Silicon Valley firms sued over “no-poaching” pact

by 01 Feb 2012

Silicon Valley firms sued over “no-poaching” pactThe world’s biggest tech companies including Google and Apple are being called to account by former employees over alleged “no poaching” deals – an indication of the extreme measures top-tier firms take to retain their key talent.

The US Department of Justice (DoJ) has released evidence from its 3-year investigation into the recruitment practices of top tech companies which indicates many CEOs and senior managers may have entered into non-competitive hiring agreements. Next week the matter will be pursued by the DoJ in a class-action lawsuit which includes the likes of Google, Apple, Pixar, Adobe, Intel and Intuit.

Documents to be submitted as evidence include e-mails between various CEOs and senior HR leaders at Adobe, Palm Inc, Apple, Google and Intel which indicate one-to-one agreements not to recruit each other's staff – examples include pacts between Lucasfilm and Pixar, as well as a Google-Intel and Google-Apple no-poaching agreements.

It has been claimed that agreements were reached in order to keep employee salaries and benefits down, prevent bidding wars for key players, and minimise shifts in talent between companies. By eliminating calling employees and offering competitive packages on behalf of their organisation, lawyers for the DoJ will argue that workers were effectively stripped of the knowledge of what they’re worth in a competitive market.

The investigation was launched after a former Lucasfilm software engineer sued the aforementioned companies, alleging the firms had a secret agreement not to poach each other’s employees. That particular matter was settled out of court, presumably out of fear that if any such agreements were to become public, punitive action would naturally be the result. However after the CoJ launched its own class action the evidence went public.

The companies' lawyers said the facts as presented by the plaintiffs show no evidence of a ‘conspiracy’. Rather, it has been argued that some companies had separate one-to-one legal agreements to work together on various business ventures and collaborations.

Whichever side prevails, the case has highlighted the high stakes of securing key talent as the tech industry remains a hotbed of job creation. In a recent survey by consulting group Right Management, it was found that 56% of 1,400 CEOs and HR professionals fear other employers are actively looking to recruit their best people.

Michael Haid, senior vice president at Right Management, said as worldwide demand for certain skills sets rise, senior and operational leaders are realising that talent is the last remaining source of competitive advantage. He added it is no surprise there’s a global war being waged for human talent, and warned that no organisation can consider itself immune from needing effective retention strategies or offering the most competitive recruitment packages. “CEOs and HR staff are right to feel enormously vulnerable and many are stressed seeking ways to hold onto their rising leadership.”

Even though most organisations reported that other companies have targeted their top performers, survey respondents were not positive about the outlook of their own leadership pipeline. Some 47% expressed doubts about maintaining their middle-level management pipeline, and just 27% said their company has a sufficient number of qualified internal candidates who were ready to assume senior management or executive roles.

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