Show Me the Money: Technology Companies Face Class-Action Suit over Wage-Fixing Scandal

April 3, 2014

Several technology giants, including Apple and Google have lost a hearing which will now allow thousands of technology workers to come together as a group to sue the companies for wages lost as result of a wage-fixing scandal. The scandal was revealed by Silicon Valley website, Pando Daily, after they obtained internal memos from Google and Apple; these memos illustrate an agreement made between Steve Jobs of Apple and Erich Schmidt of Google to “fix” the labor market for technology workers. This initial cartel agreement expanded to include many other technology companies over the years, including Dell, IBM, eBay, Microsoft, Comcast, Clear Channel, Dreamworks, and WPP, among others. The projected number of employees who have been affected by the wage-fixing agreements currently falls around one million.  A Department of Justice investigation has already been initiated regarding the illegal agreement following the first article released by Pando Daily on the subject, and had resulted in a settlement for seven technology companies premised on their agreement to limit the restricting nature of their hiring deals. However, following this settlement, the companies were served with a civil lawsuit from the employees who had been affected by the wage-fixing agreements.
The agreements between the technology companies became illegal due their secret nature and their objective to fix wages in the labor market in the face of decreased profits due to rapidly increasing technology engineer salaries.  The agreements contained the “do’s and don’ts of hiring” in addition to a promise to share information including hiring policies and wage information; the objective of this shared information was to repress the growth of salaries in the tech industry.  As more companies entered into the agreement, a process formed on the basis of a “tit-for-tat type of recruiting threat” – by refusing to ease off in recruitment of foremost hiring candidates, a company would essentially leave itself vulnerable to be poached for its employees by fellow companies within the agreement.

‘If you hire a single one of these people, this means war.’

Though many of the companies claimed that the identical non-solicitation policies were merely an unknowing coincidence, the evidence of several memos and e-mails has revealed otherwise. An illustration of the tit-for-tat mentality of the CEO’s of these technology giants is an e-mail sent from Steve Jobs to Sergey Brin of Apple which stated: “If you hire a single one of these people, this means war.” – this was in response to Google’s attempts to win one of Apple’s employees back to their company. What even further illustrates the workings of this strategy was the subsequent internal memo circulated by Apple which instructed to that Google was to be added a “hands-off list” due to their new agreement not to recruit against one another.
Since these secret wage-fixing agreements have been exposed, many of the accused companies have made efforts to settle out of court. Despite these efforts, 60,000 technology employees in Silicon Valley have won the right to bring action against the companies, including a civil class-action suit that will commence on May 27th of this year.  If the class-action suit were to prove successful for the plaintiffs, the damages to be owed could total up to nine billion dollars. While there are concerns over the impact that rivalries between CEOs may have impacted technology development and progress in Silicon Valley, there is also the issue of this being a case “where well compensated workers are going to get more money” when compared to wage actions suits for those who are not even paid minimum wage.