Employers who agree not to poach each other’s workers may face substantial monetary exposure. This was the lesson learned the hard way by tech powerhouses Adobe, Apple, Google and Intel in a recent California antitrust class action suit.
The silicon valley giants and other defendants were sued in a class action case now pending in a California federal court by a class of skilled workers. The workers alleged their wages were artificially suppressed by a series of “secret” bilateral agreements between high-level executives not to hire employees from each other.
The parties reached a proposed settlement of nearly $325 million. However, the settlement was rejected by the court, which noted that there was evidence of an overarching conspiracy between the key defendants. The court concluded that an additional $50 million was required from these defendants in order for the settlement to be fair to all class members.
While the case involves giants in the lucrative high-tech industry, there are lessons here for all employers with meaningful influence in their local job markets. These employers should be cautious about entering into extended mutual no-hire agreements with one another and should give due consideration to potential antitrust issues before doing so. Virtually every state has an antitrust act or unfair trade practices statute that could support costly claims against employers for making agreements akin to those involved in the California case.
There are legitimate business reasons that will permit certain inter-competitor agreements necessary for pro-competitive collaborations without constituting what antitrust law characterizes as improper “restraints of trade,” but direct agreements should be limited in both scope and duration and entered into only when supported by legitimate and pro-competitive business reasons.