A recent court ruling highlights that arrangements among competitors not to solicit each other’s workers violates federal antitrust laws.
On August 8, 2014, a California federal judge surprised the legal world by denying a request to approve a settlement deal in excess of $324 million, which would have ended a high-profile antitrust class action against Google, Apple, and other tech giants. The class action is based on allegations that these tech companies secretly conspired to refrain from recruiting software engineers employed by their rivals and agreed to cap pay packages in order to prevent bidding wars. According to plaintiffs and the Department of Justice, which uncovered the scheme in 2012, the companies’ practices had the effect of illegally suppressing compensation, job prospects, and employee mobility.
The district judge ruled that the proposed settlement was not reasonable and noted that at least $55 million more was needed for her to approve it. In so holding, she used settlement figures from deals struck last year by former co-defendants in the lawsuit as a baseline for how much the plaintiffs should receive from the remaining defendants. In addition, the judge noted that the discounted settlement rate proposed by Google and Apple was “troubling” given that she had just granted class certification—a huge victory for plaintiffs—and that there was substantial evidence showing that the companies entered into anti-poaching agreements.
The ruling demonstrates that judges are becoming more aggressive in their review and approval of class-wide settlement proposals. Rather than just rubber stamping a settlement agreement, judges are more likely to conduct a thorough review for fairness, especially when plaintiffs have already secured class certification and significant leverage in litigation.
More importantly, the ruling should remind all employers that arrangements between rivals in the same industry not to recruit or hire away one another’s employees and agreements to cap salaries at artificially low levels may be unlawful and subject you to significant liability.