Judge deals blow to high-tech workers' lawsuit (Update)

Apr 05, 2013 by Michael Liedtke
Silicon Valley's capital city San Jose in California. A judge on Friday cited strengths of a suit charging Silicon Valley giants with secretly agreeing not to "poach" each other's workers but shot down a request for broad class action status.

A federal judge on Friday struck down an effort to form a class action lawsuit to go after Apple, Google and five other technology companies for allegedly forming an illegal cartel to tamp down workers' wages and prevent the loss of their best engineers during a multiyear conspiracy broken up by government regulators.

U.S. District Judge Lucy Koh in San Jose, California, issued a ruling Friday concluding that the companies' alleged collusion may have affected workers in too many different ways to justify lumping the individual claims together. She denied the request to certify workers' lawsuits as a class action and collectively seek damages on behalf of tens of thousands of employees.

The allegations will be more difficult to pursue if they can't be united in a single lawsuit. Koh, though, will allow the workers' lawyers to submit additional evidence that they have been collecting to persuade her that the lawsuit still merits class certification.

"Plaintiffs appreciate the court's thorough consideration of the evidence and are prepared to address the court's concerns fully in a renewed motion," employee attorney Kelly Dermody wrote in a Friday email.

Apple Inc., Google Inc. and the other companies targeted in the lawsuit have been vigorously fighting the allegations. More is at stake than potentially paying out significant damages to more than 100,000 workers. If the lawsuit proceeds, it could also expose secret discussions among prominent technology executives who entered into a "gentlemen's agreement" not to poach employees working at their respective companies.

The case, filed in San Jose federal court, already has disclosed emails raising questions about the tactics of Apple's former CEO, the late Steve Jobs, and Google's former CEO, Eric Schmidt. Other sensitive information has so far been redacted in various court documents, including parts of Koh's 53-page ruling, but more dirty laundry could be aired if the lawsuit proceeds.

The lawsuit is trying to hold the companies accountable for an alleged scheme that cheated employees by artificially suppressing the demand for their services. The complaint hinges on the contention that the workers would have gotten raises either from their current employers or at other jobs if an anti-poaching provision hadn't been imposed. In most instances, the recruiting restrictions were in place from March 2005 through December 2009, according to the lawsuit.

Besides Apple and Google, the lawsuit is aimed at computer chip maker Intel Corp., software makers Intuit Inc. and Adobe Systems Inc., and film makers Pixar and LucasFilm, both of which are now owned by Walt Disney Co.

With the exception of LucasFilm, all the companies being sued settled similar allegations of an anti-poaching conspiracy with the U.S. Justice Department in 2010. The government opened its investigation in 2009 after finding evidence that the companies had reached behind-the-scenes agreements not to recruit each other's employees without permission. Apple, Google and the other companies lifted their poaching prohibitions without acknowledging any wrongdoing, as part of their settlement with the Justice Department.

Documents filed in the lawsuit indicated executives knew they were behaving badly. Both Schmidt and Intel CEO Paul Otellini indicated that they were worried about the anti-recruiting agreements being discovered, according to declarations cited in Koh's ruling. Nevertheless, Schmidt still fired a Google recruiter who riled Jobs by contacting an Apple employee, according to evidence submitted in the case.

Sometimes, workers who applied for a vacant position of their own volition were turned away if they were employed by one of the companies already adhering to the recruiting restrictions.

In her ruling, Koh said there's evidence that some of the employees working at the companies named in the lawsuit probably didn't earn as much money as they would have in a completely free market.

"The sustained personal efforts by the corporations' own chief executives...to monitor and enforce these agreements indicate that the agreements may have had broad effects on (their) employees," she wrote.

The problem with the lawsuit, Koh said, is that the circumstances for each employee differ too widely to qualify as a class action.

Explore further: Alibaba surges in Wall Street debut

3.3 /5 (4 votes)
add to favorites email to friend print save as pdf

Related Stories

Apple, Google chiefs face grilling on 'no-poaching'

Jan 19, 2013

Apple chief Tim Cook and Google chairman Eric Schmidt are expected to face questioning in a lawsuit accusing Silicon Valley giants of secretly agreeing not to "poach" one another's workers, according to officials ...

US judge allows tech 'poaching' suit to proceed

Apr 19, 2012

A US judge has given a green light to a lawsuit charging Apple, Google, Pixar and other technology-driven firms with colluding to keep salaries in check by agreeing not to poach one another's software engineers.

Suit says tech titans fixed worker pay

May 05, 2011

A former Lucasfilm software engineer is suing the movie studio along with Silicon Valley technology titans for what he portrayed as a conspiracy to curb pay for workers.

Apple targets Google in patent suit

Nov 07, 2012

A US judge on Wednesday was considering a request by Apple that would pull Google from the sidelines in a long-running patent war with Samsung over mobile gadgets powered by Android software.

Recommended for you

Alibaba makes Wall Street debut

Sep 19, 2014

Alibaba made its long-awaited Wall Street debut Friday on the heels of a record stock offering that opens the door to global expansion for the Chinese online retail giant.

Alibaba IPO to boost employee fortunes to $8 bn

Sep 19, 2014

Employees of Chinese e-commerce giant Alibaba will see their fortunes swell to nearly $8 billion as the company prepares a massive US stock offering that could be valued at $25 billion.

Alibaba mega IPO caps founder Jack Ma success tale

Sep 19, 2014

When Jack Ma founded Alibaba 15 years ago he insisted the e-commerce venture should see itself as competing against Silicon Valley, not other Chinese companies. That bold ambition from a time when China was ...

User comments : 23

Adjust slider to filter visible comments by rank

Display comments: newest first

dogbert
1.3 / 5 (12) Apr 05, 2013
Excellent. A "no poaching" attitude harms no one because any worker may seek and obtain employment with any employer.
ar18
1 / 5 (1) Apr 05, 2013
"No poaching" also is enforced by many of these Mafia-like companies by requiring the employee to sign a non-compete clause (so you agree to not work for their competitors for X amount of years after you are laid-off, fired, or quit). They also have your contract agency sign a non-competition agreement so that they cannot offer you another job while you are working for their company. Contract agencies honor and do not fight these agreements because 1) they make (in this economy) hard-to-find money by finding them employees, and 2) they are not willing to go up against very litigious companies. You get stuck in what eventually becomes a dead-end job with little to no chance of advancement and may not even know what is being done to you in secret. They can treat you poorly (decrease your benefits, time off, etc) and not have to worry about it. The "no poaching" attitude harms a great many people because it limits who and when someone will hire you.
dogbert
1.4 / 5 (10) Apr 05, 2013
ar18,

An employee working for Apple, for example, is not prohibited from applying for work at Google, nor is Google in any way hindered in hiring that employee. The "no poaching" agreement applies only to one company trying to hire another company's employees. Their employees are not a part of any agreement and may seek employment anywhere at anytime.

Your scenario is someone working for an employment agency. No employment agency was a part of any "no poaching" agreement and people working for an agency are not actually working for any of the companies with "no poaching" agreements.
BSD
1 / 5 (8) Apr 06, 2013
What a laugh, the only thing you could poach off iApple is how to make little white, round cornered iboxes, and the technology to add an 'i' in front of a word.
Lurker2358
1 / 5 (7) Apr 06, 2013
What a laugh, the only thing you could poach off iApple is how to make little white, round cornered iboxes, and the technology to add an 'i' in front of a word.


And yet they were the first to the MP3 player and the first practical smartphone.

It's really a shame, since Star Trek had the ideas decades earlier, including tablets with rounded edges and color touch-monitor interfaces.

The idea was around, so no other company went ahead and did it.

You can't fault Apple because they were the first to actually put the technologies and concepts together to make it work.

You CAN fault them for being greedy and trying to patent "concepts", which existed decades before the actual devices came to fruition.
dav_daddy
1 / 5 (9) Apr 06, 2013

And yet they were the first to the MP3 player and the first practical smartphone.


MP3 players were around for quite a few years before Apple put out the first ipod. Blackberry was the first practical smartphone again years before Crapple.

The only thing Apple was first to introduce was the tablet.
RealScience
not rated yet Apr 07, 2013
@Dogbert - looks like you missed this part of the article:

Sometimes, workers who applied for a vacant position of their own volition were turned away if they were employed by one of the companies already adhering to the recruiting restrictions. In her ruling, Koh said there's evidence that some of the employees working at the companies named in the lawsuit probably didn't earn as much money as they would have in a completely free market.


Don't you support free markets, and oppose those who collude against free markets?
dogbert
1 / 5 (7) Apr 07, 2013
RealScience,
Sometimes, workers who applied for a vacant position of their own volition were turned away if they were employed by one of the companies already adhering to the recruiting restrictions.


So? Sometimes people who applied for a position and were not working for one of the companies in the lawsuit were turned away. Sometimes people who applied for a position and were not working for anyone at all were turned away. In fact, most people who apply for a position are turned away.

No company has admitted turning away an applicant because that applicant was employed at another company.

In her ruling, Koh said there's evidence that some of the employees working at the companies named in the lawsuit probably didn't earn as much money as they would have in a completely free market.


But it was a free market. Anyone could apply anywhere and any company could hire any applicant.

dogbert
1 / 5 (7) Apr 07, 2013
RealScience cont...,
Don't you support free markets ...

Absolutely. And the markets in question were free. Free to hire, free to refuse to hire. Free to apply, free to be hired, free to be rejected.

It makes no sense for companies in a market to war against each other by trying to hire employees away from each other. There are better uses for resources and time.

But note that no company ever agreed not to hire someone who worked for another company. The companies retained the freedom to hire or not as they chose. Employees of the companies were free to stay or go elsewhere.

The only agreement the companies made was not to raid each others work force.
RealScience
not rated yet Apr 07, 2013
@dogbert - Your interpretation conflicts with the implication in the statement: "Sometimes, workers who applied for a vacant position of their own volition were turned away IF they were employed by one of the companies already adhering to the recruiting restrictions".

While that statement alone is not conclusive and could just be misleading wording as you suggest, that Judge Koh (who has seen more of the evidence than either of us) found that it was not a free market supports the straightforward interpretation of the 'if' clause, that some were turned away because they worked for the companies in question.

Perhaps the case will go to trial and it will be seen which interpretation is correct.
dogbert
1 / 5 (7) Apr 08, 2013
RealScience,
... some were turned away because they worked for the companies in question.


It was not stated that any employee was rejected because that employee worked for another company.

The judge rejected the class action because of lack of evidence that a class was harmed by the companies agreement not to raid each others work force.
antialias_physorg
1 / 5 (1) Apr 08, 2013
It's a pretty tricky situation, as such an agreement basically says "people need not be paid what they are worth if company CEOs agree on not bidding for them"

I can see why they threw out a class action suit, because it doesn't apply to all workers equally (how would you ascertain which workers companies would have tried to bid for - i.e. who git harmed - and which they wouldn't have?)

A "no poaching" attitude harms no one because any worker may seek and obtain employment with any employer.

The porspective new employer will offer a salary based on the salaries of people he already employs. If that salary is artificially depressed (because he doesn't need to pay more to keep people from wandering off) then the job seeker is harmed.
It's price-fixing for salaries, plain and simple.
dogbert
1 / 5 (7) Apr 08, 2013
antialias_physorg,
It's a pretty tricky situation, as such an agreement basically says "people need not be paid what they are worth if company CEOs agree on not bidding for them"


Understand that there was no such agreement. No price fixing, no agreement not to compete. The only agreement was that the companies agreed not to raid each other's work force.

The porspective new employer will offer a salary based on the salaries of people he already employs.


An employer bases an offer on many factors only one of which is the average pay of current employees. An employee negotiates a salary. The employer offers to each applicant what he feels the applicant is worth to the company. Many prospective employees get no offer of employment. The employer and the prospective employee then negotiate salary and benefits.

cont.
dogbert
1 / 5 (7) Apr 08, 2013
antialias_physorg cont ...,
If that salary is artificially depressed (because he doesn't need to pay more to keep people from wandering off) then the job seeker is harmed.


Again, the companies' agreements not to raid each others work force does not prevent their work force from seeking and obtaining other employment. That is, every employee of company A can and may 'wander off' to companies B,C,D, etc. and negotiate a different salary and benefit package.

It's price-fixing for salaries, plain and simple.


It is not price-fixing in any way.

The market fixes salary/benefits in general. Specific salary/benefit packages are negotiated sometimes above, sometimes at and sometimes below the market.

There is always competition for highly productive applicants.
nowhere
5 / 5 (2) Apr 08, 2013
The judge rejected the class action because of lack of evidence that a class was harmed by the companies agreement not to raid each others work force.

Completely incorrect. It was dismissed as a class action because the circumstances within the class vary to widely, meaning that the extent of harm to each employee is considerably varied. There is nothing regarding lack of evidence, I don't know how you formed that opinion.
dogbert
1 / 5 (7) Apr 08, 2013
nowhere,
The problem with the lawsuit, Koh said, is that the circumstances for each employee differ too widely to qualify as a class action.
nowhere
not rated yet Apr 08, 2013
It is not price-fixing in any way.


When you lower demand in a market you decrease the price for that market. Since the top companies do not try to capture tallent from other companies, there is less demand for those skilled employees. Since there is less demand, each company can pay its employees less with the knowledge that they won't get any offer from opposition, and if they seek the offer, it will be uncompetitive as both companies are enjoying the lower wages their agreement has bought. This is spacificly price-fixing.
nowhere
3 / 5 (2) Apr 08, 2013
nowhere,
The problem with the lawsuit, Koh said, is that the circumstances for each employee differ too widely to qualify as a class action.

Exactly. I am glad you found what I was referring to.
dogbert
1 / 5 (7) Apr 08, 2013
nowhere,
When you lower demand in a market you decrease the price for that market.


There was no lowering of demand.

Since the top companies do not try to capture tallent from other companies, there is less demand for those skilled employees.


The top companies did hire talent from each other.

Since there is less demand, each company can pay its employees less with the knowledge that they won't get any offer from opposition, and if they seek the offer, it will be uncompetitive as both companies are enjoying the lower wages their agreement has bought. This is spacificly price-fixing.


The companies did nothing which would have affected demand.
There was no price fixing.
antialias_physorg
3.7 / 5 (3) Apr 08, 2013
Understand that there was no such agreement. No price fixing, no agreement not to compete.

We don't know that .That was the point of filing the suit. So they must be confident that they had some evidence/indication that price fixing was going on.

I'm not saying that price fixing is going on (again: that would be for the court to find out). I'm saying that IF price fixing is going on then people are coming to (financial) harm.

Can't have capitalism and then not wanting to not pay salaries based on supply and demand. That would be hypocritical, right?
nowhere
not rated yet Apr 08, 2013
There was no lowering of demand.


If they did in fact form an anti-poaching agreement then there would be a decrease in employment offers from alternative competitors. This is a decrease in demand.

The top companies did hire talent from each other.


None of whom were sought after.

The companies did nothing which would have affected demand.
There was no price fixing.


This depends on whether the Court finds that they did in fact make and anti-poaching agreement.
dogbert
1 / 5 (8) Apr 08, 2013
antialias_physorg,
We don't know that .That was the point of filing the suit. So they must be confident that they had some evidence/indication that price fixing was going on.


The suit was not filed for price fixing. It was filed because companies had agreed not to raid each other's workforce. The lawyers filing the suit saw it as an opportunity to make money. The judge said no.
antialias_physorg
3.7 / 5 (3) Apr 08, 2013
The suit was not filed for price fixing. It was filed because companies had agreed not to raid each other's workforce.

Which, as I pointed out, is the same. If you artificially suppress demand then prices will not rise - and those who would benefit by a supply/demand scenario get short-changed.

The lawyers, of course, saw it as a way to make money (they don't care what they sue for). The people who charged the lawyers with filing the suit think they are owedmoney because the companies have damaged their earning prospect.

The ruling was not about whether price fixing happened (or not). The ruling was whether a CLASS ACTION SUIT would be allowed in the matter or whether people would have to sue individually. And in that regard I think the judge ruled correctly.