Silicon Valley Conspiracy to Suppress Wages Goes from DOJ to Class-Action

Tuesday, January 28, 2014

Three years after the U.S. Department of Justice (DOJ) determined that six tech giants in Silicon Valley were conspiring not to hire each other’s highly-skilled employees, driving down wages and depriving workers of access to better jobs, an appellate court has cleared the way for a class-action suit that could potentially cost billions of dollars.

According to the DOJ, the company actions violated antitrust laws and in the ensuing settlement with Apple Inc., Google Inc., Intel Corp., Adobe Systems, Intuit Inc. and Pixar the companies agreed to stop doing that—for five years.

No penalties were incurred in the settlement of the department’s civil suit.

Subsequent lawsuits by employees seeking damages from the smallest of the group, Intuit  and Pixar plus Lucasfilm, were settled last July for a total of $20 million. Last week, the U.S. Ninth Circuit Court of Appeals cleared the way for the hearing of a class-action suit against the other four companies, despite their protestations.

That suit represents 100,000 workers who arguably lost $9 billion from 2005 to 2009 and builds on information gleaned during the DOJ investigation.   

U.S. District Judge Lucy Koh granted class-action status last October and documents submitted to the court detailed discussions between the companies not to compete for each other’s workers.

The earliest agreement noted in the judge’s decision was a reference to “plaintiff’s evidence” that in the mid-‘80s filmmaker George Lucas struck a deal with Pixar when his company, Lucasfilm, sold it (before the name change) to Steve Jobs at Apple.

“The companies thus agreed: (1) not to cold call each other’s employees; (2) to notify each other when making an offer to an employee of the other company even if that employee applied for a job on his or her own initiative; and (3) that any offer would be “final” and would not be improved in response to a counter-offer by the employee’s current employer (whether Lucasfilm or Pixar).”    

Jobs liked the agreement and in later years extended it to other companies with whom Apple shared common interests, sometimes reflected in their board of directors.

The companies participated in a web of bilateral agreements, which included “Do Not Call” lists, that were kept secret at lower levels of the companies. At the upper end, often in CEO-to-CEO communications, emails were flying back and forth—enticing, cajoling and threatening—to bring all the participants into compliance. Jobs and Eric Schmidt at Google agreed in 2005 to share wage scale information and halt cross-company recruiting.

When Schmidt was asked by former Google Senior Vice President Shana Brown if he had any concerns about Do Not Call lists, he indicated a preference that they be shared “verbally[,] since I don’t want to create a  paper trail over which we can be sued later?”

Deals were struck between Apple and Adobe, Apple and Pixar, Google and Intel, Intel and Pixar, and Google and Intuit, although not always of totally free volition. Shortly after Apple and Adobe reached an accord, Jobs complained that Adobe wasn’t keeping its end of the bargain. The Adobe CEO responded that he thought it only applied to the most senior employees.

Jobs responded, “OK, I’ll tell our recruiters that they are free to approach any Adobe employee who is not a Sr. Director or VP. Am I understanding your position correctly?” Adobe relented.

Judge Koh set May 27 for the start of a jury trial of the lawsuit.

–Ken Broder


To Learn More:

The Techtopus: How Silicon Valley’s Most Celebrated CEOs Conspired to Drive Down 100,000 Tech Engineers’ Wages (by Mark Ames, Pando Daily)

High-Tech Workers Class Action Lawsuit (Attorneys Lieff Cabraser Heimann & Bernstein)

Justice Department Requires Six High Tech Companies to Stop Entering into Anticompetitive Employee Solicitation Agreements (U.S. Department of Justice)

Silicon Valley Employee-Poaching Case Draws Closer to Trial (by Howard Mintz, San Jose Mercury News)

Order Granting Class Certification (U.S. District Court for Northern District of California San Jose Division)

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