computed and paid, and retained “unilateral discretion” to change any of the commission contract’s terms
• Improperly reduced commissions earned after sales were booked based on criteria that it did not disclose to its employees
• Wrongfully reduced commissions to offset the costs of doing business
• Did not pay earned commissions within the timeframe set by state law
• Provided inaccurate wage statements, and
• Forced employees to sign an illegal confidentiality agreement.

The plaintiffs asked the court to award penalties and unpaid wages, attorneys’ fees and costs, and interest.

Trial Court Rules Company Violated Commission Wage Laws

After the court decided that Oracle violated certain sections of the state labor code, the parties proceeded to mediation in June 2021. They were unable to reach a resolution at that time.

A second mediation, held in mid-December 2024, led to the execution of a tentative settlement agreement near the start of April. The agreement is still subject to court approval, and a motion to approve it is scheduled to be heard on April 30.

To settle the commission wages dispute, Oracle agreed to pay $15.5 million as the “Gross Settlement Amount.” Of that, about $8,610,000 is a PAGA penalty to be paid to the California Labor and Workforce Development Agency. Three-fourths of the PAGA penalty is to be paid to the agency, while the remaining one-fourth will be distributed among over 5,000 allegedly aggrieved employees. 

Oracle did not admit to any liability in the settlement agreement. In fact, the agreement specifically says it “denies all claims, liability or wrongdoing.”

Plaintiffs’ Attorneys Win Big

The two named plaintiffs will get a combined total of not more than $100,000, while about $6.7 million is allocated to plaintiffs’ counsel fees and expenses.

The plaintiffs were represented by Sanford Heisler Sharp McKnight, a public interest law firm with offices nationwide; Valerian Law, P.C., located in Berkeley, California; and Dardarian Ho Kan & Lee, which has a national practice.

“We are extremely pleased by this settlement, which brings to conclusion nearly a decade of litigation,” Michael Palmer of Sanford Heisler Sharp McKnight said in a press release.

 “This settlement is a testament to the dedication of our clients who have invested years of their lives to this outcome,” added Valerian Law’s Xinying Valerian.

Action Steps for HR Leaders

Commission pay is a strategic risk area that requires ongoing attention. This case highlights key practices HR teams can adopt to strengthen compliance and protect business outcomes:

• Use clear, written commission agreements. Employees should receive signed agreements at the start of employment and whenever terms change. Verbal promises or unclear documents increase risk.
• Define commission terms in detail. Spell out how commissions are earned, calculated and paid. Avoid giving the company broad discretion without clear notice to employees.
• Avoid retroactive changes. Adjusting commissions after the fact without advance disclosure creates legal exposure and erodes employee trust.
• Pay commission wages on time. Delayed payments of earned commissions can lead to wage law violations, penalties and interest costs.
• Issue accurate wage statements. Pay stubs must correctly reflect all commission wages and payments to meet legal standards.
• Account for state-specific risks. Some states, like California, impose extra requirements that can sharply raise potential liability.
• Make commission compliance part of regular audits. Treat commission practices with the same level of attention as broader wage and hour compliance to prevent small errors from becoming major liabilities.