Settlement Reached in Silicon Valley Hiring Conspiracy Case

Major technology companies accused of suppressing wages

6 May 2014

Photo: Joe Ravi/Wikimedia Commons

Adobe Systems, Apple, Google, and Intel have agreed to settle an antitrust class-action lawsuit accusing them of conspiring to hold down salaries in Silicon Valley, according to a court filing on 24 April as reported by Reuters. More than 64 000 programmers and engineers filed a class-action lawsuit in 2011 against the four, alleging they conspired not to hire away talented tech workers in the interest of stifling competition and suppressing wages.

The companies had acknowledged entering into some no-hire agreements but disputed the allegation they had conspired to drive down wages. The settlement avoided a trial that had been scheduled to begin at the end of May. Had it gone forward, the plaintiffs would have asked a jury to award about US $3 billion in damages. Under antitrust law, that could have been tripled to $9 billion. The specifics of the settlement will be disclosed by 27 May, according to the filing. Bloomberg BusinessWeek reported the companies agreed to pay $324 million, which means the individual plaintiffs would receive a few thousand dollars apiece.

According to court records, the companies secretly forged no-recruit agreements between 2005 through 2009. It appears that Steve Jobs, Apple’s late co-founder, initiated the no-recruit pacts, which was a plan to avoid recruiting each other’s valued engineers. Jobs was concerned that Google would hire away his top talent, according to the Bloomberg article. Sergey Brin, Google’s co-founder, stated in court documents that Jobs told him, “If you hire a single one of these people, it means war.” Jobs also threatened Palm Computing, the makers of personal digital assistants, with a patent lawsuit if the company didn’t agree to stop soliciting Apple employees, says the company’s former chief executive.

Apple and Google had conceded the no-recruit pacts contained nearly identical terms, preventing each from hiring away the other’s employees, according to U.S. District Judge Lucy Koh. The judge noted how unusual this kind of systematic plotting is. She said the defendant’s own experts admitted they were unaware of these types of long-term, all-employee agreements among organizations.

The four companies settled a U.S. Department of Justice probe in 2010 by agreeing not to enter into such no-hire deals in the future.

Kelly Dermody, a lawyer for the plaintiffs, praised the settlement and emphasized that it constituted “a wake-up call for the Valley,” adding that the tech industry “cannot make up its own rules.”

Regardless of the lawsuit’s outcome, Apple and Google have been and continue to be among the best companies to work for.

Which side do you agree with: the employees or the companies? How would you respond if you discovered your company participated in a no-recruit agreement? 

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