Smooth Transitions : Rob Radcliff : Texas Non-Compete Lawyer & Attorney : Langley Weinstein LLP Law Firm : Dallas Employment & Employee Departures : Smooth Transitions Law Blog

We have previously addressed rumblings that the Department of Justice was investigating agreements between companies where they agreed not to contact each other’s employees for hiring purposes. 

The companies involved were Adobe, Apple, Google, Intel, Intuit and Pixar.  In the competitive impact statement, the DOJ outlined the nature of the agreements.  For example, the Google-Intuit agreement provided for the following:

Beginning no later than June 2007, Google and Intuit agreed to prohibit Google from cold calling any Intuit employees.  Senior executives at Google and Intel reached this express agreement through direct and explicit communications.  The executives actively managed and enforced the agreement through direct communications.  The agreement covered all Intuit employees and was not limited by geography, job function, product group, or time period.  In furtherance of this agreement, Google listed Intuit among the companies that had special agreements with Google and as part of its “do not call” list.  Google policed the agreement to ensure it was followed, including by investigating complaints from Intuit that Google had violated the agreement.  On each occasion, Google determined that it had not violated the agreement and informed Intuit.

From the pleadings filed by the Department of Justice, it’s clear these were rather sophisticated agreements.  Effectively included were review and complaint procedures in the event of an alleged violation of the non-solicit agreement.  These deals were essentially the opposite of broker protocol, which allows stockbrokers to move freely between members of the broker protocol without fear of a lawsuit. 

Though employers can certainly enter into non-compete and non-solicitation agreements with their employees as long as they comply with applicable state law, it would appear to be next to impossible for companies to enter into company-company agreements with one another to shut down the movement of their employees.   

The proposed final judgments prohibits the companies from entering into these agreements and requires them to disclose certain information to the DOJ, among other things.  There were no financial penalties disclosed. 

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Last year there was discussion about the DOJ's investigation of alleged improper hiring practices by companies like Google, Intel, IBM, and Apple.  Apparently, the DOJ has stepped up the investigation according to a Wall Street Journal article.  According to the article, the inquiry focuses on a pact amongst technology giants not to hire each other's employees:

The inquiry is focused on whether companies, particularly in the technology sector, have agreed not to recruit each others' employees in ways that violate antitrust law. Specifically, the probe is looking into whether the companies' hiring practices are costing skilled computer engineers and other workers opportunities to change jobs for higher pay or better benefits.

Apparently, the DOJ is struggling with how to challenge the practice because it has antitrust ramifications and results in keeping wages down. 

What a great deal for the employer:  Prevent your employees from leaving and keep their salary down at the same time without having to worry about the enforceability of a non-compete agreement.  Most employers constantly have to worry about the departure of talented employees to their competitors for more money.  If the allegations are true, that concern has been eliminated in portions of tech world.

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Seventy percent of participating U.S. employers indicated they had rejected a job applicant based on their on line profile in a recent Microsoft survey.  U.S. employers were well ahead of the UK, Germany, and France:

The study found that employers' scrutiny focused on concerns about the applicant's lifestyle, inappropriate comments by the candidate, and unsuitable pictures and video:

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High-tech companies have been vigorous in their attempts to keep employees from departing to competitors as evidenced by the Mark Papermaster lawsuit filed by IBM and Steven Johnson case.  According to some reports, Google and Microsoft entered into an unofficial agreement not to poach each others' employees.  Essentially, neither company would actively pursue or recruit the company's talent. 

Here is a redacted email that was included in the TechCrunch report between Google and a prospective Apple candidate:

From: XXXXX XXXXX <XXXXX@google.com>
Date: XXXXXXX XX, 2008 X:XX:XX AM PDT
Subject: Re: Google Opportunities- Follow up email…

Thanks for getting back to me.  I don’t believe that we have been in
contact previously - apologies if I am wrong about this.

From your reference to the [APPLE DIVISION], I take it that you are
currently working there.  If this is the case, we will not be able to
proceed with your application.  Google has an agreement with Apple
that we will not cold call their staff.  If you are not currently
working at Apple and are interested in learning more about [A GOOGLE DIVISION]
please let me know and I would be happy to chat with you.

Thank you again for returning my email.

Both companies are headquartered in California making the enforcement of a non-compete almost impossible.  Of course, this type of agreement could violate antitrust laws and according to the Washington Post, the Justice Department has launched a probe into the alleged practice.

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