Provided by: Judge Ruth B. Kraft

I generally look to statutory updates and case law for blog ideas but this week have turned to the New York Times. A fascinating lawsuit is playing out in Silicon Valley (in the interest of full disclosure, my older son, Michael, is a proud member of Yahoo’s management). The suit, a class action, charges that executives of hi-tech companies colluded between 2005 and 2009, agreeing not to poach each other’s employees.

Plaintiffs’ counsel, representing a class of 64,000 (yes, you read that right!) programmers, are seeking billions of dollars in damages. They allege that the computer engineers were victims of a conspiracy by being prevented from freely negotiating for what their services were worth. The late Steve Jobs has been labeled as the chief architect/villain of the strategy.

The Justice Department investigated this matter and reached settlements with the companies in question: Apple, Google, Intel, Intuit, Adobe and Pixar. Those settlements resulted in agreements to drop the anti-poaching agreements. However, it did not preclude programmers from litigating against their employers and the discovery has resulted in very damning emails being made public. For example, Steve Jobs, was worried about Google expanding into Apple’s airspace. He wrote to Sergey Brin of Google that “if you hire a single one of these people that means war”. Google backed off and came to an informal agreement with Apple that they wouldn’t poach each other’s techies. Then these agreements purportedly spread throughout the Valley. Allegedly, Steve Jobs vetoed Google’s hiring of programmers who were former Apple employees. Much of these understandings were handshake agreements.

Currently, the Justice Department is investigating eBay . Notably, the one company that did not cave to Steve Jobs’ demands was Palm, Inc., which hired a leading former Apple executive at the same time that Apple sought to rehire him. Apple threatened a patent infringement suit but Palm did not bulge.

Those clients for whom I have written employee handbooks know that one of my signature details is a provision that employer’s rules may not violate employee rights under the National Labor Relations Act, typically in terms of sharing information as to the terms and conditions of employment.

I would not doubt that similar handshake agreements exist in virtually every industry. Obviously, most of you do not have the same deep pockets as the technology behemoths in Silicon Valley. Nevertheless, you should consider the consequence of any anti-poaching/hands off deals, whether explicit or tacit understandings because they pose yet another element in employee counsel’s armamentarium. Simply an allegation that such an agreement exists could land you in federal court at enormous expense.
Have a question or comment?
Contact Jennifer at Jennifer@Kirschenbaumesq.com or at (516) 747-6700 x. 302.