Microsoft and Redwood City-based company Oracle, a database and software developer, are the latest Silicon Valley tech companies to be sued for allegedly using illegal tactics to keep employee wages low. Complainants are attempting to join with a similar 2011 claim against other Silicon Valley companies like Apple and Google.
The cases “concern overlapping conspiracies that each grew out of the same unlawful anti-solicitation agreement between Google and others, including Oracle.” The 2011 class action suit, brought by more than 60,000 engineers claims Google, Apple and other companies struck deals not to pursue each other’s employees effectively suppressing wages. This was allegedly accomplished through a list of “restricted hiring” companies whose employees could not be pursued by recruiters even if the employees reached out, along with a “no cold call” list in which companies like Google could not pursue employees from companies on that list. In 2010, the Department of Justice reached settlements with Google, Adobe, Intel, Intuit and Pixar, in which the companies agreed to stop abiding by these agreements.
Microsoft and Oracle’s involvement in the agreements were not made public until a Google memo was filed as part of the initial 2011 class action case, revealing the potential involvement of a dozen more companies in the illegal wage-fixing cartel, potentially affecting thousands of additional employees.
Currently, the Microsoft and Oracle lawsuits are seeking class-action status. If achieved, Oracle and Microsoft employees may be looking towards a settlement upwards of hundreds of millions of dollars. U.S. District Court Judge Lucy H. Koh, who is overseeing the settlement negotiations between the initial class and the tech companies, shocked the parties by rejecting a $324.5 million settlement in August, of which Apple and Google now appeal. Judge Koh believes the plaintiffs underestimate their bargaining power because “there is ample evidence of an overarching conspiracy.” Judge Koh even went further to identify Steve Jobs as “a, if not the, central figure in the alleged conspiracy” based on witness depositions. An acceptable deal is likely in the works in order for Apple and Google to steer clear of trial, where damages could climb as high as $3 billion.
These class actions may be just the tip of the iceberg in terms of potential litigation from the alleged anti-poaching agreements begun by Apple. In August, plaintiff Andre Klein filed a derivative shareholders complaint in the U.S. District Court for the Northern District of California claiming misconduct by Apple directors and officers including “breach of fiduciary duty, gross mismanagement, corporate waste, and breach of the duty of honest services” stemming from the anti-poaching claims which plaintiffs allege cost the company significant resources and lost opportunities.
If the class action against Microsoft and Oracle is certified it is possible that similar shareholder claims may be filed against these companies as well. Although as a company spokesperson said, “the plaintiffs omit the fact that Department of Justice looked into the same claims in 2009 and decided there was no reason to pursue a case against Microsoft.”
Steve Jobs, founder of Pixar, is also portrayed as the leader of a no-poaching scheme alleged in a separate case filed against Walt Disney Co., DreamWorks Animation SKG Inc., and two Sony Corp. units. Regardless of the outcome, it’s clear that we have not seen the last of these class action and derivative shareholder claims stemming originally from the Apple and Google no-poaching conspiracy allegations.
Silicon Valley Juggernauts Continue to Struggle with No-Poaching Claims (PDF)