Silicon Valley's Shocking Collusion: Inside One of the Largest Wage Theft Trials in U.S. History
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One of the largest wage theft cases in American history was settled last Thursday, with the terms of the agreement kept secret. The companies involved include some of America's largest tech titans, including Apple, Intel, Adobe and Google. For years, in essence, the companies had agreed not to recruit employees from one another as a way of keeping labor costs down: Less recruitment equals less a less competitive job market and depressed wages.
The agreement affected the wages of hundreds of thousands of tech workers, amounting to an estimated $9 billion in the later half of the 2000s. The documents that came out in the discovery process of the class-action lawsuit are loaded with smoking guns; in one damning email thread after another, emails from big CEOs like Steve Jobs and Eric Schmidt make it clear that they were consciously engaged in keeping down Silicon Valley labor costs. Court documents describe it as an "overarching conspiracy,” violating the Sherman Antitrust Act and the Clayton Antitrust Act.
What the documents reveal is nothing like the "free market," innovation-based dogma we've heard from Silicon Valley for decades now, but the same old industrial patterns: power players running the companies colluding with each other to protect their profit margins, with the price of labor the paramount focus.
Mark Ames, who is my longtime friend and collaborator, was the first to recognize the importance of the case, and wrote a number of stories about the emails for Pando Daily, where he is the senior investigative reporter. The stories are filled with lurid details, from Eric Schmidt conveying to his team at Google that eBay CEO Meg Whitman had been complaining about Google's recruiting efforts, to revelations that Google begged Steve Jobs for permission to hire one of his trusted talents, only to be rejected by Jobs. As Ames wrote, "For all of the high-minded talk of post-industrial technotopia and Silicon Valley as worker’s paradise, what we see here in stark ugly detail is how the same old world scams and rules are still operative." [Read the archive of Ames' wage-theft cartel coverage here.]
The trial didn't get very much coverage from the publications, print and online, that cover the tech industry, like Wired, TechCrunch or Valleywag. But in the weeks leading up to the settlement, larger national outlets like the New York Times, Wall St. Journal and Bloomberg News picked up on Ames' reporting and grappled with the consequences. I reached out to Ames in New York for a short interview about some of the takeaways from this case.
Jan Frel: The details of the settlement are secret, but do you have any ideas about what the workers will get, and do you have any sense of what the lawyers handling the case will get in fees?
Mark Ames: The damages—i.e. the stolen wages— have been estimated at $3 billion total. In a successful antitrust suit using the Sherman Antitrust Act such as this, damages are tripled, so the Big Tech firms—Apple, Google, Intel, Adobe—have been looking at potentially paying out $9 billion. Rumors since Friday—and they look credible as far as I can tell—say the final amount was much lower, more like $300 million or so. Whatever the sum, the plaintiffs' lawyers seemed satisfied. The most important thing here for the rest of us is that there is now a precedent set for successfully using antitrust law to bust up a wage-theft cartel. That is new and that is a tough hurdle to overcome.
I don't know what the fee structure is in this for the lawyers on either side. What I can say is that both sides have top-notch legal teams. The plaintiffs' side is represented by Lieff Cabraser which has a rather stellar reputation in class-action suits.