Suit Reveals Alleged Silicon Valley Anti-Poaching Scheme

Some of the biggest technology firms in the world may have violated federal antitrust laws by engaging in secret pacts not to hire each other's best workers, a new lawsuit claims.

The suit, filed in federal court in San Jose, claims Apple, Google, Intel, Adobe, Intuit, Lucasfilm, and Pixar entered into anti-poaching agreements not to recruit employees from each other. The plaintiffs claim such agreements allowed the Silicon Valley companies to keep workers' wages low by stifling competition for the most sought-after workers.

According to the plaintiffs' Jan. 27 court filing, Apple's former CEO Steve Jobs personally policed the agreement with Google.

Jobs, in a March 2007 email to Google's CEO Eric Schmidt, forwarded an attempt by a Google employee to recruit an Apple engineer, writing "I would be very pleased if your recruiting department would stop doing this," the plaintiffs' filing states. Schmidt then forwarded Jobs's email along to others at Google, writing "I believe we have a policy of no recruiting from Apple and this is a direct inbound request. Can you get this stopped and let me know why this is happening?"

In response, Google's director of staffing, Arnnon Geshuri, wrote that the employee who contacted the Apple worker would be "terminated within the hour."

The suit contends that these so-called "gentleman's agreements" are illegal, but Apple's attorney reportedly said they are common among technology firms, and do not represent a conspiracy.

"The obvious explanation for the existence of these agreements were the collaborations," Apple's defense attorney George Riley, said on Thursday in U.S. District Court in San Jose, according to an Associated Press report.

The U.S. Department of Justice in 2010 investigated similar allegations against all the same companies except Lucasfilm. That case was settled quietly, and the companies involved did not admit any wrongdoing but agreed not to enter into such agreements in the future.

The plaintiffs' latest court filing includes snippets of emails previously obtained by the Justice Department that reveal the extent of such agreements in Silicon Valley. Apple also allegedly had agreements with Adobe and Pixar. Intel and Google also reportedly had a "handshake 'no recruit'" policy, though did not have anything signed, according to the plaintiffs' filing, citing internal communications from Intel CEO Paul Otellini. Pixar and Lucasfilm allegedly had a written agreement not to recruit from each other.

The filing claims that the defendants helped each other form such agreements. Intuit's chariman of the board, Bill Campbell, who is also an Apple board member, in 2005 helped set up the deal between Google and Apple, for example.

Not all firms agreed to such a pact, however. In 2007, the CEO of Palm, which is now owned by Hewlett-Packard, wrote to Apple's Jobs saying "Your proposal that we agree that neither company will hire the other's employees, regardless of the individual's desires, is not only wrong, it is likely illegal."

The plaintiffs' lead attorney, Joseph Saveri, told the Associated Press that the workers could potentially get thousands of dollars each if they win the case. The plaintiffs are hoping to turn the suit into a class action, which would affect tens of thousands of workers.

A spokesman for Intel told the Associated Press that the company "disagrees with the allegations" and plans to vigorously defend itself. Adobe, meanwhile, reportedly declined to comment as the case is pending while the other firms named in the suit did not respond.