Lawsuit Over Tech Anti-Poaching Pact Receives Class Action Certification

A lawsuit alleging that several of the country’s most powerful high-tech companies had a secret, non-compete deal recently received class-action certification. More than 60,000 employees of Adobe Systems Inc., Apple Inc., Google Inc., and Intel Corp. are members of a class that allege that the pact not to recruit or hire each other’s employees resulted in decreased competition and lower salaries.

As we previously discussed on this Business Law Blog, many of the same Silicon Valley companies entered into a settlement with the Department of Justice in 2010 over similar allegations. Although they did not admit wrongdoing, they agreed to end the practice of entering agreements to refrain from, or pressure others to refrain from, soliciting, recruiting, or otherwise competing for another firm’s employees.

More recently, Lucasfilm and Pixar agreed to pay a combined $20 million to settle the civil antitrust claims against their companies. However, the remaining defendants employ over 90 percent of the class members.

The class certification process was not an easy process for the plaintiffs, and reflects the tough new standards established by the U.S. Supreme Court in Walmart v. Dukes, Comcast v. Behrend, and Amgen v. Connecticut Retirement Plans. U.S. District Judge Lucy Koh of the Northern District of California previously denied certification, but allowed the plaintiffs to provide additional evidence regarding the commonality of the harm suffered by the class.

After presenting new deposition testimony and limiting the class to only technical workers, the Judge changed her mind, concluding, “Plaintiffs’ evidence suggests not only that the anti-solicitation agreements eliminated a key tool of recruitment, cold calling, but also that the impact of this elimination affected the entire technical class.”

While liability must still be proved by plaintiffs, even the costs of defending these claims highlight that anti-poaching agreements have the potential to result in very costly liability. It must be understood that there are strong public policies on both federal and state levels against the restraint of trade.  California, for example, outlaws non-compete agreements in employment agreements that do not involve the sale of a business. Non-solicitation agreements generally do not cause such problems provided they are not part of a conspiracy among employers as opposed to agreements entered into directly between employers and their employees.

The latest decision further suggests that the Supreme Court has not put class action suits totally out of reach. This case also demonstrates that obtaining a certification still remains a major hurdle for plaintiffs’ lawyers, however.

If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Gary Young, or the Scarinci Hollenbeck attorney with whom you work.