
Judge rejects $324.5M settlement over Apple, Google hiring - uptown
http://www.reuters.com/article/2014/08/08/us-apple-google-ruling-idUSKBN0G822T20140808
======
bkeroack
The otherwise amazing book by Ben Horowitz (of Andreessen-Horowitz fame)
called _The Hard Thing About Hard Things_ has a chapter that basically lays
out and encourages this type of illegal behavior (called "Is It Okay to Hire
People from Your Friend's Company?").

It literally recommends that companies maintain a "do not hire" (aka "do not
poach") list of other organizations from which HR is forbidden from
recruiting. It also recommends calling the CEO of the other company on the
down-low to ask permission before extending an offer.

It really disgusted me when I read it. Such smart people doing such dumb
things, and encouraging would-be CEOs to do the same.

~~~
balls187
Seems taken out of context.

Do not hire is different than do not poach.

The wisdom I subscribe to is, if you have common investors, it's bad form to
actively poach from portfolio companies.

For companies that are later stage, it's bad form to poach _key_ employee's
from portfolio companies.

Do Not Hire agreements between companies, however, seem unreasonable, except
when there is clear cause for conflict of interest.

~~~
phaker
_Seems taken out of context._

In a [post] on his blog Horowitz describes a scenario in which a person
currently employed at a company that is "important" to you comes in for an
interview. The recommended course of action is to 1: block the hire, 2: inform
said company about it. There are two things i just can't agree with at all:

* The part about informing the current employer: about 50% of the time it will end with ruining the next few weeks or months of his/her life. I.e. getting them fired, with ruined prospects of getting the job they took the risk for. Note that at e.g. apple the standard procedure when they find out that an employee is looking for a job is to escort them out of the building right then and there.

* Note it's not about "poaching", he explains thoroughly that it applies to people who ask for an interview on their own accord too.

If you don't want to read the whole thing, at least read this gem:

 _It is important to note that just about all of these kinds of policies
violate the Right to Work laws in California. Specifically, if you block a
hire based on this kind of policy and the employee loses their job and cannot
find work, your company is liable for his wages. As a result, the business
relationship with the other company must be extremely important for you to
employ any kind of “hands off” policy._

said blog [post]:
[http://www.bhorowitz.com/is_it_ok_to_hire_people_from_your_f...](http://www.bhorowitz.com/is_it_ok_to_hire_people_from_your_friend_s_company)

~~~
001sky
You are taking it out of context, though. BH is basically talking about an
issue that could kill your startup. Whether or not you like that reality,
there is a real risk that the other company will retaliate for something they
see as an adverse breech of trust.

Note that logic: the problem is not with the company ben is advising. The
issue is at the third part company. If that company decides to "go nuclear"
and sever all ties because you poached/goaded or otherwise got involved in
their "interal politics" (note: this is not a _per-se_ issue of
math/economics/money), bad things might happen to your firm.

CEOs of startups have a fiduciary duty to avoid "bad things", and even that
choice is a catch-22 (ie, two bad things...) you pick the worst-bad one. And
that is what he is saying.

In other words, he's talking about something that is a real-world problem. If
you want to vent out about the issue, it really sits with the third part
company. They are typically the one with all the power in the situation.

Example:

Startup A had 80% of its business tied to a single company, BigCo B. Like it
or not, the CEO of startup A needs to avoid a situation where the CEO of BigCo
B comes to the conclusion that he won't do business with A becaus of Politics
(note: not economics).

Whether or not poaching is politically sensitive (or offensive) and/or
warrants this type of "nuclear" response, is a function of many thing. But
none of that is BH's responsibility in the larger world.

This dynamics is something that has played out for millenia from kings and
queens and royal courts to how the predisent and Y combinator select their
staff and senior leadership.

At a certain level of the game, its all about trust. And polticial power is
essentially a combination of trust and goodwill. And its easy to disolve and
can reak havok on any company of any size when systemically undermined. So you
need to pay attention to it.

In other words, this is a much bigger issue. The tack of trying to shoot or
lynch the messenger is sort of misplaced. Because the startup is the employer
and may have a power asymmetry with a potential hire; but that startup is in
itself subject to potential power assymetries at much higher levels.

(This goes for pissing off BOD members, VCs, and Key clients alike...maybe it
suck/isn't fair...etc... but the reality is you need to pick your battes as a
small company. And picking fights with the consituents you need to help you
build your biz is ~dysfunctional and needs to be understood as such.)

~~~
phaker
The thing that irks me the most is not the practice itself. My problem is with
everything else in that post.

Note that he has not described it as a morally ambiguous but sometimes
unavoidable choice (like you did) but as the most righteous and noble option.
That he's openly admitting he knows that it's illegal. Pay attention the
sugar-sweet language of his parable and how its tone gets more colorful
whenever the story takes a darker turn (from pov of the employee).

I mean, this entire thing is something out of a dilbert strip. I'm serious.
This is something you'd expect Dilbert's CEO to write. The self deceit, the
contrast between the language of "hurt feelings" vs the unstated reality of a
person getting fired as a consequence and the stupidity of it all are mocked
in hundred different Dilbert strips. Remember when this wage fixing story
surfaced and the surprised comments that they were stupid enough to put it in
email? If Mr Horowitz ever gets in similar trouble the paragraph i quoted
above will make these troubles a lot worse.

~~~
001sky
There's plenty of scope to fairly critique the BH piece. He's not perfect or
beyond taking a few shot across the bow on a controversial subject.

But the situation of apple and google colluding (ie, this linked article) IMHO
is a ~different situation here than the subject of the BH piece.

1> Google and AAPL as of the time of the lawsuit were not small players
(fighting for their lives). They were 'fat cats' essentially at the top of the
food chain.

2> Their motivations seem inherently economic/greedy, and fundamentally anti-
competitive. They were not even vaguely 'customer centric' or otherwise
constructive (except at the most tenditious levels).

3> The defendents were self aware their actions were unethica/illegal, and in
the context of (1) and (2), were actively taking steps to
hide/bury/conspire/collude regarding the illegal activity.

So this type of context is not the same. Calling out the BH essay seems to add
a layer of useful sophistication to the discussion here. Half the utility,
tho, is understanding the difference.

------
olefoo
"Those who do not remember history are doomed to repeat it." -Santayana

This is yet another iteration of American labor politics. That it involves
workers with greater skills than in previous iterations is not germane. The
reason that labor unions arose in the first place was that capitalists
actively exploited workers. And, guess what? Capitalists still exploit
workers, even when the workers tools are laptops and VMs rather than steam
engines and Bessemer converters.

How easily we forget that our grandfathers fought and died for the forty-hour
work week. How easily we give that up, because we're working for "disruptive
startups".

If you want to know what previous iterations of no-hire agreements looked
like; see
[http://en.wikipedia.org/wiki/Blacklist_(employment)](http://en.wikipedia.org/wiki/Blacklist_\(employment\))

~~~
dmix
This _is_ the market reacting to malicious behaviour by large organizations.
As far as I can tell, in this situation it seems to be working. The court
system nor the market isn't putting up with their shit.

I'd much prefer courts handle this than solving the problem by creating a
second problem. Which in your example, the unions themselves eventually become
too powerful or negatively effecting the job market and upward mobility of
smaller players. We would see benefits in the early days then eventually reach
by a stasis where everything starts moving extremely slowly and consumed by
bureaucratic process.

Then only those embedded within the union system benefit, while competing
global markets without constraints operate more efficiently. While smaller
players in the job market start hiring less due to the high bar needed to hire
union workers.

I've witnessed this first hand as an electrician in my family ran a successful
business, until the workers organized into a union and he had to shut it down
because their demands made it completely unprofitable (they demanded expensive
benefits programs and high wages, keep in mind we live in Canada with public
healthcare). The workers lost their jobs and most ended up working for another
much larger company. Unions create bigger companies and bigger unions.

~~~
x0x0
The court system isn't putting up with it? You must have a liberal definition
of punishment, if you expect $300mm to change behavior. If you add a zero it
may have an actual impact, but at $300mm it's possible the companies net saved
money.

edit: for a (very rough) estimate of how much money google saved, remember
that in late 10 they gave their entire staff a 10% raise, effective 1 Jan 11.
So if you look at their 2011 10k [2], a _very_ rough underestimate of their
comp expenses -- looking at R&D alone -- is $5,162 (numbers in millions). So
if 1.1x = 5162, then x = 4692 and that 10% raise cost google $470m. A fine
less than the savings of one year of your illicit behavior -- and for just one
company! -- discourages behavior exactly how?

[1]
[http://online.wsj.com/news/articles/SB1000142405274870352360...](http://online.wsj.com/news/articles/SB10001424052748703523604575605273596157634)

[2]
[http://www.sec.gov/Archives/edgar/data/1288776/0001193125120...](http://www.sec.gov/Archives/edgar/data/1288776/000119312512025336/d260164d10k.htm)

~~~
dmix
Considering it is not a criminal offense and instead a civil one, the only
option for the courts is to fine them.

But I actually agree with you, as an alternative to unions the reaction I'd
like to see is strengthening the courts ability to punish malicious acts by
corporations and have more individual responsibility. As we've seen where
banks destroy thousands of peoples lives by purposely gambling their savings
away. Or pharma companies mislabeling products every year:
[https://en.wikipedia.org/wiki/List_of_Largest_Pharmaceutical...](https://en.wikipedia.org/wiki/List_of_Largest_Pharmaceutical_Settlements)

While these cases are much worse than conspiracy to not hire people, I agree
settlements aren't always the best solution because it seems to keep
happening. There needs to be stricter and real punishment for businesses. One
reason is we need to stop protecting those executives directly involved with
the conspiracy from being shielded by corporate legal entities, who can easily
pay out the fines.

Which is why I agree with the judge the current settlement is insufficient.
Unfortunately a greater fine is the courts only option, that is the real
problem IMO.

------
suprgeek
I had two concerns when this was made public:

that this was a laughably low amount considering the scope of the collusion
and the time-scale over which it happened.

that it looks like a good deal to all the companies concerned on two fronts -
325 Million is a pittance compared to what Apple, Google or Adobe make in a
month. and the perception of the non-tech folks that this is about the rich
whining about not getting caviar rather than a real issue.

At least the first one is being addressed (somewhat). I hope the final
settlement really makes them hurt financially so that it becomes one more item
in the HR manual - "thou shalt not enter into illegal no-hire agreements even
when pressured by an asshole" .

For the second issue there needs to be some effort put in towards
communicating with the non-programmer public and educating them about why shit
like this is a VERY bad idea no matter who does it or who is impacted.

~~~
adevine
The fact that this settlement was rejected by the judge should be an
embarrassment for the plaintiffs' lawyers, and IMO is a great example of the
problems with the incentives in class action settlements. Basically, the judge
is saying there is substantial evidence that the plaintiffs would win
considerably more if the case went to trial. From the lawyers' perspective
though, if they settle they get a sure thing, and, importantly, they don't
have to do any more work.

So in other words, if this settlement had been approved, the employees would
have gotten a raw deal, while their attorneys would have gotten tens of
millions for poor work on a pretty clear cut case.

~~~
rando289
IANAL, but this makes a lot of sense. Lawyer's motivations are really really
important.

------
erobbins
Good. the decimal point needs to move (right) before this settlement can even
remotely be considered fair.

~~~
troydavis
As an employer, I'd like to see it move right by two places. I'm not
optimistic though.

~~~
Consultant32452
It would be interesting to see an analysis of what the economic impact of
these depressed wages has been. $3 Billion is probably not too far off the
mark. Probably not $3 Billion directly to the programmers impacted, but
definitely to the broader economy.

~~~
Zigurd
Across the industry, the number of employees affected is easily in the high
hundreds of thousands, at a direct cost to them of tens of thousands of
dollars per year. So billions to maybe low tens of billions is not an
unreasonable range. And would that get trebled under California employment
law?

~~~
alexqgb
As of April, Apple had cash reserves of about $160 billion. Just saying.

~~~
gress
Just saying what? If you fine Apple $160B, then you have to fine Google a
similar amount, since they are co-conspirators.

~~~
alexqgb
What I'm saying is that the amounts of cash held by - and available to - these
companies is so eye-poppingly astronomic that even an twelve digit settlement
- which the law may allow - is nowhere near enough to bankrupt them.

------
MangezBien
Is there any recourse for the engineers who weren't directly affected by the
collusion but were affected by the indirect effect on the market as a whole?

~~~
DevX101
don't hold your breath

------
numlocked
It's strange that even the NYT got this wrong -- the bulk of the agreement was
not in fact about poaching engineers, but rather sales and product people[0].

[0] [http://www.businessinsider.com/emails-eric-schmidt-sergey-
br...](http://www.businessinsider.com/emails-eric-schmidt-sergey-brin-hiring-
apple-2014-3)

~~~
spoondan
_the bulk of the agreement was not in fact about poaching engineers, but
rather sales and product people_

Do you have a better citation for this claim? The linked Business Insider
article does not claim such a thing, and the court filings the article cites
do not support the claim.

The article cites Google's Special Agreement Hiring Policy that divides
companies into three categories: Restricted Hiring, Do Not Call, and
Sensitive. Only the protocol with respect to Restricted Hiring companies is
constrained to Sales, Product, and G&A. Google's protocol for the Do Not Call
companies seems to prohibit actively recruiting any employee at those
companies. The article does not address whether other companies limited the
scope of collusion to, "sales and product people."

------
mrbird
Does anyone know how many people are likely to actually be paid out as part of
the class?

~~~
gopher1
There are 64,000 plaintiffs.

Source: [http://techcrunch.com/2014/08/08/judge-rejects-comically-
low...](http://techcrunch.com/2014/08/08/judge-rejects-comically-
low-324-5m-settlement-to-tech-workers-who-were-cheated-out-of-fair-wages/)

~~~
yonran
By the way, Judge Lucy Koh estimated that fees would be $82885000, so each of
the 64466 class members would have received $3750, not quite the “essentially
zero” that Alex at TechCrunch claims in the article you link.

Source: Judge Koh’s order [http://www.scribd.com/doc/236255928/Apple-Google-
Intel-Adobe...](http://www.scribd.com/doc/236255928/Apple-Google-Intel-Adobe-
Wage-Fixing-Settlement-Denied)

~~~
nostrademons
$3750 is about a week's pay for a tech worker, so essentially zero.

Salaries jumped by about $30K/year when the pact collapsed, so the commenters
above who are calling for the decimal point to shift a place to the right
aren't all that unreasonable.

~~~
dasil003
Assuming that is the true effect, it should probably 2-3x that in punitive
damages otherwise the collusion was still a good idea, and next time it will
be more adequately paranoid corporate types covering their asses instead of
the self-assured Jobs forwarding evidence around with smileys.

------
yuhong
From
[https://plus.google.com/103157122834258782502/posts/dvxSd4wn...](https://plus.google.com/103157122834258782502/posts/dvxSd4wnkG6)

"I'll settle for a personal letter of apology, written by and signed by Eric,
Larry and Sergey."

AFAIK the SEC is already beginning to push for admission of wrongdoing.

------
justina1
I'm curious if this will have any impact on the practice other than companies
getting better at not leaving a paper trail.

If it doesn't, the only people this settlement will help is those at the named
companies and not the trickle down effect it's had on the rest of the
industry.

~~~
bjt
A case like this leaves institutional scar tissue. There will be new sections
in HR policy manuals and training programs. Executives will be gun-shy about
any conversations that even come close to those at the heart of this lawsuit.
There will definitely be an effect.

For a while. As time passes and this case fades from memory I expect such
collusion to eventually happen again.

------
GeneralMayhem
This is still worrying.

>In her ruling, Koh repeatedly referred to a related settlement last year
involving Disney and Intuit. Apple and Google workers got proportionally less
in the latest deal compared to the one involving Disney, Koh wrote, even
though plaintiff lawyers have "much more leverage" now than they did a year
ago.

>To match the earlier settlement, the latest deal "would need to total at
least $380 million," Koh wrote.

$380 million??!!?!?! That's not really any better when they're suing for $3B,
and having it come from a judge's mouth is NOT helping. I'm glad she turned
down $324m, but the new number is still insulting.

~~~
UntitledNo4
Leverage = $380 million.

Now the judge tells them "you have much more leverage". So tey have to work
out how much more leverage they have. 5 times the leverage would be $1.9
billion.

That's at least how I understand the text, and I find it very honest of the
judge. I guess she can't give them the exact sum she thinks is appropriate.

------
jessriedel
> After the plaintiffs’ lawyers took their 25 percent cut, the settlement
> would have given about $4,000 to every member of the class.

> Judge Koh said that she believed the case was stronger than that, and that
> the plaintiffs’ lawyers were taking the easy way out by settling. The
> evidence against the defendants was compelling, she said.

Can anyone explain this from the perspective of the economic/sociological
motivations of the lawyers? People often complain about a huge chunk of the
money going to the class-action lawyers who are too eager to settle, but the
traditional argument is that a fixed percentage structure (rather than an
hourly or flat rate) gives the lawyers the proper incentive to pursue the
interests of the class by tying their compensation directly to the legal
award.

Here's my best guess: Lawyers, like most people, are risk adverse for
sufficiently large amounts of money. (They would rather have $10 million for
sure than a 50% chance at $50 million.) On the other hand, the legal award
will be distributed over many more plaintiffs. Since it will be much smaller
per person, the plaintiffs are significantly less risk adverse. So the lawyers
settle even thought it's not in the best interests of the plaintiffs.

This suggests the following speculative solution for correctly aligning the
incentives of the lawyers and the class action plaintiffs: either (a) spread
the legal work over many lawyers such that the potential compensation for them
is small enough that their utility function is at least as linear as the
plaintiffs or (b) turn the class-action lawsuits legal team into a corporation
which must answer to many shareholders.

Proposal (a) has problems because it might require the number of lawyers to be
comparable to the number of plaintiffs, which could be thousands or millions.
Proposal (b) strikes many people as weird, and introduces other principal-
agent problems, but it does have precedence:

[http://dealbook.nytimes.com/2012/04/30/looking-to-make-a-
pro...](http://dealbook.nytimes.com/2012/04/30/looking-to-make-a-profit-on-
lawsuits-firms-invest-in-them/)

Would love to hear an expert opinion on this.

------
chaostheory
I know this is illegal but I wonder whether any, most, or even all of the
plaintiffs will be blackballed from most large companies in the future? Yes
it's wrong, but in practice it's both easy to do and get away with it.

------
yutah
'To match the earlier settlement, the latest deal "would need to total at
least $380 million," Koh wrote.'

------
funkyy
$324.5 is just a wild number or is there a math behind it?

------
aceperry
The plaintiffs have those companies "dead to rights."

------
davidf18
This collusion depressed the price of engineering talent but so does H1B
Visas. Need to work on the current battle as well...

~~~
jahewson
National collusion against talented individuals born by chance within the
boundaries of another administrative area seems more like an entrenched
privilege than a worthy "battle", especially given how much of US companies'
revenue comes from outside the US.

------
dreamdu5t
There's nothing wrong with "collusion." Collusion is nothing more than free
association. Same with "poaching" for that matter. There's nothing wrong with
two people agreeing to work for each other. People should be free to negotiate
their own agreements.

The arguments for criminalizing such free association are based in sentiment
not reason.

~~~
asdfologist
Collusion leads to artificially suppressed wages, which makes the labor market
inefficient, to the detriment of the employees.

In general, completely unregulated free markets lead to monopolies and price
manipulation, among other problems.

So no, collusion is wrong.

~~~
dreamdu5t
What's artificial about wages or prices determined through agreement (the
market)? What constitutes an agreement's artificiality?

~~~
asdfologist
Consider the extreme scenario where all companies collude, sending wages to
near zero. Would you still call this "agreement"?

~~~
dreamdu5t
Sure, let's consider it.

Let's say all companies form an agreement to not hire from any other company.
They're now in a situation where either they must terminate the agreement in
order to hire, or bid against other companies for labor that is not currently
working for any of the firms. Companies bidding over labor drives wages
upwards... not downwards.

------
cognivore
"The ruling by U.S. District Judge Lucy Koh in San Jose, California, said the
proposed settlement amount "falls below the range of reasonableness," before
dashing back to her new two million dollar home to pack for her European
vacation.

~~~
rayiner
In NorCal that's like, what, 2BR/2BA a mile away from any public transit?

~~~
cognivore
Very true. I 48 years old and can remember reasonable home prices, so I kind
of just did a Dr. Evil on that.

------
mcfunley
Their collusion depressed the price of engineers generally. I spent a lot of
the years in question ignoring recruiting emails from those companies, and
this affected the amount my employer needed to pay me to do that. We should
dig up the corpse of Steve Jobs and tar and feather it.

~~~
stanmancan
That last sentence right there is one of the few times I really wish I was
able to down vote. I valued your opinion until you felt the need to include
that.

~~~
iancarroll
You'll get it at around 600 karma, if you didn't already know.

~~~
stanmancan
I wasn't aware so thanks for the heads up!

