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Anti-Poaching Agreement Costs Apple, Google, Intel and Adobe $324.5 Million

By Ted Banks and Sarah Marmor

For many years, many people thought that agreements regarding employees were not covered by the antitrust laws.   Four major hi-tech companies have just learned that this is not necessarily so.  A deal among the major Silicon Valley employers -- Google, Apple, Intel and Adobe -- not to “poach” one another’s top employees has just resulted in a large payment to settle a class action lawsuit days before trial was to begin.  In re High-Tech Emp. Antitrust Litig., No. 5:11-cv-02509, (N.D. Cal.  May 22, 2014) (motion for preliminary approval of settlement).

The companies’ agreement first came to light after an investigation and then prosecution by the Department of Justice for violation of both antitrust and labor laws.   A class action then was instituted on behalf of 64,000 technical employees seeking $3 billion.  The problem?  If companies agree not to hire a class or group of employees, they are limiting competition for those employee’s services, and (at least in theory) reducing or controlling the salary that the employees can command due to the reduced demand.

Employers should be sensitive to any agreement with another company about employees, their salaries, or their benefits.  There is a very specific exception for employers to work together to jointly negotiate a union contract, but in the absence of a union situation, employers cannot work together without creating antitrust issues.   Employers should also be very careful about sharing information with competing employers, even if there is no formal agreement among them to use that information to control wages or the like.  HR departments often send out surveys of wages or benefits, and even if there is no agreement regarding the results of the survey, the mere fact that the employers communicated creates the inference that there was a tacit agreement to align their salaries and benefits.

There are ways to protect and preserve your employees – through appropriately tailored noncompete agreements.  And there are ways to obtain information about prevailing wages and benefits.  But these need to be done in consultation with counsel lest you inadvertently run into antitrust buzz saws from the government and private plaintiffs.

Ted Banks is head of the firm’s antitrust practice.  tbanks@scharfbanks.com

Sarah Marmor is head of the firm’s employment law practice. smarmor@scharfbanks.com