US Justice Dept investigates IT firms' hiring practices

Apple, Google and other vendors are in the department's sights

The US Department of Justice (DoJ) is investigating whether the hiring practices of Google, Yahoo, Apple and some other technology companies may have violated anti-trust regulations, The Washington Post reported last week. The focus of the investigation is not clear, but appears to address the possible agreements among these companies not to poach top executives from one another. The investigation includes biotech company Genentech, as well as other tech companies, the Post said, citing two unidentified sources. Tom Ajamie, managing partner of the Ajamie law firm in Houston, says he was surprised by the reports of the investigation. Ajamie's firm focuses on antitrust and employment cases, and Ajamie has represented several tech companies in lawsuits over employees leaving for competitors, he says.

Employees jumping from one tech vendor to another is common, Ajamie says. "I'd be surprised to think that there's some formal agreement not to hire each other's employees," he says. "The competition among these companies [for employees] is extremely vicious."

Last July, a former vice president of imaging and printing services at Hewlett-Packard pleaded guilty to stealing trade secrets from IBM, where he formerly had worked, Ajamie notes. The DoJ brought that case, and there are several other recent cases where tech companies have sued each other or their employees over hiring each others' workers, he says.

The DoJ investigation "came out of left field," Ajamie says.

However, Keith Hylton, a law professor at Boston University and an antitrust expert, says many tech companies have huge investments in employees and will try hard to keep them.

"It's quite likely that each of these firms invests in training their employees, and over time the employees develop skills that are useful to other high-tech companies," he says.

"Given this, there is an enormous incentive among the tech firms to poach after the intensive training period. An agreement might make sense, as a solution to a collective action problem, given this incentive," Hylton says.

But it would be easier for tech companies to sign noncompete agreements with key employees in states where those contracts are legal, he says. California, however, has a law against noncompete agreements.

Non-compete agreements have been a factor in two recent US cases, one involving David Donatelli, an EMC executive who went to HP and the other involving Mark Papermaster, an IBM employee who left to work for Apple. The cases were settled after Donatelli and Papermaster agreed to certain conditions before taking up the positions with their new employer.

The reported move by the DoJ reflects plans for a more aggressive approach to antitrust enforcement by the Obama administration. Christine Varney, assistant attorney general in charge of the DoJ's Antitrust Division, said last month that as part of an overall plan to get tougher on antitrust concerns, the DoJ should take a close look at the high-tech and Internet industries and new ways of measuring antitrust activity there. A number of tech companies, including Google, have been under scrutiny in the US for possible antitrust behavior. The Federal Trade Commission is said to be investigating whether the close ties between Apple's and Google's boards of directors violate antitrust laws. Google's deal with authors and publishers on scanning of books has also attracted government scrutiny in the US.

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Tags careersGoogleApplehiringYahooUS Justice department

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