Some surprised by DOJ tech hiring investigation

A U.S. Department of Justice investigation of technology vendors' hiring practices has prompted surprise from some antitrust and employment law experts, with one saying the DOJ has other antitrust issues to pursue.

Early news reports of the investigation didn't offer many details, so it's difficult to know what kind of case the DOJ has, said Ed Black, president and CEO of the Computer & Communications Industry Association (CCIA), a trade group in favor of stronger antitrust enforcement. On Wednesday, The Washington Post reported that the DOJ has launched an antitrust investigation of Google, Yahoo, Apple and other tech companies for allegedly agreeing not to hire each others' employees.

Tech hiring practices doesn't seem to be an "obvious case" for the DOJ, Black said. "Maybe there's an issue there, and maybe there's not," he added.

Black named three other antitrust investigations he'd like to see the DOJ launch: Intel's behavior in the processor market, IBM's market share in the mainframe computer market and the level of competition among broadband providers. CCIA isn't opposed to a hiring investigation, "but there's some very big, low-hanging fruit that I'd like to see them take care of as well," Black said.

Representatives of Google and Yahoo, as well as the DOJ, declined to comment on the investigation.

Tom Ajamie, managing partner of the Ajamie law firm in Houston, said 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 said.

Employees jumping from one tech vendor to another is common, Ajamie said. "I'd be surprised to think that there's some formal agreement not to hire each other's employees," he said. "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 noted. 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 said.

The DOJ investigation "came out of left field," Ajamie added.

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

"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 said. "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."

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


Copyright © 2009 IDG Communications, Inc.

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