by Meridith Levinson

“No Poaching” Agreements Threaten Silicon Valley Tech Careers

Aug 27, 2009

S.V. tech firms' efforts to prevent each other from recruiting their employees seriously hinders those employees' careers.

The “no poaching” agreementsthat Silicon Valley tech companies allegedly inked to protect their workforces from competitors’ job offers have again come under scrutiny. And rightly so. 

So-called “no poaching agreements,” where companies agree not to recruit each others’ employees, made news in early June, when reports of a Justice Department investigation into the shady labor practice leaked. The Justice Department is currently investigating whether the technology companies suspected of involvement in the “no poaching” agreements (among them, Google, Apple, Yahoo, Genentech and others) are violating Federal antitrust laws by establishing an anti-competitive labor market practice.

The controversy over the practice resurfaced late last week, when Bloomberg reported that in 2007 former Palm CEO Ed Cooligan rejected such a proposal from Apple CEO Steve Jobs. In the communications between the two CEOs, Cooligan called Jobs’ proposal wrong and “likely illegal,” according to Bloomberg.

Darn right it’s wrong. And not just because of the antitrust issues such an agreement raises. It has significant implications for employees of those companies, too.

A “no poaching” agreement would seriously hamper their careers by limiting their mobility in the Silicon Valley tech community. Sure, an Apple employee can still apply for a job at Google and vice versa, but we all know that most job offers result from networking as opposed to the traditional job application process.

A “no poaching” agreement would also inhibit employees’ salary growth. Without offers from prospective employers in the area, Silicon Valley tech company workers have less leverage inside their own organizations to negotiate their salaries. The “no poaching” agreement effectively sets pay rates for professionals in the area.

As such, it’s a short step away from price fixing the labor market, in my opinion.

If the CEOs of the top tech companies in Silicon Valley did, in fact, agree not to recruit each others’ employees, I hope the Justice Department finds them in violation of antitrust laws. It may be the only way to prevent the practice, and thus restore competition—and fairness—to the labor market.

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