Google, Apple, Intel and Adobe Systems settled a class-action lawsuit alleging they conspired to refrain from soliciting one another’s engineers and other highly sought-after technology workers to prevent a salary war.
The roughly 64,000 tech workers who had filed the lawsuit against the companies had planned to ask for $3 billion in damages at trial, according to court filings. That could have tripled to $9 billion under antitrust law. The trial had been scheduled to begin May 27 in San Jose, Calif.
Terms of the settlement, announced yesterday, aren’t being revealed yet. Those details will be provided in documents that will be filed in court by May 27, according to Kelly Dermody, an attorney representing the workers.
Interestingly, a Justice Department investigation first brought the agreements to light. That inquiry ended in 2010 with an antitrust complaint against Apple, Google, Intel, Intuit, Adobe and Pixar for banning cold-calling workers at other companies. The companies settled the complaint, but didn’t admit guilt. There were no financial penalties, either.
Originally there were seven defendants in this lawsuit. However, settlements with Lucasfilm and Pixar (both now owned by Disney) and Intuit were reached last year. Those companies agreed to pay a total of $20 million.
At the heart of the lawsuit is, essentially, a “gentlemen’s agreement” that the companies created to retain employees by not cold-calling others’ workers. The companies maintain that the so-called “no-poaching” cartel wasn’t illegal because they still could hire employees from their partners in the arrangement, as long as the workers themselves initiated the inquiries about vacant positions.
Executives at the companies also allegedly wanted nothing in writing. As an article in the New York Times reports about documents filed in the case, there is the story of an Intel recruiter who asked Paul S. Otellini, then Intel’s chief executive, about a deal with Google.
“We have nothing signed,” Otellini wrote back, the NYT article reports. “We have a handshake “no recruit” between Eric and myself. I would not like this broadly known.”
Furthermore, Eric E. Schmidt, then Google’s chief executive, wrote in another email in the case: “I don’t want to create a paper trail over which we can be sued later,” the article reports.
Be that as it may, there seem to be a number of documents filed in court to the contrary. Indeed, the case was based largely on emails among Apple’s late co-founder Steve Jobs, former Google CEO Schmidt and executives at other Silicon Valley companies, a Reuters story reports.
For example, in one email exchange after a Google recruiter solicited an Apple employee, Schmidt told Jobs that the recruiter would be fired, court documents show, Reuters reports. Jobs then forwarded Schmidt’s note to a top Apple human resources executive with a smiley face, the story reports.
Apparently though, not all executives at Silicon Valley tech companies were involved. For instance, Google also attempted to persuade one of its former executives, Sheryl Sandberg, to join the no-poaching pact after she became Facebook’s chief operating officer in 2008. Sandberg refused to go along and Facebook continued to recruit Google employees, according to a sworn deposition that she provided in the case.
It will be interesting to learn about the details of the settlement next month, as well as watching the fallout—if there is any, which seems unlikely.
In the meantime, what’s your perspective on the case? Would you call talented employees at a rival company and attempt to lure them away? Is there anything wrong with that? Furthermore, would an agreement to not “poach” rivals’ top talent artificially keep wages low?