Suit claims Silicon Valley firms conspired to hold down wages of techies

Jan. 24, 2014

Well, this is interesting. There is a lot of chatter this morning about a class action suit scheduled to come to trial in May which claims tech giants in Silicon Valley informally avoided hiring each other's tech employees. Over on, author Mark Ames relates that

"In early 2005, as demand for Silicon Valley engineers began booming, Apple’s Steve Jobs sealed a secret and illegal pact with Google’s Eric Schmidt to artificially push their workers wages lower by agreeing not to recruit each other’s employees, sharing wage scale information, and punishing violators. On February 27, 2005, Bill Campbell, a member of Apple’s board of directors and senior advisor to Google, emailed Jobs to confirm that Eric Schmidt 'got directly involved and firmly stopped all efforts to recruit anyone from Apple.'”

This stuff initially came out in a Dept. of Justice suit started in 2010, Ames says, which eventually resulted in the class action suit scheduled to begin in May. Ames helpfully provides a copy of the suit on which interested readers can read in full. It says in part that

"Between approximately 2005 and 2009, Defendants Adobe, Apple, Google, Intel, Intuit, Lucasfilm, and Pixar allegedly engaged in an “overarching conspiracy” to eliminate competition among Defendants for skilled labor..... The conspiracy consisted of an interconnected web of express bilateral agreements among Defendants to abstain from actively soliciting each other’s employees....Plaintiffs allege that each agreement involved a company under the control of Steve Jobs (Co-Founder, Former Chairman, and Former CEO of Apple) and/or a company that shared at least one director with Apple’s Board of Directors......Defendants memorialized these nearly identical agreements in CEO-to-CEO emails and other documents, including “Do Not Call” lists, thereby putting each Defendant’s employees off-limits to other Defendants....... Each bilateral agreement applied to all employees of a given pair of Defendants. ......These agreements were not limited by geography, job function, product group, or time period. Nor were they related to any specific business or other collaboration between Defendants."

Over on the Naked Capitalism site, Yves Smith had take on the suit that is a bit more snarky:

"........But Silicon Valley’s royalty occupy a class of their own, the toast of TED talks and the model for aspiring entrepreneurs the world over. And the admiration is particularly strong among the rank and file workers in the San Francisco area. So it’s more than a bit ironic to see that these titans of technology engaged in a formal arrangement to suppress pay to the tune of $9 billion across Apple, Google, Intel, Adobe, Intuit, and Pixar. Here you thought it was only those poor Foxconn workers making iPhones in China who were being exploited. Silly you. It’s surprising to see the Obama Administration, which has not even done a good job of faking interest in pursuing criminal charges against major financial firms or their top executives for nearly destroying the global economy, make a frontal assault on some of Silicon Valley’s biggest names. But the conduct in question, namely price fixing, is slam-dunk criminal if the charges prove out."

When the trial begins in May, the proceedings should be fun to watch.


Addendum, 3-3-14: Now the New York Times has picked up the story.  

Thanks to reader Steve Jasik for pointing out a couple of interesting comments posted to the NYT article. Jasik writes, "As always, the comments are interesting, more than one points out that this practice has been going on for years in almost every industry :-("

2ond most popular comment:

Projunior Tulsa 12 hours ago

Those Silicon Valley executives choose to have their companies head quartered in an area of the country where the average price of a 3-bedroom house is over a million dollars. But of course they don't want to pay programmers and engineers the kind of money it takes to afford a million dollar house. After all, a dollar saved on worker compensation is a dollar more for the executive bonus pool. So they hatch this no-poach conspiracy as outlined in this article. But that's only part of the story.

They also have their PR departments working overtime to publicize their crocodile teared lament over the shortage of American workers with the technical skills they need. They simultaneously decry the sorry state of the American education system that has failed them by not producing the kind of workers they want to hire. Then they spend lavishly on lobbyists to buy influence in Congress to make the current, rotten-to-the-core, H-1B visa program even more rotten. The thousands and thousand and thousands of "temporary" H-1B indentured servants brought in by these companies to fill positions that (can you imagine!) there just weren't any qualified American applicants for, serve one purpose only: to maintain downward pressure the wages of IT workers across the country.

Never underestimate the ability of the one percenters to strangle the middle class.

--------------  this comment is more interesting:

pjd   is a trusted commenter

Westford 5 hours ago

I can assure you that this practice is NOT limited to Silicon Valley.

During the 2000's, I worked at a large computer manufacturer in New England. Middle managers told us, "Don't recruit people from Intel.

We have an agreement."

This practice affects engineers in every high tech enclave -- the valley, Seattle, Boston, and Austin, to name a few. It has nothing to do with protecting one's IP. It's all about wage suppression.

Engineers worked hard to acquire and maintain expert knowledge with real economic utility and worth. Salaries can only be suppressed through artificial means, including ridiculous immigration policies.

This should be a cautionary tale for anyone flirting with libertarianism. From the elite executive point of view, they have the right to do anything they want against workers. It's just freedom, after all.


About the Author

Lee Teschler | Editor

Leland was Editor-in-Chief of Machine Design. He has 34 years of Service and holds a B.S. Engineering from the University of Michigan, a B.S. Electrical Engineering from the University of Michigan;, and a MBA from Cleveland State University. Prior to joining Penton, Lee worked as a Communications design engineer for the U.S. Government.

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