Tech giants lose round in wage-fixing suit

Judge Koh clears the path to trial for a class-action lawsuit alleging wage-fixing and collusion by tech juggernauts, one that could lead to sweeping changes in Silicon Valley.

Seth Rosenblatt
Seth Rosenblatt Former Senior Writer / News
Senior writer Seth Rosenblatt covered Google and security for CNET News, with occasional forays into tech and pop culture. Formerly a CNET Reviews senior editor for software, he has written about nearly every category of software and app available.
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A diagram from the suit demonstrating how the tech companies allegedly reached agreements on hires and compensation.
A diagram from the suit demonstrating how the tech companies allegedly reached agreements on hires and compensation. Lieff Cabraser Heimann and Bernstein

US District Court Judge Lucy Koh on Friday quashed a request for summary judgment by defendant tech firms in a lawsuit filed against them by their employees, CNET has learned, setting the stage for a trial.

The class-action lawsuit was filed by a group of around 64,600 engineers, designers, quality analysts, artists, editors, and system administrators employed by one of seven technology firms between 2005 and 2010. It accuses the companies of conspiring to eliminate competitive hiring and keeping wages artificially low.

Seven companies are named as defendants in the lawsuit: Adobe Systems, Apple, Google, Intel, Intuit, Lucasfilm, and Pixar. Publicly available court documents make it clear that executives at the highest levels of leadership at each company were at the very least aware, and often actively involved, in the implementation of the non-compete agreements.

Pixar and Lucasfilm already have agreed to settle with their affected employees for $9 million, while Intuit has agreed to pay $11 million. This affects around 8 percent of the plaintiffs.

Apple and Intuit did not immediately respond to requests for comment. CNET will update the story when we hear back from them. Adobe and Google declined to comment, and Intel says it is studying the ruling.

Silicon Valley dreams of monopoly face cold light of courtroom

Scheduled to start in late May, the trial is expected to take around five weeks. By the end of the summer, how Silicon Valley does business could be forever altered.

"Business people talk about competition and free markets, but they dream of monopoly and control," said Jim Balassone, director of business ethics programs at the Markkula Center for Applied Ethics at Santa Clara University in Silicon Valley.

The attempt to keep employee salaries down in a business culture known for its enthusiastic embrace of free-market economics presents an ethical conundrum for the companies accused in the lawsuit.

The case hinges on whether there was an agreement between competing companies to not hire employees away from each other, said David Lowe, a labor and employment attorney at Rudy, Exelrod, Zieff and Lowe.

"Did that suppress wages? Was it collusive activity? If that's the case, the savings to the companies came out of the salaries of the workers," Lowe said.

Balassone said that it complicates the relationship between the companies and their workers.

"[H]ow do we explain this to our employees? That's a hell of a deal," he said. "It's like trying to explain to your wife or spouse why you committed adultery," Balassone said. "There's no good answer...This isn't the first time, and it won't be the last time, unfortunately."

Not your typical wage-fixing case

Lowe, who has spent his entire career representing employees in individual and class action employment lawsuits, said that he's never seen a case like this one.

"No similar cases come to mind. This one has gotten on the radar partly because of who the defendants are, [and] partly because of the number of affected employees," he said.

Assuming the case is decided in favor of the employees, aside from a punitive cash settlement, it could change how tech juggernauts do business.

"[T]hese companies work hard to present an image of a utopia for their employees, all kinds of perks, what a wonderful place to work these companies are," Lowe said. Assuming the allegations are true, Apple and Google are "just like any other big company."

When people realize that they're being underpaid, Lowe said that sometimes leads to more union activity or collective bargaining.

"At the end of the day, they're all about making money for the shareholders, no matter how many fancy lunchrooms you provide."

Update, 4:40 p.m. PT: Adds that Google declined to comment and Intel is studying the ruling.

Update, March 29 at 10:40 a.m. PT: Adds that Adobe declined to comment.