Salesman who helped land Veritas UK's 'largest ever' deal was lawfully docked £275k in commission, says judge
- Reference: 1619433908
- News link: https://www.theregister.co.uk/2021/04/26/veritas_salesman_275k_commission_docked/
- Source link:
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.
[1]
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.
[2]
But it was not to be. Johnston fell partial victim to what [3]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.
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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 [5]written decision , published early last week.
Johnston's claim for unlawful deduction from wages failed. ®
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[1] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/storage&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YIbjm1k-Lfc7XRBDubU6TgAAABI&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
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[3] https://www.theregister.com/2021/04/15/sas_salesman_500k_commission_withheld/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/storage&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YIbjm1k-Lfc7XRBDubU6TgAAABI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://www.gov.uk/employment-tribunal-decisions/mr-d-johnston-v-veritas-technologies-uk-ltd-4103322-slash-2020
[6] https://whitepapers.theregister.com/
Deduct from the legal fees
Instead, he found, another part of the sales compensation plan about quotas explicitly allowed Veritas to decrease quotas after a sale ...
It seems that the judge had a much clearer idea of what was going on there.
Much more than the barrister asshat the poor chap hired who evidently did not have a close enough look at the "Incentive Compensation General Terms and Conditions" tome.
Had he done so, he would (?) have advised his client properly instead of drawing him into a claim for unlawful deduction he could not possibly win.
I say it is more than enough grounds to not pay any legal fees, at least to the asshat.
O.
Re: Deduct from the legal fees
It's not unusual for clients to want to persist despite due warnings that their chances are low. If it's not fraudulent, criminal or repugnant to continue, then lawyers are likely to see it as their duty to continue, do their best, and let the judge hear the arguments, weigh the clauses and decide. To set themselves up as the judge, walk away and leave the client unrepresented would be extreme.
Also, fees.
Back in the 80s...
Someone I know was once given a sales portfolio of "unwinnable" contracts. The sales team had tried to bid for all of them but had failed. They were promised a 10% sales bonus on any of the contracts they could convert. A quick look made it clear that the pitches made to the potential clients hadn't been very good and the sales team were not interested in the capabilities of the systems. They just wanted to sell "product" and didn't care what it was. So every bid response was rewritten and tailored to the organisation letting the contract. Soon orders rolled in and within a year contracts for £10m let.
When it came to bonus time the bonus paid was less than £60K. The employer was questioned about which bit of 10% they didn't understand. The response was "Yes, but we didn't think you'd make any sales. We're certainly not going to pay you £1m!" They left the company and the order book collapsed again.
Re: Back in the 80s...
> The employer was questioned about which bit of 10% they didn't understand. The response was "Yes, but we didn't think you'd make any sales. We're certainly not going to pay you £1m!"
I'm minded of Edison and Tesla
And always getting such offers in writing, then checking that they're ironclad before proceeding
Slice of a bigger pie
One of our friends ran a company and really did pay unlimited commissions. She knew that the more commissions she paid out, the more she was making overall. She used to agonise over how to pay her sales staff *more*. Everyone in the industry was lining up to work for her.
Re: Slice of a bigger pie
Yes, that's how company start to be full of salesman while people creating the products leave because they are paid a pittance, product starve, and salesman one day find their customers are no longer happy about what they sell....
Re: Slice of a bigger pie
Sales people have their place, they are after all doing something your average techy person can't do (with a few exceptions). They deserve the commission they get so long as they didn't completely blatantly lie to make the sale, which is sadly quite often what happens.
The support staff around the product being sold should indeed be compensated well. That however is a different matter entirely, as without the sales in the first place there'd be no compensation for anyone at all. Its quite easy to forget that when you're staring green eyed at the bonus figures and lifestyles sales people seem to have. I've done technical sales, I was on commission and didn't do too badly. I hated it though and went back to a straight salary position as soon as I could.
Re: Slice of a bigger pie
Just an anecdote...
Years ago, when I was just a developer, we went to give a demo to a potential customer. This was long before the Internet so demos had to be given in person and either they came to you or you went to them, taking your demo kit with you.
There was a problem setting-up and we needed another hour. I said this to the salesman and he didn't even blink - just took the customer away and kept them busy for an hour. When they came back the demo worked and we got the sale.
My opinion of that salesman went up rather a lot as a result.
Re: “blatantly lie”
That’s what a pre-sales analyst is for.
To keep the salesperson in check.
Re: Slice of a bigger pie
I worked in a company who was treating its salespeople very well, then started to think after all developers weren't so important, as salespeople looked very good at selling their products.
One of the manager - a salesman itself - clearly explained developers should be regarded as "blue collars" because they didn't do more than putting software products together, the important part was selling it. So they started a company reorganization in that direction. For example, no more bonuses to developers for successful projects delivered in time and with happy customers. Still salespeople got bonuses and benefits.
Soon all skilled developers left. They replaced them with the only ones who could accept the lower wages and toxic environment. Quality went down the sink. Customers started to sue the company after the sales because the product never really did what the salespeople promised. That company then went bankrupt. Some of the customers asked to old developers to maintain their software but was not always possible (I did for one who kept the IP and bought the source code, and made nice money).
It is true you need sales to to make the money rolling in, it is also true in a competitive environment you need competitive products, otherwise you have nothing to sell, and often you can deceive a customer only once. Of course if you can offshore most of the work and your customers have little choices it can work....
Re: Slice of a bigger pie
Indeed, some sales staff are so good, they sell stuff their engineers didn't know existed and have no idea how to produce.
Re: Slice of a bigger pie
Decent companies stick a large percentage of revenue in to R&D. I think it was ~14% at the last few companies I worked for - most of that is salaries. The senior tech people at my last 3 companies were very well paid - several hundred thousand dollars a year for the experienced people. The money for those salaries has to come from somewhere.
There's a competitive market for experienced tech people as well. It's a symbiotic relationship.
“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. “
He lands their biggest ever deal and the judge agrees that Veritas set the quota too low.
I’m not in sales but wouldn’t want to work there if I was.
Now knowing how much these guys get paid I’ll push them harder for stuff, they should earn their commissions, I’m not doing the work for them anymore.
Renewal?
I believe it was a renewal, in which case the really tough sell (assuming your delivery is good) has already been done...
sometimes...
There is a difference between what is legal and what is right
Re: sometimes...
and between what is actually in the contract someone signed, and what they think was in it.
How much?
Given his base salary and bonus's, I'm not weeping too hard for him
bad move by Veritas
regardless of how you feel about the pay of salespeople, screwing a top performer is always a bad move for a sales culture. I agree the product/R&D should be the primary investment but to think that a salesperson does not play a strategic role is wrong. They get paid that amount of money for a reason, if it was easy, everyone would do it.
I assume he'll now loose all the rest paying all the legal fees.