U-M expert addresses employee poaching cases

March 9, 2015
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FACULTY Q&A

Norman BisharaNorman BisharaNorman Bishara, associate professor of business law and ethics at the University of Michigan’s Ross School of Business, can discuss the pending settlement in the high-profile litigation involving Apple, Google and others.

He can also discuss noncompete agreements used in the recent A123 Systems v. Apple case related to Apple’s hiring of car battery engineers and the Jimmy John’s case, as well as ongoing state and federal investigations and newly proposed state legislation around the nation.

Q: What are the allegations against Apple, Adobe, Google and Intel all about?

Bishara: Essentially, the employees were being treated like the firm’s personal property. Theses high-tech companies—and a few others that settled earlier—were the subject of a federal investigation that revealed some embarrassing evidence such as emails where the executives colluded to form “nonpoaching” agreements. Basically, these firms promised to not recruit each other’s employees. About 64,000 workers joined the class action lawsuit seeking compensation for suppressed wages and harm to their job advancement.

Q: Why do you think the federal judge overseeing the case will likely approve the new $415 million settlement offer considering she declined an earlier offer of $324.5 million as insufficient compensation for the 64,000 workers?

Bishara: It is difficult to really know how much is enough since a settlement in this case is meant to compensate a huge swath of tech workers. A $90 million increase over the last offer is significant so it is not surprising that U.S. District Judge Lucy Koh is apparently viewing this updated offer as a means for the defendants to pay their “fair share” this time. A trial with multiple defendants and lots of evidence is a risky and expensive undertaking so it seems in everyone’s interest to get this matter wrapped up.

Q: If California allowed noncompete clauses in employment contracts, do you think this case would exist?

Bishara: From the evidence, it appears that the defendant tech firms resorted to these illegal “do not poach” agreements out of frustration that recruiters at other firms were hiring away the best and brightest workers. Ironically, the environment of fast and free tech-employee mobility that fuels the innovation that these companies value and thrive in is the same free market they wanted to subvert with backroom deals. Also a new case against Apple in Massachusetts accusing it of poaching electric car battery engineers puts these issues to the test once again in a state that does enforce noncompetes.

Q: Anything else you think is important to mention?

Bishara: This is an interesting time for the human capital law and policy that influence employee mobility. For example, members of Congress recently asked for Federal Trade Commission to investigate sub shop Jimmy John’s practice of having all its workers—including the low-wage workers behind the counter making sandwiches—sign noncompetes. It appears that Jimmy Johns has never tried to enforce the low-wage worker noncompetes and it seems unlikely that a court would allow the agreements, which suggest there is some chilling effect at work intended to scare workers. The New York state attorney general is also investigating these practices, so there may indeed be some more government intervention in the works.

Contact Norm Bishara: 734-647-6823, nbishara@umich.edu. Bio: myumi.ch/JmMPJ