Wage Fixing Scheme Shocks Silicon Valley: Google, Apple, and Many Others Now Under DOJ Investigation

When you think of Google, Dell, and Virgin Industries, one of the first things that comes to mind is their legendary treatment of their employees. Modern, beautiful campuses with flexible work hours, state of the art fitness centers and cafeterias, and the championing of a happy and balanced profession are all hallmarks of these popular technology companies. So it came as a huge shock to many tech observers that these companies, along with many others including, Apple, PayPal (which is now owned by EBay), Oracle, and Microsoft have engaged in a decades-long wage fixing scheme amongst the executives and management to artificially keep wages for software engineers, middle managers, and a variety of other employees low so these companies could increase their profits.

The suit was based upon a series of discovered emails between the late CEO of Apple, Steve Jobs, and Google CEO Eric Schmidt; however, a simultaneous Department of Justice Investigation, has indicated, through leaked documents, that the plan was far more expansive.

The controversy began back in 2011, when five former software engineers sued Apple, Google, Adobe Systems, and Intel in a Federal District Court in California for colluding in an “overarching conspiracy” to keep wages low by promising not to poach each other’s employees. The suit was based upon a series of discovered emails between the late CEO of Apple, Steve Jobs, and Google CEO Eric Schmidt; however, a simultaneous Department of Justice Investigation, has indicated, through leaked documents, that the plan was far more expansive. Companies ranging from the entertainment industry (LucasFilm and Pixar), to internet service providers (Comcast, EarthLink, and AOL), to even retail venders (Best Buy and Nike) all are part of discussions lasting several years.

In light of these new discoveries (and several others not revealed to the public), the District Court, affirmed by the Ninth Circuit, allowed the five software engineers to elevate their case to a class action suit, allowing for more plaintiffs to join and potentially more damages.

While the trial is set to begin in May, the widely different companies have unsurprisingly approached the litigation in a variety of different ways. Some companies, like LucasFilm and Pixar, have settled with some employees and publicly changed their hiring practices, others have stayed tight-lipped in preparation of the upcoming trial. One company not attempting either of these two approaches is Facebook. One of the fascinating aspects of the leaked documents from the DOJ investigation was the anger that many of the implicated companies held towards the social media giant since they apparently refused to sign on to the plan and their aggressive tactics to hire employees from other organizations at an impressive clip. Facebook COO Sheryl Sandberg, in a statement to the district court, capitalized upon this information, claiming that although she was approached by Google several times, she “declined at that time to limit Facebook’s recruitment or hiring of Google employees.”

So what does this all mean for the tech companies involved? First, as the trial approaches, experts expect more and more companies to settle out of court through financial agreements with some and public changes to their hiring practices. The vast majority of individuals currently listed as plaintiffs are still employed by the industry, so by getting these giants to change their procedures, they will now be free to test the market. Second, and more importantly, the technologies that these companies invented and pioneered are now being used to expose the ugly side of the business. In the age of WikiLeaks, Anonymous, and easily accessible information, expect these companies to be more vigilant in their dealings with one another as both the government and private citizens will attempt to keep a closer eye on their inner workings.