Oracle staff policies in the dock

Larry Ellison could be forgiven this week for feeling that hell hath no fury like a former Oracle executive scorned.

The software supplier faces having to pay out $2.66m to a former manager after a California court found last week that she had been wrongfully dismissed. And there's more to come.

Two other suits have been filed by former senior executives who were apparently ousted after falling out of favour. They are suing for a total of $28.5m.

But Oracle employees are well used to falling in and out of favour with the flamboyant Ellison, who periodically takes hands-on charge of the company's day-to-day decision making in between flying jets and skippering racing yachts.

It seems that no-one is safe, as was proved by the deterioration in Ellison's relationship with Ray Lane, his highly regarded chief operating officer. Lane left the organisation in July after complaining that he was becoming increasingly marginalised.

But Lane is only the latest in a long line of high-profile scalps, which in the last year have included UK managing director Phillip Crawford and executive vice president for Europe, Middle East and Africa (EMEA) Pier Carlo Falotti. They were among the better known of Oracle's executives in Europe.

In the US, however, senior managers have been fighting back with claims for financial compensation.

Last week's case involved Sandy Baratta, former vice president of global alliances at Oracle. She was dismissed after informing her managers that she suspected some of her co-workers were misappropriating secrets from arch rival SAP.

Baratta, who was fired the morning after telling her boss Gary Bloom about the potential problem, claimed her dismissal was triggered by her decision to pass on the information. She said she was fired over the telephone on her way to a business meeting with representatives from SAP.

Industrial espionage
The issue came to light after Oracle's customer relationship management group announced that it was developing an interface between its front-office applications and SAP's R/3 back-office packages. Baratta believed that the group may have unlawfully obtained SAP trade secrets to undertake such development work.

During the court case, Baratta's lawyers alleged that an Oracle employee stationed at SAP's headquarters in Walldorf, Germany had gained access to the company's software.

Oracle has inevitably said it will appeal. "Oracle intends to challenge the verdict by both post-trial motions and by appeal, and believes there is a high likelihood the verdict will not be allowed to stand," said a company statement. It also claimed that Baratta was, in fact, dismissed because of an "inappropriate" attitude towards her co-workers.

But the jury also ruled that Oracle retaliated against Baratta when she complained about certain remarks made by Bloom regarding pregnant executives. Baratta was five months pregnant when she was dismissed in April last year.

Bloom's involvement in the case is somewhat embarrassing, however, because he is widely seen within Oracle to be Ellison's 'chosen son' and is tipped to be his successor when Ellison finally decides to step aside. The situation has been made worse by the fact that Bloom is also cited in a second wrongful dismissal allegation which is still pending.

In another case, Randy Baker, former executive vice president, claims that Oracle unjustly fired him six months before his retirement date, depriving him of some $16m in stock options. Baker, who was a member of the vendor's management committee, is demanding $18.5m in lost income, compensation and damages.

The lawsuit names Bloom and Ellison as defendants. Ellison is alleged to have made "derogatory comments" to Baker about his age and those of Oracle's managers in general. Baker was 55 at the time. Ellison, coincidentally, is also 55. Baker was demoted in late January this year and allegedly fired unjustly the following month.

According to the suit, Baker told Bloom and Ellison in 1999 that he planned to retire in August 2000 and was assured that he could work until that date. But on top of allegedly being fired, he also claims that all of his benefits were subsequently cancelled, including his family health insurance. He also alleges he was told that his unvested stock options would be "null and void".

Timing is everything
From a European perspective, however, the headline grabber has to be the suit filed by Falotti, whose claim that the company deprived him of $10m in stock options may hinge on whether the US courts accept his doctor's note.

Falotti was ousted from his post four days before his options were due to vest. He attests that the 125,000 options are legally his and that he was deprived of them by the timing of his dismissal.

Falotti ran Oracle's EMEA group from Geneva, and under Swiss law companies cannot dismiss employees if they are too unwell to attend work in the first place. Falotti has produced a doctor's note stating that he was unwell on the day of his sacking and would have continued to be ill for an indefinite period thereafter.

Oracle, on the other hand, argues that its corporate employment contract supersedes Swiss law and that Falotti has no claim to the money.

But what makes the case particularly interesting is that Oracle's defence suit presents a radically different version of Falotti's departure than that which was pitched by its spin doctors at the time.

According to Oracle's lawsuit, Vance Kearney, vice president of human resources for EMEA, went to Falotti's office on 31 May. But Falotti had already left and was boarding a train for his native Italy. Kearney then called Falotti on his mobile phone to deliver the news of his dismissal, which was effective immediately. Ellison and Falotti later discussed the issue.

Quite how this squares with Oracle's vociferous denials after the event that Falotti was axed, remains to be seen. At the time, the company insisted that he had decided to retire, despite Falotti himself going on the record in Paris a few weeks earlier to state that he had no such plans.

It is also difficult to reconcile Oracle's latest version of Falotti's departure with comments made at the supplier's European User Group meeting in Madrid this summer. Sergio Giacoletto, Falotti's replacement, said at the meeting that the decision to place him at the helm was taken back in January. He had, he claimed, been forced to keep quiet about it until 1 June when he took over.

Whatever the explanation behind the apparent contradictions in Oracle's statements, the industry will have to wait until the hearing before any more details emerge. The company has a policy of refusing to comment on forthcoming litigation.

But what is clear is that Baker's and Falotti's days in court will provide further insights into the workings of Ellison's company and its attitudes towards staff.