Multiple tech giants have settled a lawsuit with employees who alleged that the companies had agreed not to solicit each others' employees in order to keep wages down. Apple, Google, Adobe Systems, and Intel were all involved in the practice, according to court documents. While the tech companies did admit to the existence of no-hire agreements, they did not say that the goal was to prevent wage increases.
Before the case was settled -- reports indicate the companies have agreed to pay out $324 million -- e-mails between top executives at companies like Google and Apple were made public. The e-mails proved that the companies were refusing to hire employees from one another. By settling outside of court, the companies have prevented other e-mails from being released.
Tens of Thousands Get Cash
The case, led by attorney Kelly M. Dermody and filed in 2011, involved 64,600 employees, all of whom will now be receiving part of the settlement. Dermody, who works with Lief Carbraser Heimann & Bernstein, announced on Thursday that a deal had been reached and that the terms would be presented to the court in May.
No-hire agreements between tech companies are currently illegal because of a settlement reached between the U.S. Department of Justice and the companies in 2010. That settlement prevented Apple, Google, Intel, and others from entering into no-hire contracts for five years.
Documents previously made available as a result of the case indicated that as many as a million employees were affected by these agreements. Initially, Apple's CEO Steve Jobs and Google's former CEO Eric Schmidt agreed to not hire each other's workers. Over time, however, that agreement spread to many of the high-profile U.S. tech companies.
An internal Google document from 2006 explained the firm's policy regarding wage fixing and hiring. The memo stated that as of early 2005, the agreement involved Genentech, Intel, Apple, PayPal, and Comcast. Only two of these companies were ultimately included in the Justice Department's investigations and the lawsuit that was settled this week.
There are a few reasons settling out of court is beneficial both for the employees and the tech companies. From the workers' point of view, they could have lost their case had they continued in court. And the companies also benefit since additional incriminating e-mails will not be released.
One line of communication between Jobs and Schmidt made it remarkably clear that Apple and Google had agreed not to hire certain individuals. The e-mails between the two men occurred when Google hired an Apple employee. Jobs was not happy that Google had hired the individual. Schmidt responded, telling Jobs that the Google recruiter responsible for the hire would be fired.
The executives apparently knew that what they were doing was neither legal nor ethical, as other court documents show that Schmidt wanted the no-hire agreement to be made verbally so that a paper trail would not be created.