Why it matters: On the heels of a $324 million settlement between engineers and tech companies in California federal court, eBay reached a deal with the Department of Justice (DOJ) and California’s Attorney General over similar charges. According to the authorities, eBay and Intuit had an agreement not to recruit each other’s employees and eBay agreed not to hire Intuit employees who approached the company. In addition to promising not to make any deals regarding employee recruitment for a five-year period, the settlement with California requires eBay to pay a total of $3.75 million. Employees or prospective employees affected by the alleged agreement will be eligible for restitution from a $2.375 million fund; the remainder constitutes civil penalties to the state. Given the amount of antipoaching litigation – and the high dollar amounts companies are paying out – employers would be well advised to steer clear of recruitment and hiring agreements and should be on the lookout for copycat suits from other plaintiffs.

Detailed Discussion

In 2010 the DOJ completed an investigation into several big-name technology companies based in California that were accused of agreements not to recruit each other’s employees.

Seven companies – Adobe Systems, Apple, Google, Intel, Intuit, Lucas Films, and Pixar – reached a deal with the DOJ in which they promised to halt antipoaching agreements. Some of the companies subsequently faced lawsuits from affected employees. Intuit, Lucas Films, and Pixar paid a total of $20 million to settle, while Adobe, Apple, Google, and Intel narrowly avoided trial by agreeing to a $324 million deal.

One of the targets, eBay was alleged to have reached an agreement with Intuit that lasted from 2006 until 2009 that prevented each company from recruiting employees from the other. eBay also promised not to hire Intuit employees who approached it. The “handshake” agreement between senior executives was fully documented in e-mails, according to the California AG’s office.

In one message, a senior vice president in eBay’s human resources department wrote to former CEO Meg Whitman that although eBay was keeping up its end of the deal, “it is hard to do this when Intuit recruits our folks.” The e-mail was triggered by a recruiting flyer sent from Intuit to an eBay employee. In response, Whitman forwarded the e-mail to the founder of Intuit, Scott Cook, and requested that he “remind your folks not to send this stuff to eBay people.” Cook replied with an apology, adding, “I’ll find out how this slip up occurred again.”

According to the DOJ and California AG’s office, the alleged agreement harmed employees by depriving them of job opportunities and lowered their salaries and benefits.

Pursuant to the deal with the DOJ, eBay will not pay any money but is subject to a five-year moratorium on anticompetitive agreements to restrain employee recruitment and hiring with other companies. In its agreement with the state of California, eBay will pay civil penalties and an additional $2.375 million in restitution, for a total of $3.75 million.

Restitution will be paid on a tiered schedule, with an estimated 40 employees of Intuit considered for but not offered a position at eBay receiving between $5,000 and $10,000 each. Another 950 Intuit employees who applied for and were not offered a job at eBay are eligible for between $1,000 and $5,000. A third group of roughly 13,000 current and former employees who were affected by the agreement but don’t fit into the first two categories will receive a maximum of $150 each.

A preliminary approval hearing for the settlement is scheduled for Aug. 29 in California federal court.

To read the proposed final judgment in U.S. v. eBay, click here.

To read the proposed settlement deal in California v. eBay, click here.