Apple and Google face salary fixing lawsuit

John Ribeiro
21 April, 2012
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Apple, Google, Intel and Adobe are accused of agreeing not to poach each others staff, therefore holding back career development and suppressing compensation. A federal court in California has ordered seven technology companies in the state including Apple, Intel, Adobe and Google to face a private antitrust suit from five former employees, who alleged that the companies conspired to eliminate competition between them for skilled labor to suppress compensation and mobility of employees.

District Judge Lucy H. Koh of the U.S. District Court for the Northern District of California, San Jose division ruled on Wednesday that the plaintiffs’ antitrust claims cannot be dismissed on the basis of implausibility, and that they have adequately pleaded antitrust injury as a result of six agreements among the companies. The case evolves around a comment made by Apple’s  late-CEO Steve Jobs to Palm’s CEO: “We must do whatever we can to stop cold calling each other’s employees and other competitive recruiting efforts between the companies.”

Judge Koh was ruling on a joint motion by the defendant companies to dismiss the complaint filed under the Sherman Act and Cartwright Act antitrust laws.

The former employees, all software engineers, had charged that from 2005 to 2007 the defendants had entered into nearly identical “do not cold call” bilateral agreements whereby each placed the employees of the other in a “do not cold call” list with instructions to recruiters not to “cold call” these employees.

In a properly functioning and lawfully competitive labor market, each defendant would compete for employees by soliciting or “cold calling” current employees of one or more other defendants, the plaintiffs said.

“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,” Judge Koh wrote in her 29-page order.

“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,” Judge Koh added.

The seven companies were also investigated in this connection by the U.S. Department of Justice, and they settled in 2010 while admitting no wrongdoing, but agreed not to ban cold calling and not to enter into any agreements that prevent competition for employees.

It is reasonable to infer that such significant wide-ranging, company-wide, and worldwide policies would have been approved at the highest level, Judge Koh said referring to the six agreements.

The alleged role of Apple co-founder Steve Jobs in the agreements has been referred to by the plaintiffs. Jobs is for example alleged to have threatened Palm with litigation for not entering into a “do not cold call” agreement, according to the plaintiffs. The conspiracy consisted of an interconnected web of express bilateral agreements, each with the active involvement and participation of a company under the control of the late Steve Jobs and/or a company whose board shared at least one member of Apple’s board of directors, the plaintiffs said according to the court document.

 The case will move on towards a June 2013 trial.

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