DOJ settles no-recruit claims against tech companies

Six Silicon Valley companies have agreed not to enter into further non-solicitation agreements as the result of a settlement with the Department of Justice.

The DOJ had been investigating a variety of interlocking broad agreements between six companies--Adobe, Apple, Google, Intel, Intuit, and Pixar--that prohibited them from soliciting one another's employees, which the DOJ said today "eliminated a significant form of competition to attract highly skilled employees." The settlement, if approved, would end the investigation and likely discourage such agreements between other high-tech companies in Silicon Valley.

The agreements mostly covered the practice of company recruiters "cold-calling" employees of other companies involved in the agreements. According to the complaint, Apple had no-cold-call agreements in place with Adobe, Google, and Pixar, while Google had these agreements in place with Intel and Intuit, in addition to the one it maintained with Apple.

For example, Apple and Google reached such a deal in 2006. Apple agreed not to "directly solicit" Google employees, and both Google and Apple put each other on internal lists of companies that recruiters were told not to cold call.

None of the agreements actually prohibited any of the companies from hiring each other's employees altogether, restricting the scope to just cold calling. However, the DOJ felt that because the agreements covered all employees--not just those in overlapping business lines--"they were broader than reasonably necessary for any collaboration between the companies," it said in its press release.

Google issued a statement following the DOJ's announcement. "In order to maintain a good, working relationship with these companies, in 2005 we decided not to 'cold call' employees at a few of our partner companies," it said. "Our policy only impacted cold calling, and we continued to recruit from these companies through LinkedIn, job fairs, employee referrals, or when candidates approached Google directly. In fact, we hired hundreds of employees from the companies involved during this time period."

Apple did not immediately return a call seeking comment, and Intuit offered a statement late Friday: "We have agreed to disagree with the DOJ on the issue of any wrongdoing in this matter. We do not intend to enter into the types of broad non-solicit agreements that are prohibited by the settlement. The terms of the settlement will not have a significant impact on our business, so we have decided to resolve this matter. We are in agreement with the DOJ in our shared desire to maintain an open, fair, competitive market for talent."

The DOJ said that it reached this settlement as part of a wider investigation into hiring practices in Silicon Valley, and that it is looking into non-solicitation agreements in general in other industries.

There are a few obvious links between the companies named in the settlement. Back when these agreements were drafted, Google CEO Eric Schmidt sat on Apple's board, and former Genentech CEO Arthur Levinson sat on the boards of both companies. Bill Campbell is currently a director on both Intuit and Apple's boards and played an instrumental role in helping Google get off the ground. Paul Otellini, Intel's CEO, currently sits on Google's board of directors. And, of course, Apple founder and CEO Steve Jobs also founded Pixar, and sat on its board of directors until selling the company to Disney in 2006.

Updated September 25, 10:00 a.m. PDT: Added Intuit statement.