Employees at top Silicon Valley companies can sue bosses accused of entering a secret pact that kept salaries down, a judge in California has ruled.
The lawsuit claims that between 2005 and 2007 Apple, Google, Intel, Adobe, Intuit, Pixar and Lucasfilm entered into non-compete agreements to end the practice of poaching of staff with promises of fatter paychecks and other benefits. Five software engineers sued after a Department of Justice investigation unearthed evidence of recruitment shenanigans. The accused firms sought to have the case dismissed – a request denied on Wednesday by Judge Lucy Koh.
"The fact that all six identical bilateral agreements were reached in secrecy among seven Defendants in a span of two years suggests that these agreements resulted from collusion, and not from coincidence," she wrote in her judgment.
"For example, it strains credulity that Apple and Adobe reached an agreement in May 2005 that was identical to the 'Do Not Cold Call' agreement Pixar entered into with Lucasfilm in January 2005."
The late Steve Jobs was a key mover in the underhand pacts, it is claimed. Apple had agreements with Pixar, Google, and Adobe that senior staff would be placed on a recruitment blacklist and not approached for better-paying jobs, it was alleged. An email from Jobs indicated he tried to broker similar deals with other employers, the court heard.
"We must do whatever we can to stop cold calling each other's employees and other competitive recruiting efforts between the companies," Jobs wrote in an email to the then CEO of Palm Ed Colligan, and Jobs threatened to tie the firm up with litigation if Palm didn't agree.
Colligan held firm however, and turned Jobs down flat. "Your proposal that we agree that neither company will hire the other's employees, regardless of the individual's desires, is not only wrong, it is likely illegal," he replied.
Google's Eric Schmidt is also named as a key mover by the plaintiffs. They claim the executive chairman negotiated non-compete deals with Intel and Intuit to block staff from being offered better deals to change employers.
The DOJ concluded in 2010 that such deals had been going on and banned the practice in a settlement with the companies – but the firms involved admitted no guilt. Now employees have the go-ahead for a class-action suit against their employers and, based on the number of staff potentially involved, the bill for the firms could be very high indeed.
Rumors of managers trimming costs by colluding to keep wages down have long been rife in Silicon Valley, but it wasn't until the DOJ stepped in that evidence came to light. The authorities are now investigating which other companies may have had similar deals and the possibility of further action seems likely.
Judge Koh said that the plaintiffs were now free to sue the firms under the antitrust Sherman Act and California’s Cartwright Act. The case is expected to begin in June. ®