The Friday Roast – Silicon Valley’s despicable wage cartel

SUMMARY: The wage cartel class action brought by Silicon Valley workers against Google, Apple, Adobe, Intel, Lucasfilm, Pixar and Intuit tells a dark tale of how seemingly benign, if not generous employers will shackle their employees given half a chance. 

Earlier in the week, US District Judge Lucy Koh upped a $324.5 million award against Google, Apple, Adobe and Intel ‘by at least $55 million to $380 million. The case is a class action suit brought on behalf of 64,000 tech workers. While the award may look like a lot, it works out at less than $6,000 per employee before legal costs. More to the point, it exposes some despicable wage cartel practices that should be thoroughly roasted.

The original complaint makes damning reading alleging, among other things that the cartel demonstrably acted to ensure that the best engineers could not be poached from each other. It is alleged this that had the effect of operating a pay cap so that there was no financial incentive for skilled workers to move between the companies. This followed a DOJ investigation, heavily cited in the case.

The case provides a useful graphic to illustrate the timeline over which formal agreements were executed among the companies and how they spread over time:

Cartel Agreement history

Cartel Agreement history

What is clear is this all starts with Pixar and Lucasfilm. The complaint alleges that the genesis of this cartel came directly from Steve Jobs, then CEO of Pixar, who continued the practice under formal, albeit secret agreements once he arrived as CEO at Apple.

The complaint makes lurid reading, telling a tale of agreements that were enforced by monitoring hires. It also tells a tale of attempted strong arming of Palm and rebuffed requests made to Facebook. Plaintiffs argue:

Defendants’ conspiracy was an ideal tool to suppress their employees’ compensation. Whereas agreements to fix specific and individual compensation packages would be hopelessly complex and impossible to monitor, implement, and police, eliminating entire categories of competition for skilled labor (that affected the compensation and mobility of all employees in a common and predictable fashion) was simple to implement and easy to enforce.

Tom Foremksi provides appropriate color to the case, saying:

This is a shameful multi-year collusion from companies who are Silicon Valley’s largest, and richest and who constantly declare their devotion to their engineers by providing them with free lunches and everything else they need. It’s a halitosis of hypocrisy — it stinks. Clearly, there’s no free lunch — the employers made out like bandits on savings from lower salaries, hiring costs, and staff turnover. 

He goes on to describe Steve Jobs’ ‘rusting legacy':

Steve Jobs was a bully and these CEOs paid him their lunch money. 

Harsh words indeed but you can read for yourself how executives behaved. The full text of the complaint is embedded at t the end of this story.

Reducing these arrangements to written form and then providing a digital trail speaks to a breathtaking arrogance of massive proportions. Did Jobs et al believe their secret would remain safe forever?

Cartels of all kinds are not a new phenomenon. We’ve seen this across many industries with some arguing that the way the telcos operate is close to cartel like in action if not in deed. My concern however lies with the impact on the workforce.

Is this the future of work?

In recent months, I’ve been wondering how difficult it will be to establish a thriving knowledge based environment where people freely share what they know for the good of everyone. In this context, the concept of the learning organization is central. However, it strikes me as impossible to build out those organizations if there is a lack of trust between management and the workforce. Few things hit the untrust bitton faster than the knowledge you’ve been nickel and dimed, or, worse still, that you’ve been unknowingly shackled by a salary cap.

With services like Glassdoor providing a crowdsourced method of getting better information around salary levels, the wage cartel’s ability to choke the market is restricted. But that still leaves workers wondering about what else their employer may be up to that restricts opportunity.

One thing I have seen is for companies to take to themselves any IP developed using the company’s software. This makes no distinction between stuff done at work and stuff done out of work time or stuff done as a simple exercise in tinkering. If it’s using our shit, then it’s all our shit says the contract. Is this right? No. It instills fear into employees and in the long run stifles innovation.

This case will never go to trial. The two sides will come to agreement and checks will be cut. But there is no denying that the reputation of some Silicon Valley giants has been irrevocably tarnished. ‘Do no evil’ says Google? Sounds as though that mighty ambition has finally come crashing to earth.

Featured image: Adapted from © carballo – Fotolia.com

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Den Howlett

@dahowlett

Disruptor, enterprise applications drama critic, BS cleaner, buyer champion and foodie trying to suck less every day.
Den Howlett
Den Howlett

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