Big corporations relentlessly push the ideology that free markets are good for everyone—but when they don’t like what the market gives them, they are among the first to try to subvert it, as the Silicon Valley non-recruitment collusion case—which has already cost three firms $20 million in damages—demonstrates.

Back in 2009, the U.S. Department of Justice (DOJ) got wind of allegations that several Silicon Valley tech companies had been colluding among themselves since at least 2006 to drive down salaries by agreeing not to recruit each other’s employees. The plan was evidently hatched by Apple CEO Steve Jobs. DOJ filed a civil suit alleging violations of the federal antitrust laws. “These no cold call agreements are facially anticompetitive because they eliminated a significant form of competition to attract high tech employees, and, overall, substantially diminished competition to the detriment of the affected employees who were likely deprived of competitively important information and access to better job opportunities,” the complaint argued.

After just a year, DOJ announced a settlement in which seven companies—Lucasfilm, Intuit, Pixar, Adobe, Apple, Google and Intel—admitted they made so-called “gentlemen’s agreements” to refrain from making “cold-calls” to one another’s employees. Although the corporations did not concede the illegality of the scheme, they agreed not to engage in similar conduct for 5 years. The deal provided nothing to their employees, whose salaries were the target of the conspiracy in the first place.

Not surprisingly, some of those workers soon filed suits, some of them seeking class-action status and demanding damages for pay they lost as a result of the conspiracy. The suits were eventually consolidated in federal court in the Northern District of California. Although the consolidated class action suit initially claimed a class of more than 100,000 employees affected by the scheme, the plaintiffs later reduced that number to about 64,000.

Last week, federal Judge Lucy Koh approved a settlement agreement between some of the workers and three of the defendants: Intuit, Lucasfilm and Pixar, having previously approved a class of about 50,000 salaried employees in the technical, creative, or R&D fields who worked for any of the seven companies from 2006 until December 2009. Judge Koh found that the $20 million settlement to be fair and reasonable, of which Walt Disney subsidiaries LucasFilm and Pixar will pay $9 million, and Intuit will pay $11 million.
 

In her decision, Koh pointed out that the conspiracy largely centered on former Apple CEO Steve Jobs, for each of the no-hire agreements involved a company under his control or that shared at least one director who was on Apple’s board. The suit sets forth several examples of Jobs demanding that other companies not “poach” Apple’s workers, including a 2007 email from Jobs to Google CEO Eric Schmidt saying that Jobs “would be very pleased if your recruiting department would stop” recruiting an Apple engineer. In another case, Palm CEO Edward Colligan told Jobs that his demand for compliance with the no cold calls agreement was “not only wrong, it is likely illegal.”

Because the other four corporate defendants—Adobe, Apple, Google and Intel—did not reach a settlement, they will remain “jointly and severally liable for all damages caused by the conspiracy, including damages from the settling defendants' conduct,” according to Judge Koh. But Stephen Hirschfeld, CEO of the Employment Law Alliance, says the remaining four will be under even greater pressure to settle as well, because “there is an assumption that if they actually get in front of a jury and there are thousands of plaintiffs, a jury will think, ‘Well, if there's smoke, there must be fire.’”

-Matt Bewig

To Learn More:

Tech Labor Conspiracy Case Settled With Three (by Elizabeth Warmerdam, Courthouse News Service)

Judge OKs Class-Action Suit against Apple, Intel, Google, Adobe (by Steve Johnson, San Jose Mercury News)

In re: High-Tech Employee Antitrust Litigation (Order granting class certification) (pdf)

DOJ Sues Apple, Google, Intel, Adobe, Pixar & Intuit for Labor Antitrust Violations (Courthouse News Service)

Tech Giants Conspired on Wages, Plaintiffs Assert (by Jonny Bonner, Courthouse News Service)