By Meg Thering

On May 27, 2014, employees of high-tech firms in the Silicon Valley filed a motion in the Northern District of California seeking approval of a settlement agreement releasing antitrust claims they had brought against Adobe Systems, Incorporated, Apple Inc., Google, Inc., and Intel Corporation.  In the complaint, the plaintiffs alleged that the defendants had agreed to refrain from hiring each other’s employees in an effort to drive down compensation levels in the Silicon Valley. Specifically, the complaint alleged that Defendants entered into “illegal agreements not to recruit each other’s employees; (2) illegal agreements to notify each other when making an offer to another company’s employee; and (3) illegal agreements that, when offering a position to another company’s employee, neither company would counteroffer above the initial offer” and that they entered into such agreements “to reduce employee compensation and mobility by eliminating competition for skilled labor” in violation of the Sherman Act, 15 U.S.C. § 1 and the Cartwright Act, Cal. Bus. & Prof. Code § 16720, et seq. See In Re High Tech Emp. Antitrust Litig., No. 5:11-cv-02509 (LHR) (N.D. Cal. May 22, 2014).

While the issue of liability was never reached, the cost to defendants was high.  As part of the proposed settlement, defendants would pay a total of $324,500,000 (not counting earlier settlements by other defendants).  Not only are the defendants paying now, the litigation has been costly and time intensive.  This proposed settlement has been agreed to only after three years of litigation which included “the completion of extensive fact discovery, including the taking of 107 depositions, the review of millions of pages of documents, and analysis of over 50 gigabytes of data consisting of approximately 80,000 different files produced by Defendants; two rounds of class certification briefing and argument, including the exchange of eight expert reports by four economists; completion of expert merits discovery (covering a total of 10 experts across the parties); and briefing, argument, and partial denial of Defendants’ motions for summary judgment and exclusion of expert testimony.” In their motion seeking approval of the settlement, Plaintiffs noted that eBay and Intuit had been sued by the Department of Justice and the California Attorney General “regarding an alleged agreement between eBay and Intuit not to poach each other’s employees, which later became a no-hire agreement between the companies.”

This proposed hefty settlement is a reminder to employers in California and nationwide that the overlap of antitrust laws and employment laws cannot be ignored.  Additionally, California employers, especially, should revisit how they are protecting their trade secrets as non-compete and non-solicitation agreements are generally not enforceable in the Golden State. Cal. Bus. & Prof. Code § 16600 makes many restrictive covenants unlawful.  That Section provides: “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” The three exceptions to this rule provided for in the Business & Professions Code relate to professional partnerships, limited liability company members and the sale of a business (though see our recent blog posting about a California resident who was forced to litigate a non-compete dispute in Illinois).  California employers seeking to protect their trade secrets through contractual provisions should look to measures other than non-compete agreements, such as  return of property provisions, and confidentiality agreements. California employers will be hard pressed to keep information about employee compensation confidential though since California Labor Code § 232 prevents employers from prohibiting employees from disclosing the amount of their wages to others (or terminating them or disciplining them for doing so).