Did Apple, Google and other tech giants really steal $9 billion from their own employees? 1

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The luminaries of Silicon Valley are idolized like sports stars. They are adored for the revolutions they have launched and praised for the fortunes they have amassed. They are revered for their business savvy and shrewdness. But it turns out there is another darker side to the Silicon Valley success story.

It was early 2005. Silicon Valley had finally shaken off the hangover from the Dot Com Bubble and things were back in full swing. Steve Jobs had just introduced the iPod Shuffle to the world, the latest in a long line of tech hit wonders that were about to send Apple share prices into the stratosphere. Google Maps had just gone live, destined to send paper maps the way of the dodo bird. And the demand for high-tech engineers was about to go into overdrive. Google’s human resources department had recommended that the company “dramatically increase the engineering hiring rate”, which would involve “drain[ing] competitors to accomplish this rate of hiring.” In other words, Silicon Valley appeared to be on the brink of a bidding war for high-tech talent, threatening to stifle growth, profit margins and share prices.

Cue the quick-thinking CEOs of Silicon Valley, who got together and formed a pact not to recruit or hire each other’s employees and stave off the bidding war. The day was saved! Capitalism had prevailed!

Or had it?

Not according to an antitrust lawsuit filed by the Department of Justice in 2010 and a civil class action lawsuit filed against Adobe, Apple Inc., Google, Intel, Intuit, Pixar and Lucasfilm in 2011. According to the lawsuits, what Steve Jobs, Eric Reid and company had done was nothing less than an anti-competitive conspiracy to violate federal and state antitrust laws. The lawsuits estimated that the wages of over 100,000 tech employees were unlawfully reduced as a result of the illegal pact, leading to an estimated $9 billion in wages effectively stolen from them to pad the tech giant’s profit margins.

As one publication noted, there is a certain irony in the fact that spiraling demand for high-tech engineers may actually have lead to a reduction of their wages.

David Pando of Pando Daily has constructed an authoritative account of how the tech giants formed and maintained the pact to keep high tech wages down. He quotes from numerous emails that clearly weren’t vetted by any lawyers before they were sent. Based on the emails, it is clear Steve Jobs wasn’t exactly shy about bullying and goading other CEOs into line.

When Google began recruiting Apple’s Safari team, Jobs shot off this email to Google CEO Sergey Brin: “If you [Brin] hire a single one of these people that means war.” Brin immediately ordered a freeze on all recruiting of Apple employees.

Likewise, when Adobe began recruiting junior-level Apple employees, Jobs emailed Adobe CEO Bruce Chizen asking for an explanation. Chizen replied that he had thought the pact was limited to non-recruitment of senior level employees. Jobs then threatened: “OK, I’ll tell our recruiters they are free to approach any Adobe employee who is not a Sr. Director or VP. Am I understanding your position correctly?” Chizen immediately backed down and agreed to stop all efforts to recruit any Apple employees. Chizen told his staff: “if I tell Steve [Jobs] it’s open season (other than senior managers), he will deliberately poach Adobe just to prove a point. Knowing Steve, he will go after some of our top Mac talent…and he will do it in a way in which they will be enticed to come (extraordinary packages and Steve wooing).”

For all its glitz and glamour, Silicon Valley is becoming a tale of two cities, of haves and have-nots. John Plender of the Financial Times has calculated that Apple, Microsoft, Google, Cisco, Oracle, Qualcomm and Facebook have amassed a cash pile amounting to a staggering $340 billion in the form of cash and liquid investments. Awash in cash, these tech giants had no good reason to break the law in order to steal $9 billion from its own employees.

Unfortunately, civic responsibility is in exceedingly short supply in Silicon Valley nowadays. According to one study, the gap between the privileged and the rest in Silicon Valley has only grown more vast over time. The average house in Palo Alto sold for more than two million dollars in 2013. There are fifty or so billionaires and tens of thousands of millionaires in Silicon Valley. Meanwhile, poverty levels have also hit record levels accompanied by a 20% rise in homelessness due to soaring housing prices. Emmett Carson, chief executive of the Silicon Valley Community Foundation put it thus: “Rising tides do not lift all boats. . . We have to be intentional as a community about addressing inequality.”

George Packer of the New Yorker suggests tech titans have turned a blind eye toward the plight of their lesser brethren in part because they have constructed and lived in their own virtual worlds, physically and mentally aloof from their surrounding communities: “At Facebook, employees can eat sushi or burritos, lift weights, get a haircut, have their clothes dry-cleaned, and see a dentist, all without leaving work. Apple, meanwhile, plans to spend nearly five billion dollars to build a giant, impenetrable ringed headquarters in the middle of a park that is technically part of Cupertino. These inward-looking places keep tech workers from having even accidental contact with the surrounding community.”

This epidemic of moral aloofness has not infected all. Palm CEO Edward Collagan was one of the few willing to stand up to Jobs and fight for his workers. He emailed Jobs: “[Y]our proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.…I can’t deny people who elect to pursue their livelihood at Palm the right to do so simply because they now work for Apple, and I wouldn’t want you to do that to current Palm employees.”

Fast forward to 2014. Palm is no longer around. Apple continues to dominate the tech world. And that class action? It settled for $20 million, a fraction of the $9 billion estimated to have been stolen from high-tech workers. What’s that saying about good guys finishing last?

Eugene Lee

About Eugene Lee

Eugene D. Lee represents employees throughout California who seek to protect their legal rights in the workplace. Mr. Lee has obtained numerous six- and seven-figure settlements and judgments for employees throughout California. Mr. Lee received a B.A. with honors from Harvard University, and a J.D. with honors from the University of Michigan Law School. Prior to starting his own firm, Mr. Lee was a lawyer in the New York offices of Shearman & Sterling and Sullivan & Cromwell.

One comment on “Did Apple, Google and other tech giants really steal $9 billion from their own employees?

  1. Reply Sam Rudolph Mar 28,2014 3:38 pm

    Your point about moral aloofness is especially well taken — both in the structure of those new buildings and in the increased focus on virtual reality. Is the new Virtual Reality actually dividing us from ourselves? Alienating us from each other? From Reality itself? The question, at least, deserves to be asked.

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