No Harm No Foul? The Justice Department Finds Anti-Trust Violations in Hiring Practices

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Expert Perspective by Grahall’s OmniMedia Editorial Board

In their September 24, 2010 article for the  Wall Street Journal authors Thomas Catan and Brent Kendall (U.S. Tech Probe Nears End)  write: “Several of the U.S.’s largest technology companies are in advanced talks with the Justice Department to avoid a court battle over whether they colluded to hold down wages by agreeing not to poach each other’s employees… these agreements constitute an effort by companies to fix the price of labor, and are therefore just as harmful as price-fixing or bid-rigging—automatic violations of antitrust law.”

Silicon Valley’s response has been two-fold.  First they contend, according to the Wall Street Journal article, that “…banning such agreements could harm Silicon Valley’s open, collaborative model.” If organizations work together on innovations and initiatives, they need to do so without the risk of losing their best talent and intellectual capital to their partner (i.e. competitor).  And secondly, even if these agreements constituted a requirement that (according to the September 24, 2010 article Apple, Google, Intel, other tech firms admit secret agreements to not poach employees by Patrick May, Mike Swift and John Bourdreau  in Mercury News) you “don’t cold-call any of our employees with job offers and we won’t cold-call any of yours.”  There were many other ways to identify, compete for and attract key talent among these companies including “LinkedIn, job fairs, employee reference”, etc.

Grahall’s Board member Robert Cirkiel suggests it might make sense to have different rules for collaborative arrangements where individuals from competing companies work side by side.  Roberts says: “When that occurs, the combined entity acts as a defacto company for the duration of the project.  Perhaps in these cases the rules should emulate those of a single employer.  It is quite typical for a company to restrict poaching employees of one department by another.  Does that ‘restraint’ disadvantage employees’ earning potential?  Not necessarily. The smartest companies set up protocols so that workers can move from department to department and not negatively impacting the business.  The foolish companies don’t provide this flexibility and risk losing their most ‘employable’ people to competitors.  Similarly where two companies collaborate, the better employees are not tied to either one – they can move to a third employer.”

So is there a legitimate concern here?  Were these tech companies colluding to control wages?  Or were they interested in retaining top talent and avoiding the significant cost of replacing experienced and key employees?

The legalities are clear, if not entirely compelling– this practice constitutes a restraint of trade (the trade being that of the worker’s opportunity for new employment) but the problem is more likely philosophical than real.  Social networks such as LinkedIn and job boards such as Monster provide tech savvy employees and employers ready access to one another without the need for the telephone for a cold call.   If, as a television advertisement for that well-known dating site claims, that  1 in 5 personal relationships start on-line, the number of employment relationships that are created the same way must be higher.

The Mercury news article quotes Valerie Frederickson, a Menlo Park-based human resources consultant saying: “While these practices may be good for the bottom line, they are blatantly unfair to the rank-and-file…”  To which we say – “WHAT”?

Let’s be really frank, here.  Rarely is it one individual on a project or product critical to its survival and very, very rarely would that person be of the “rank and file”.   Likely the individuals who are most important to a company and therefore subjected to the “do not call” agreement will be higher ranked and better paid.  The database administrator, or application reviewer for example aren’t going to be on the “do not call” list.   So, although it is clear that there is a violation of the antitrust laws; the better question might be who is really being harmed and who is the Justice Department protecting with this antitrust complaint?

And that leads to the fundamental question of whether our antitrust laws, which date back to the Sherman Act of 1890, are able to address the issues and potential conflicts in a global, networked business environment. We rather doubt the “old laws” and old ideas about enforcement in a “new world” will have much usefulness or applicability.  We just wonder, in fairness, if anything created in 1890 is still operating productively today. 

Contact Grahall’s OmniMedia Editorial Board at edie.kingston@grahall.com

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