Oracle's headquarters in Readwood Shores, CA
Oracle’s headquarters in Readwood Shores, CA (Jason Doiy / The Recorder)

SAN FRANCISCO — Oracle America Inc. on Wednesday was sued by the Department of Labor for allegedly favoring people of Indian descent in hiring while paying white men more than women and minorities, making it the third major Silicon Valley company to land in the labor enforcer’s crosshairs in less than a year.

Oracle, represented by Orrick, Herrington & Sutcliffe senior counsel Gary Sinsicalco, is also accused of failing to turn over compensation and hiring data in violation of rules that apply to federal government contractors. The Labor Department complaint seeks to cancel Oracle’s millions of dollars in existing contracts and debarment to preclude it from participating in future bids.

The suit comes on the heels of an action against Google Inc. in early January for allegedly failing to hand over employee pay data as part of a routine compliance evaluation by the department’s Office of Federal Contract Compliance Programs (OFCCP). Last September, Palantir Inc. was sued by the department over alleged discrimination against Asian applicants in hiring.

Janet Herold, the Labor Department’s regional solicitor in San Francisco, on Wednesday insisted that the department isn’t targeting tech firms and said that the auditing was done at random. “I think that the reality of why this happened is that Silicon Valley [companies] have become big federal contractors,” she said.

Herold, however, added that the results of the investigations reflect the larger debate about a lack of diversity in the Valley, and particularly the lack of opportunities for women.

Orrick’s Sinsicalco declined to comment. Oracle spokeswoman Deborah Hellinger called the complaint “politically motivated, based on false allegations, and wholly without merit.”

“Oracle values diversity and inclusion, and is a responsible equal opportunity and affirmative action employer. Our hiring and pay decisions are non-discriminatory and made based on legitimate business factors including experience and merit,” Hellinger said in a statement.

She declined to elaborate as to why Oracle believes the suit was politically motivated, but Oracle CEO Safra Catz is reportedly serving on the transition team of President-elect Donald Trump. (Herold pointed out that the department’s “Notice of Violation” was issued to Oracle in March 2016.)

Julia Judish, an attorney at Pillsbury Winthrop Shaw Pittman who advises companies in Labor Department audits, said that most suits over alleged violations of federal contractor rules do not end in debarment or cancellation of contracts. “That’s very rare. This is clearly a shot across the bow,” she said.

“It looks from these complaints that the OFCCP is trying to change the hiring culture at these companies,” Judish added, pointing out that both the Palantir suit and the Oracle case call out the practice of heavily relying on existing employee referrals for hiring new workers.

“Employee referrals are not illegal. The problems arise when you have a company that is already not diverse in its workforce,” she said. “People like to hire people like them.”

The complaint specifically targets Oracle’s headquarters in Redwood Shores. That’s customary for these types of actions, which start with compliance audits of specific contractor offices. The department conducts thousands of such audits each year, according to Judish, most of them without event.

According to the Labor Department’s complaint, Oracle has engaged in “systemic compensation discrimination” against women, Asians, and African-Americans across 80 job titles at its headquarters. For female product developers—a category including programmers—Herold said government statisticians had determined there was a roughly one in a trillion chance that the pay disparity could be explained by anything other than discrimination.

At the same time, the complaint alleges that from as early as January 2013, Oracle has used a hiring process that has disproportionately favored applicants of Indian origin. The complaint identifies this group as “Asian applicants, particularly Indian Asians,” but Herold said that Oracle’s hiring practices essentially only benefited Indian applicants and not other Asians.

The Labor Department investigated whether Oracle was favoring H1B visa holders from India who might be paid less than American citizens, Herold said. “We definitely considered that, but it can’t be explained by that,” she said, adding that the department had concluded Oracle is engaged in “national origin discrimination.”

Judish speculated that Oracle may have decided not to hand over all of the data requested by the Labor Department because it felt the government was over-reaching. For big companies like Google and Oracle that have the resources to fight back, she said, choosing to take an adversarial approach may be intended to draw a line in the sand and avoid future scrutiny.

But it also is one of the surest ways to get sued, Judish added. The department “takes very seriously its authority to get the information that they feel they need in order to conduct a compliance review.”

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