Have you been thinking about the fact that average Americans are still struggling to pay the bills, or wondering why worker pay hasn't risen a lick in the past few years? If so, there's a courtroom drama scheduled to unfold this May in San Jose, California, and it promises to shed some light on these very issues.
The case, in which tech giants like Google (NASDAQ:GOOGL) and Apple Inc. (NASDAQ:AAPL) will answer charges of wage-fixing in the technology industry, is sure to be an eye-opener, if a sampling of documents perused by PandoDaily is any indication.
Years of wage suppression
The lawsuit, brought against a group of four tech titans and representing nearly 65,000 employees, has been years in the making. In September 2010, the Department of Justice settled civic charges against the aforementioned companies, as well as Intel Corp., Intuit Inc., Adobe Systems and Walt Disney's Pixar Animation unit for antitrust violations.
Just as in the instant case, the tech and entertainment companies were accused of agreeing not to poach each other's employees. The DOJ commented that the no-solicitation agreements, which began in 2005, "eliminated a significant form of competition to attract highly skilled employees" and exerted a chilling effect upon the compensation levels and chances of intra-industry mobility of tech workers.
The settlement, which required the six companies to stop engaging in no-poaching agreements for five years, did not levy any fines or penalties. In 2011, a group of five software engineers sued Apple, Adobe, Google, and Intel over the no-solicitation deals, seeking class action status.
After several years, during which time the tech giants unsuccessfully tried to have the suit dismissed, a federal appeals court judge finally upheld a lower court's ruling to allow the suit to move forward as a class action.
Collusion hurts workers, and the industry
There seems little doubt that these no-poaching pacts were meant to depress wages for certain categories of tech workers. Why would these companies do such a thing? Certainly, companies like Apple and Google are not destitute – in fact, they are among the top five non-financial companies holding the lion's share of all corporate cash, according to Moody's. If it was merely a question of keeping valued employees, well, the tech companies only had to sweeten the competitor's offer.
The drive to hold down pay doesn't seem to apply to CEOs, by the way. Despite Tim Cook's showy self-inflicted pay cut last year, he still made about $40 million . Google CEO Larry Page's net worth of $31 billion certainly wasn't built with a yearly salary of $1, either.
It seems unlikely it would be simply mean-spiritedness, but consider this tidbit. Some of the biggest U.S. firms lobbying to increase the number of H-1B visas from 65,000 annually to something like 300,000 are tech companies. These employers claim that there is such a shortage of highly skilled workers available domestically that they must import such employees from foreign countries – who then may stay in the U.S. and work for up to six years. Detractors note that these imported workers are generally paid lower wages then U.S. workers.
If there is truly a shortage of workers here at home, the tech titans have only themselves to blame. By keeping wages artificially low and limiting employee mobility, their actions have likely kept general interest in pursuing such career paths depressed. Instead of encouraging American youth to choose technology majors to alleviate any job shortages, these companies have done just the opposite – all the time crying to congress that they cannot find enough skilled labor to be competitive.
The worst part about this distasteful scenario is it might be more widespread than anyone knows. What began as a deal between Apple and Google in 2005 quickly mushroomed , encompassing other, seemingly diverse businesses like Genentech, JCrew, and Comcast. Is this sort of thing still going on? Who knows.
The class action lawsuit could wind up costing big tech $9 billion or more in damages. If the plaintiffs prevail, we might be seeing a whole lot more of these types of lawsuits in the future.
Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Adobe Systems, Apple, Google, Intel, Intuit, and Walt Disney. The Motley Fool owns shares of Apple, Google, Intel, Intuit, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.