How Silicon Valley Giants Got Caught Up in an Anti-Poaching Lawsuit

by Don Reisinger

The story behind the alleged collusion dates back to 2005 when the companies involved in the lawsuit allegedly started telling their hiring managers not to poach employees from companies that were part of the agreement. According to the lawsuit, that agreement was in place for about four years—a surprisingly long time.

Apple co-founder Steve Jobs had, at one point, asked then-Google CEO Eric Schmidt not to steal employees from him. In 2007, Jobs wrote an email to Schmidt, saying that he would be “very pleased if your recruiting department would stop doing this,” the lawsuit papers show. Schmidt sent an email internally, saying that he thought it was clear that Google has “a policy of no recruiting from Apple.”

Given their size and importance in the technology industry, it’s no surprise that Google and Apple have received the most attention related to the lawsuit. However, they were by no means the only companies involved. The original lawsuit included Adobe, Intel, Intuit, Pixar and Lucasfilm. The last three companies have already settled the case out of court.

Despite three of the companies involved in the suit settling the case out of court, the remaining firms said they have done nothing wrong. In fact, Intel has gone on the record to say that it denies “the allegations contained in the suit,” adding that the company has not “violated any laws.” The other companies involved in the suit have echoed the sentiment, denying any illegality.

So, what exactly is the argument against the defendant companies? According to the plaintiffs, that the companies allegedly decided not to compete with each other meant that their wages were negatively affected. The employees said that had they been able to work at the company of their choosing, their salaries would have been pushed up and the marketplace in general would have been more employee-friendly.

Although allegations that the technology companies colluded over non-competition spanned four years—2005 to 2009—they didn’t agree to compete until 2011. That doesn’t necessarily mean that they were cooperating in the interim, but it wasn’t until two years after the end of the alleged collusion that they formally agreed to end all cooperation.

Although the alleged collusion occurred between 2005 and 2009, the plaintiffs have argued that the dollar number they receive should span 2005 to the present day. The employees said that because the companies stopped other firms from recruiting their employees, they reduced competition in the employment market. Therefore, the plaintiffs said, the companies are continuing to profit to this day from lower employment costs. Any possible settlement should include those profits, the plaintiffs said.

As noted, the companies involved in the case said that they are innocent. However, they have offered not one, but two settlements to put this case behind them. In a statement to reporters, Adobe said that the decision to go after a settlement is based on its desire to “avoid the risk, burdens, and uncertainty of ongoing litigation.” In other words, it might just be cheaper to settle than continue a court battle.

In total, seven companies have been implicated in the case with employees. As noted, three of them settled for a combined $20 million to pay 8 percent of those affected by the suit. Based on that, last May, the four remaining companies said that they would pay $324.5 million, using the same ratio as Lucasfilm, Intuit and Pixar. However, a court ruled against the settlement, saying it was too low. Now, the companies have gone back to the drawing board.

There is still hope for Apple, Google, Intel and Adobe to settle this case. The companies announced on Jan. 15 that they have now agreed to pay $415 million to settle the case with the plaintiffs. Once again, the federal judge will need to approve the deal, but it could be getting closer to the amount Judge Lucy Koh thinks they should pay.