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Tim Cook Ordered to Give Deposition in Employee-Poaching Ban Antitrust Case

Bloomberg is reporting that Apple CEO Tim Cook has been ordered by U.S. District Judge Lucy Koh to give a deposition in a lawsuit claiming that Apple and five other companies entered deals not to recruit each other's employees.
Koh told lawyers yesterday that Apple founder Steve Jobs was copied on e-mails at issue in the case, and that she found it “hard to believe” that Cook, as Apple’s chief operating officer at the time in question, wouldn’t have been consulted about such agreements.

The judge said she was disappointed that senior executives at the companies involved hadn’t been deposed before yesterday’s hearing over whether she should certify the case as a group lawsuit.


The case goes back to 2005 and alleges that Apple, Adobe, Pixar, Lucasfilm, Google, Intel and Intuit had agreements not to poach employees from the companies that were privy to the agreements. Employees were free to apply at jobs at any of the companies on their own volition, however.

The agreements were investigated in 2010 by the Justice Department and the claims were eventually settled, with the companies agreeing not to enter employee-poaching bans for five years.

The current lawsuit is a class-action civil suit by employees who say they were harmed by the anti-competitive actions of the companies within the agreement.

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21 months ago

I don't really see the problem. This is just a head-hunting agreement. What's wrong about that, if the employees are still free to apply anywhere they want?


You've obviously never been recruited away by a competitor. When companies know that people are poaching their employees they pay better. If you as a company know you have nothing to worry about, you're less likely to give raises and large bonuses. Recruiters come with big raises for employees. It's not uncommon in my experience to see 30-50% raises being offered in tech. If Apple knew that wasn't going to happen they don't have to pay as well. That definitely hurts employees. It kills the free market.
Rating: 6 Votes
21 months ago

I don't really see the problem. This is just a head-hunting agreement. What's wrong about that, if the employees are still free to apply anywhere they want?


If you don't see what's wrong with it, you have to learn a lot in life.
Rating: 4 Votes
21 months ago
Not sure why they would even enter into such an agreement. You want the best employees, and if you have someone that you don't want to leave, then treat them right.
Rating: 3 Votes
21 months ago

I don't think the government should be able to interfere in this way.
We've gotten so used to government inference everyone thinks its ok.
If the employees were able to apply on their own, what's the harm?


The government ALWAYS, as you characterize it, "interferes". In the U.S. the Department of Justice often determines in the first instance what activities constitute a violation of the antitrust laws, but the reason the government must always be involved is because individuals and companies must resort to government funded and staffed courts to resolve disputes. The government in the form of courts must decide which party should prevail and this can involve determining whether or not an agreement can be enforced or not, sometimes on the basis of whether that agreement is in keeping with the sort of society we want to have. For that reason, the government interferes when a bookie sues a gambler who has welshed on a bet by saying, in many states, that it will not allow its courts to be used to collect money from a wager that was illegal to have been made in the first place.

Here two companies have made a contract with each other that arguably affects the rights of an employee of one of the companies who had no involvement in the making of that contract, and who certainly did not consent to it. Assume that in the absence of that contract the other company would have attempted to recruit that employee by offering a 25% augmentation in salary. In effect, the contract has harmed the employee by arguably improperly removing the fair competition for his services that is the essence of capitalism.

So whether the Justice Department decides that the contract is a "combination in restraint of trade", or the employee decides that he has been harmed by illegal collusion to keep his compensation low, or whether one of the companies sues the other for breaching the contract by approaching the employee, the government is going to get involved.

The alternative, which existed in the distant past, and even today in some parts of the world, is that anyone who thinks he has been harmed by the acts of another gets his friends and relatives together and physically attacks whomever they think did them wrong. Long before governments were instituted among men to organize armies, coin money, or negotiate with other governments, people supported an authority to decide disputes among them. It is what separates us from barbarians.

Additionally, there are many reasons why an employee of Company A would not apply to Company B for a job, not the least of which is that if Company A learned about it, it might fire him to replace him with a more loyal employee it could count on not to defect to the competitor. Once you achieve a responsible role in an organization it is far more likely that you will be recruited to your next assignment than that you apply for it, and for that reason any limitation on recruiting deprives you of opportunity.

At the same time, though, there are situations where it is fair to prevent, for a reasonable period of time, one company from making offers of employment to the employees of another. Courts and governments generally are charged with making judgments about when particular circumstances justify enforcing or refusing to enforce a particular agreement.

In this particular case it appears that Apple contracted with a number of unrelated companies to avoid a hiring war where each company was raiding the employees of the other, setting off an expensive auction for employees with rare skills. It is certainly understandable that these companies would see some advantage to themselves in avoiding such a battle, but it is incontrovertible that another consequence is that the compensation of those with valuable and rare skills would not make as much as they would otherwise. The agreement, consequently, is a violation of the law of supply and demand since the demand has been artificially suppressed. In a free capitalist society we must always be vigilant to ensure that the competition that is the heart of our economy is not circumvented by collusion among competitors, and we entrust that duty to be vigilant to our government.
Rating: 2 Votes
21 months ago

The judge should through them all out of the court room. What a stupid thing to sue about.
Than apple should just fire them all.


Well, it didn't take too long into this thread for a comment like this to pop up.
Rating: 2 Votes
21 months ago

if the employees were able to apply on their own, what's the harm?


exactly!
Rating: 2 Votes
21 months ago
I don't think the government should be able to interfere in this way.
We've gotten so used to government inference everyone thinks its ok.
If the employees were able to apply on their own, what's the harm?
Rating: 2 Votes
21 months ago

Non-solicitation agreements are commonplace in the United States, and as far as I know have been deemed generally enforceable as not contrary to public policy in every state, unless the restrictions are found to be specifically unreasonable as to time, geography, or extent, or unless the agreement also prohibits hiring in the absence of solicitation. (Of course, the distinction is a bit naive considering how difficult it is to prove that someone in the soliciting company initiated a suggestion that the employee make an "unsolicited" application.)

The position of the current DOJ that these agreements are a violation of the U.S. antitrust laws is relatively new, and as far as I know, no court has yet substantively upheld Justice's broadest stance. My own opinion, FWIW, is that the outcome would be highly fact-dependent, and depend on the industry, the specialty, and the relationship of the two companies. For example, if a subsidiary were to be sold by a parent company, and the buyer insisted on an agreement that for some reasonable period of time the parent could not solicit any sub employee who had been employed at the time of the sale, I can't imagine a court finding an anti-trust violation. On the other hand, if all the major tech companies in Silicon Valley entered into a mutual non-solicitation pact relating to, say, Python developers, I'd rather be representing the DOJ than the cartel.

I think the government right now is overplaying its hand, and if it isn't judicious in picking its spots, there's a good chance that a case with lousy facts for them will end up as the controlling precedent.


I agree the outcome would be fact-dependent, but then so are all points of law, are they not? Assuming the facts are essentially as we know them, the question here may be less complicated than is being made out. Whether it be for pig iron or employees, whenever companies agree to not complete with one another, they have formed a type of cartel. It is difficult to imagine any circumstances beyond the very limited where such an agreement would not violate the Sherman Act.

It seems when Apple began this practice several years ago that Steve Jobs was warned that it was likely to be illegal. My feeling is that Apple and the other involved companies will do whatever is required to settle this as promptly as possible by consent and without trial, as any court finding of fact will only make the civil suits that much more powerful. They will not want to repeat the mistakes made by Microsoft.
Rating: 1 Votes
21 months ago
It's fine for a company to ban it's contract agencies from poaching if they are also placing. That is not an issue or the issue here.

What we have is a group of companies that "secretly" colluded to keep wages down by not poaching from their partners. Not detailed in the story was the fact that they also would be less likely to hire people from those other companies.

This does in fact put a cap on wages because the free market is stifled.
Pixar didn't need a secret agreement. Steve was head of both Apple *AND* Pixar at the time. Intel is/was an Apple partner.

As someone that works in the industry, I watch the IEEE Salary Survey and also participate in the survey. I keep a pretty good eye on what the market pays. What they did prevents a free market because companies won't seek out the brightest and the best at the highest pay. Waiting for you to look means you get less money than if they come look for you.

Anti-Trust laws in America are to prevent companies from making secret agreements that are counter to what is best in the public interest.
Rating: 1 Votes
21 months ago

Well, it didn't take too long into this thread for a comment like this to pop up.


Some of us have yet to accept the new world order, where corporations are entitled to the protections of the state but aren't legitimately subject to any laws. We are a pitiful lot, to be sure.
Rating: 1 Votes

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