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

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

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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.

High Court ruling threatens wage theft victims’ rights

High Court ruling threatens wage theft victims’ rights

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By Eugene Lee

In the early 1800s, workers in England rioted against unemployment, wage cuts and near-starvation, demanding “a fair day’s pay for a fair day’s labour.” Few would think to challenge such a demand. But two centuries later, fair pay remains as elusive as ever for low wage earning workers.

Consider the case of Everardo Carrillo and Juan Chavez. Both men worked for logistics companies with warehousing operations in California. According to Chavez, “I went 28 consecutive days without a day off. There were no lunch breaks, no rest breaks. ” Carrillo said, “I once worked from 7 a.m. to 2 a.m. the next day. . . If you asked questions [about pay arrangements], you could be laid off for two or three days or a week.” Carrillo, Chavez and four other workers took their employers to court in a class action suit seeking to recover more than $10 million in wage theft.

Today’s workers are facing what commentators have described as an “invisible epidemic” of wage theft. According to a survey conducted by Fast Food Forward, an advocacy group, a whopping 84% of fast food workers in New York City reported being victims of wage theft. That’s 4 out of every 5 fast food workers. Meanwhile, according to CNN Money, the number of collective lawsuits filed in federal court in 2011 alleging wage and hour violations of the Fair Labor Standards Act were up 400% from 2000 levels.

Until recently, workers who have been victims of wage theft have had the option of filing a complaint directly with the California Labor Commissioner, otherwise known as the California Department of Labor Standards Enforcement, or “DLSE.” The DLSE offers a number of benefits for workers over the usual route of filing a civil lawsuit: no filing fees, shorter processing times, hearings before deputy commissioners who appreciate and understand low wage worker conditions, assistance with collecting on any judgments awarded by the DLSE, streamlined evidentiary procedures, etc. For workers with wage claims too small to attract the interest of contingency fee attorneys, the DLSE may be their only feasible option.

Now that right is being threatened.

In a decision issued in October 2013, the California Supreme court held that employers can force employees who have signed arbitration agreements to give up their right to file a complaint with the DLSE. These workers must now submit their disputes to arbitrators, essentially private judges. As any attorney who represents workers will tell you, arbitration is a forum that is best avoided by workers. For one thing, arbitrators overwhelmingly tend to favor employers – who are often repeat customers – over employees – who the arbitrators will likely never see again. Arbitration can also be expensive, particularly compared to the DLSE complaint process which has no filing fees. Finally, according to Prof. Alex Colvin, a researcher at the Pennsylvania State Department of Labor Studies and Industrial Relations, employees who sue their employers instead of going to arbitration not only win more, they get bigger awards.

But not all hope is lost. The Supreme Court opinion went on to note that workers are still free to challenge the fairness or “unconscionability” of the arbitration agreements they had signed. Moreover, if workers can show that the arbitration would be less “affordable” and “accessible” than filing a complaint with the DLSE, that could “support” their challenge.

Most employees are not equipped to fight the battle against forced arbitration on their own.  And most contingency lawyers cannot afford to take on cases of wage theft unless the losses are in the tens of thousands of dollars.  So does this mean that low-wage workers have no choice but to seek redress in the unfriendly arbitration forum?  Not necessarily.   In select cases, the DLSE legal department can choose to step in or “intervene” on behalf of the worker.

This is what actually happened for one of my clients. After I filed a DLSE complaint for my client, I learned that he had signed an arbitration agreement. The employer’s law firm immediately filed a petition to compel arbitration in civil court, asking the court to order my client to dismiss his DLSE complaint and participate in what no doubt would have been a long, expensive, and probably futile arbitration. Given the relatively small size of my client’s claim, challenging the petition or proceeding to arbitration probably would have made little economic sense.

Cue the DLSE legal department. A DLSE lawyer called me and let me know that the DLSE legal department would be willing to step in and fight the employer’s petition on my client’s behalf. In the end, the threat of that intervention was enough to get the employer to cave. The case resolved and my client and I thanked the DLSE lawyers profusely.

I’m encouraged that the DLSE took action to vindicate my clients’ rights and I’m rooting for the agency to keep up the good work.  Forcing low wage workers into arbitration is really just an attempt to cut them off at the pass that would lead to recouping their stolen wages.  The more employers learn that the DLSE is serious about being a law enforcement agency, the more likely wage and hour laws will be followed and forced arbitration won’t serve as a get-out-of-jail-free card for scofflaw employers engaged in wage theft.   As worker advocates fight for a legal standard that can keep the DLSE’s doors open to low wage workers,  DLSE intervention in these cases stands as an essential bulwark against exploitation of low-wage workers.

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.

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