On Google’s 10 Percent Pay Hike . . . And Antitrust Law-10/11/10

On Google’s 10 Percent Pay Hike . . . And Antitrust Law


By Thomas Catan

WASHINGTON — Just six weeks after Google and five other technology firms agreed to scrap secret no-poaching agreements to avoid a Justice Department antitrust suit, the company has given all its employees a 10% pay rise to stop them from jumping ship.

Was it a coincidence, or should Google employees be sending Attorney General Eric Holder a giant thank you card? That’s the question being asked by some tech-watchers on the west coast and antitrust lawyers in D.C.

“I’m not sure about causation, but the correlation between the end of the no-poaching agreement and a large voluntary raise is striking,” said Eric Goldman, director of the High Tech Law Institute at Santa Clara University.

Google isn’t saying whether its big raise was related to the end of the do-not-poach agreements. “While we don’t typically comment on internal matters, we do believe that competitive compensation plans are important to the future of the company.” a company spokesman said.

The answer is more than just academic. Some lawyers say it could have a major impact on any private lawsuits brought by employees of the companies that maintained the no-poach agreements: Google, Apple, Intel, Adobe Systems, Intuit and Walt Disney unit Pixar Animation.

If you buy that the two events are related, the thinking goes, then Google has effectively put a figure on the size of the damages caused by the alleged “cartel.” And that’s likely to be a big figure, with estimates of its cost ranging from $400 million to north of $1 billion a year.

It wouldn’t take much for an enterprising plaintiffs lawyer to argue the pay rise represents the amount the company would have had to pay in an unrestrained market for its most valuable commodity: talent.

During the year-long investigation, Google and other technology companies argued to the Justice Department that the no-poaching agreement was necessary if companies were to be able to work together without fear of losing their best employees.

In the settlement, the Justice Department said that no-poach agreements were OK if they were confined to areas of collaboration like joint ventures. But it argued that blanket agreements putting all workers at a rival off limits to recruiters was just a way to hold down compensation.

Google said at the time: “While there’s no evidence that our policy hindered hiring or affected wages, we abandoned our “no cold calling” policy in late 2009 once the Justice Department raised concerns, and are happy to continue with this approach as part of this settlement.”

Of course, Google would have some strong arguments in any court case, one of the reasons why plaintiffs lawyers haven’t filed suit yet. Most people saw its latest pay adjustment as coming in response to a threat from Facebook, which has been hiring away large numbers of its top executives and employees. Yet Google never maintained a no-poaching agreement with Facebook.

Plaintiffs would doubtless respond that the settlement ramps up the pressure on Google to retain its workers regardless. Whereas Google previously had to worry about Facebook, now it has to worry about five other big competitors head-hunting its software engineers and executives.

Good to know someone’s doing ok in this economy.