With the Techtopus wage theft lawsuit settled, all eyes turn to eBay

By Mark Ames , written on April 29, 2014

From The News Desk

The Silicon Valley wage theft class action lawsuit, covered extensively by PandoDaily, reached a settlement last week, just a month before it was due to go to trial in San Jose.

There’s a rumored settlement figure going around, but we’ll know for sure the true amount and terms when it’s made public in court filings no later than May 25. Whatever the final sum, the plaintiffs’ side has been expressing satisfaction both privately and publicly.

The case has been more than an embarrassment for the Big Tech defendants — led by Apple, Google, and Intel. It’s also exposed the raw brute politics at the top of the Silicon Valley corporate pyramid, and how the concentration of so much overwhelming wealth and power impacts the lives of the tech industry workforce, a workforce that’s supposed to be a model for the utopian New Economy future. The workforce that supposedly has it best in America.

A disturbing question arises from this story: Perhaps the tech workforce — itself powerless, manipulated, their wages covertly stolen by a handful of billionaire board directors looking to pad their profits — really is the best-treated workforce of the future. What does that say for everyone else, and for the future?

When I first described the tech CEOs conspiracies to restrict hiring and recruiting as “wage theft” — situating the Silicon Valley wage theft cartel in the broader political context of record inequality in wealth and in power — we at Pando were criticized by people on both sides: from the right, for exaggerating the effects of the secret agreements (libertarian economist Tyler Cowen, ever the contrarian, claimed that non-solicitation agreements might raise employees’ salaries); from the left, for daring to equate the politics of Silicon Valley higher-income wage theft to the exploitative politics of low-income wage-theft.

But the evidence was overwhelming, and shocking. This story reminds us that even though middle- and upper-middle income workers aren't obvious objects of pathos, they are subject to many of the same exploitative forces as lower-income workers in an oligarchy like ours today. As it turned out, those who did take an interest in the story, such as the New York Times, came to similar conclusions as Pando did about the political significance of this story.

The other perhaps more important consequence of the class action settlement is that this is a rare major victory for employees against corporate power: A landmark court precedent has now been set in this case, the first of its kind in which antitrust law is used to bust up a secret wage-theft cabal. Legally, it means that future class action suits against illegal wage-fixing agreements will be easier to bring. More than a few legal professionals have told me they are sure this case will be taught in law schools and legal seminars. (And thanks again to University of San Diego law professor Orly Lobel, author of “Talent Wants to be Free,” for taking time out to teach me about the unique historical nature of this class action labor antitrust suit.)

Generally antitrust suits target firms that conspire to fix prices, or fix market share to lock in a dominant market monopoly. In this case, the Sherman Antitrust Act was used to bust up an “overarching conspiracy” between the seven tech companies to eliminate competition for tech employees, effectively stealing tech industry wages just as they were skyrocketing upwards in 2005—the year that the wage-theft cartel began.

Now that there is a precedent set awarding class action status to an antitrust wage theft suit, perhaps others who have suffered wage theft at the hands of a secret cabal of CEOs will have a better chance of clawing some of those stolen wages back. Perhaps also tech workers and others who assumed "this can't happen to me" will be more skeptical in their grasp of corporate power in relation to individual employee power, regardless of whatever New Economy cant their charismatic CEOs and corporate communications directors — and tech media boosters — tell them.

Power is power; it has its own logic, an exponentially alien logic the further one individual separates from the power of billionaires and massive corporations.  The frightening logic of a company with hundreds of billions of dollars in cash on hand, and board members worth billions meeting in secret pursuing their own unique interests, is something that few if any of us on the outside can grasp.

The lawsuit may be settled, but the issue of wage theft and Big Tech power in politics, in media, and in relation to its employees is very much alive. And the first place all eyes should now focus on is the still ongoing federal and state antitrust suit against eBay over its secret wage theft agreements. The eBay case is very similar to the one just settled, taking place in roughly the same timeframe and involving some of the very same actors as in the big Silicon Valley class action that just settled. Like Apple, Google and Intel, eBay is a Silicon Valley behemoth in its own right, spawning its own billionaire oligarchs (Pierre Omidyar, Jeff Skoll, Meg Whitman), whose private interests are so at odds with the touchy-feely "community" cant eBay beams to the public. For example, the list of "eBay Community Values" includes:

* We believe that an honest, open environment brings out the best in people.

  • We recognise and respect everyone as an individual.
  • We encourage you to treat others the way you want to be treated. Indeed. I reported in previous articles in the Techtopus series, the US Department of Justice antitrust suit against eBay arose from the same DOJ investigation into Apple, Google et al. California’s Attorney General Kamala Harris is also pursuing an antitrust suit against eBay over the same wage-fixing scheme.

Before the DOJ antitrust division launched this case against eBay in 2012, there was plenty of evidence of eBay’s collusion in the Techtopus wage theft cartel. Confidential Google documents name eBay and its subsidiary PayPal as parties to the same illegal non-solicitation agreements that the DOJ and the class action lawsuit went after Google for. Private emails between Google CEO Eric Schmidt and his executives, revealed during discovery in the class action, show Meg Whitman and eBay muscling their way into the secret non-solicitation agreements at an early stage, in order to stifle eBay’s rising labor costs.

As far as the court dockets reveal, eBay’s role in the wage theft cartel began September 7, 2005, when Schmidt relayed to his executive team a “rough call from a good friend” — eBay CEO Mega Whitman — who called to complain that Google’s recruiting practices were jacking up eBay’s labor costs. As Schmidt explained to Google’s Executive Management Group, the company’s Politburo:

“Meg called to talk about our hiring practices...Google is the talk of the valley because we are driving salaries up across the board.”

“We need to get this fixed.” Schmidt’s first response was to fire a Google recruiter “immediately” for making the mistake of upsetting Meg. As we’ve seen throughout this story, summary execution of one’s own company recruiters was the usual first-response to appease the Silicon Valley gods whenever time one of these gods complained.

A month after Whitman’s call to Schmidt, Google’s VP for Human Resources sent Eric Schmidt a draft of Google’s illegal “Do Not Call” list, including both eBay and PayPal on the confidential document. Schmidt approved:

“This looks very good Eric.”
And then, in one of the most damning pieces of evidence demonstrating that the conspirators in the wage-theft cartel were fully aware that their secret non-solicitation agreements were illegal, Schmidt advised his Google HR executive not to leave a paper trail:
“I would prefer that [Google sales executive] Omid [Kordestani] do it verbally [i.e. share ‘with Ebay/PayPal the rules as they pertain to them’] since I don’t want to create a paper trail over which we can be sued later?”
To which the Google HR executive agreed:
“makes sense to do orally. i agree.”
To give a sense of how much damaging evidence there is out there against eBay, the DOJ and California antitrust suits don’t even name Google in their suit — not yet, anyway. Instead, both federal and state antitrust suits name Intuit as eBay’s co-defendant. And here too, the evidence presented thus far is damning.

Intuit, you’ll recall, was one of the seven defendants in the recently-settled Big Tech wage-theft suit. Intuit settled earlier, along with LucasFilm and Pixar.

As with the other agreements, Intuit and eBay forged their wage-theft pact through the incestuous interlocking board directorships: Scott Cook, founder of Intuit and chairman of Intuit’s executive board committee, also sits on eBay’s board of directors. Cook and Whitman, both billionaires, shared a common language and interests, much as billionaire Eric Schmidt shared a common language and sympathies with Whitman over his own employees’ fates, and over the law that the rest of us have to follow. (Intuit's chairman at the time, Bill Campbell, also served on Apple's board of directors; as "special adviser" to Google's executives; and as personal "coach" to both Steve Jobs and Eric Schmidt. Campbell played a central role in helping to arrange and maintain the illegal wage-theft cartel, according to court dockets.)

According to the DOJ complaint, eBay’s recruiters were instructed that:

“Meg [Whitman] and Scott Cook entered into an agreement (handshake style, not written) that eBay would not hire from Intuit, period.”
When that agreement was violated—as when Whitman emailed to Cook an Intuit recruitment flyer sent to one of her eBay employees, with a message to Cook asking him to “remind your folks not to send this stuff to eBay people,” Cook immediately apologized:
“#@!%$#^&!!! Meg my apologies I’ll find out how this slip up occured again...”
The cute, chummy language between the billionaires Whitman and Cook, their flippant attitude towards their employees whom they’re busy ripping off (like Steve Jobs’ “smiley” over learning that Google fired a recruiter on his behalf) — it’s as though they’ve absorbed without reflection or malice a sense that the world is divided between three-dimensional billionaires like themselves, and human capital; between flesh-and-blood protagonists, and pixelated extras, labor expenses on the company spreadsheets.

Last year, Eric Schmidt in his deposition pretty much made this exact point when explaining to the Lieff Cabraser attorney why he ordered Google’s top executives to protect Meg Whitman’s needs over his own employees. Schmidt explained:

“I have socialized with Meg and her husband. After we went public, Meg invited me over for a chat to advise me how to become a better public company CEO. Meg has been very gracious and very helpful to me for many years. I'm a very big supporter of Meg. So if Meg calls me and she has got a problem, I'm going to pay attention.”
Meg's problem was eBay's labor costs. The same problem that inspired Meg to tap her fellow eBay board director Scott Cook of Intuit to do something about it.

According to the government filings, the wage-theft conspiracy between eBay and Intuit began in November 2005, just a month after Eric Schmidt placed eBay on Google’s secret “Do Not Call” list. That month, eBay COO Maynard Webb emailed Intuit/eBay board member Scott Cook to ask for his “advice on a specific hiring situation and then see if we could establish some guidelines on an ongoing basis.” Webb proposed a “structure” under which eBay would “not actively recruit from Intuit,” but that eBay could hire Intuit employees who contacted eBay on their own, so long as eBay notified Intuit if it was making offers on senior executives first.

Scott Cook rejected Webb’s proposal — but only because it didn’t go far enough. To effectively suppress wages, you needed to ban all hiring between companies, period. As California Attorney General Kamala Harris’ complaint describes it,

“Mr. Cook rejected this proposal...saying that ‘we don’t recruit from board companies, period’ and ‘[w]e’re passionate on this.’ Mr. Cook committed that Intuit would not make an offer to anyone from eBay without first notifying eBay, and said ‘[w]e would ask the same.’”
A month later, in December 2005, Meg Whitman and Intuit’s Cook “discussed the competition for two employees with an eye toward eliminating that competition altogether.”

By August 2006, the agreement between eBay and Intuit to restrict hiring each other’s employees “was put into effect,” and by April 2007, “eBay’s commitment metastasized into a no-hire agreement.”

The eBay-Intuit antitrust suit is still in its early stages, and so far lacks the detailed evidence made public in the Techtopus case: No depositions yet, very little discovery disclosed. That’s because unlike the seven Big Tech defendants in the case that just settled, eBay is still fighting the DOJ and California suits at the earliest stages. When the DOJ first announced its suit against Apple, Google, Intel et al in late 2010, a settlement was reached almost immediately. The DOJ settlement became the basis for the civil class action lawsuit filed in 2011, and settled last week. Most of what we learned in the wage-theft suit about Steve Jobs, Eric Schmidt, Sergey Brin and the rest was revealed in the discovery process of that class action lawsuit. Judging by this standard, eBay looks like it is pursuing a strategy of stopping the DOJ and state of California suits before they can be used as the basis for a subsequent civil suit.

But with all that we already know, eBay is going to have a hard time playing dumb and convincing a judge or a jury that their secret agreements with Intuit to ban cold-calling had no bottom-line impact on their employees. That’s because eBay’s Senior Vice President for Human Resources, Beth Axelrod, had already published a book, “The War for Talent,” laying out the case for cold-calling as the most important recruitment method in the tech industry. The DOJ antitrust complaint quotes from eBay’s VP for Human Resources own writings:

“The recruiting game is changing for yet another reason: It’s no longer sufficient to target your efforts to people looking for a job; you have to reach people who aren’t looking.”

“...structural forces fueling the war for talent” have resulted in power “shift[ing] from the corporation to the individual,” giving “talented individuals . . . the negotiating leverage to ratchet up their expectation for their careers.” So ebay’s Axelrod is already on record preaching the wonders of cold-calling to her colleagues in the executive recruitment world — and to employees, whom she argues benefit most from the increasing reliance in the New Economy on cold-calling as the best means to recruit talent.

And yet according to the DOJ and California AG complaints, Axelrod played a key role in suppressing cold-call recruiting, actively supervising eBay’s secret non-solicitation agreements with Intuit. In her book, Axelrod insisted that cold-calling not only is desirable for companies, but that it also empowers individual talent in negotiating their employment terms with corporations. And yet behind the scenes, according to the DOJ antitrust division’s complaints, Axelrod helped to strip eBay’s and Intuit’s employees of that very same power and leverage gained through cold-call recruiting, at a time that her boss, Meg Whitman, was complaining to Google that her employees' salaries were rising too quickly.

Of course, Beth Axelrod was not the instigator of the non-solicitation agreements that she helped to enforce — only the demigods of the tech world, the billionaire board directors and CEOs have that prerogative. But her expertise on cold-calling does make it that much harder for eBay to play dumb about the wage-suppressing effects of secret CEO-level non-solicitation agreements of the sort eBay was party to.

As the DOJ antitrust complaint sardonically charges:

“Instead of working harder to acquire this critical and scarce talent, eBay and Intuit called a truce in the ‘war for talent’ to protect their own interests at the expense of their employees.”
The evidence of Axelrod’s role in the eBay-Intuit wage-suppression conspiracy is laid out clearly in the complaints. In 2007, when the eBay-Intuit wage-suppression agreement was fully functional, Axelrod instructed an eBay human resources manager that under no circumstances could they recruit Intuit employees — even if that Intuit employee was “dying” to work for eBay and had contacted eBay on their own.

As Axelrod told two eBay staffers in 2007:

“We have an explicit hands of[f] that we cannot violate with any Intuit employee. There is no flexibility on this.”
Shortly afterwards, Axelrod emailed her boss Meg Whitman to let her know that she was enforcing the deal cut between billionaires Whitman and Cook:
“I keep getting inquiries from our folks to recruit from Intuit and I am firmly holding the line. No exceptions even if the candidate proactively contacts us.”
The DOJ didn’t file its case against eBay until November 2012, and was soon afterwards joined by the state of California’s attorney general. The California complaints hint strongly that eBay did not modify its behavior after the DOJ busted open the Silicon Valley wage theft cartel in 2010, and this may be why the DOJ went after eBay later in 2012.

The eBay wage-theft antitrust case takes on new importance now that the Big Tech wage theft cartel lawsuit has settled. What will change, politically and legally, in the post-class action settlement era? The success of the Big Tech wage-theft antitrust class action lawsuit also raises the question—will eBay be next?

For our full Techtopus coverage, see here.

[Illustration by Brad Jonas for Pando]