“Do Not Hire Agreements” among Google, Intel, Apple and Other Tech Firms Violates Chinese Laws?

u=192487636,1824686138&fm=23&gp=0_副本(By You Yunting) As reported, the CEOs of tech giants Apple, Intel, and Google might be forced to go to court to account for mutual unwritten agreements about not soliciting each other’s workers for employment. These cases started due to the dissatisfaction of relevant employees, who believed that such “do not hire agreements” damaged that legal rights and interests. The news has also revealed emails from former Apple CEO, Steve Jobs, threatening Palm and Google and demanding that they stop using headhunters to obtain the email addresses of Apple employees. This news also raised the concerns within the industry.

In fact, the lawsuit mentioned in the news actually began two years ago. According to reports at that time, a US based law firm representing former Lucasfilm employee, Siddharth Hariharan, filed group litigation to the California Circuit Court accusing Apple, Google, Intel, Adobe, Intuit, Pixar, and Lucasfilm of jointly conspiring to control increases to the salaries of their workers. As claimed in the lawsuit, the plaintiffs executed a confidential agreement, by which they would not actively poach each others’ employees. Additionally, they promised to notify the original hirer when offering a post to one of its staff members. Also the plaintiffs said that the companies involved also agreed to provide the employee the same payment as paid by the previous employer.

The case involves employment, antitrust, and other legal areas. This case occurred in America, and is similar to the illegality and trampling of competitive principles by China’s monopolistic public service companies. Furthermore, the conspiracy by the American companies in this case appeared to be fairly light. Despite these facts, however, with societal development, the author firmly holds that all industries in China will ultimately promote free competition, with laws and regulations opposing monopolies using the principles of “open, fair and just.” For this reason, the case is of referential value, and the following is our discussion on it.

Question 1: What’s wrong with the reported agreement?

The core value of market competition is “open, fair and just.” The main problem of the agreement privately signed among the tech giants is hindering competition. Hiring competitors’ employees is a common market competition strategy. So long as it does not violate laws or infringe the trade secret or IP rights, it should be encouraged because it promotes competition among companies. The beneficial elements of competition are promotion of social development and progress, quickening the pace of technological improvement, lowering product costs, and increasing the salaries of competent employees. Finally, consumers and employees are also about to benefit from the market competition.

If leading giants in the market enter into an agreement to not take employees from competitors and provide employees changing jobs with the same pay they already enjoyed, this is essentially putting a limit on competition. This kind of restrictive behavior might lead to employees being unable to earn fair pay in their negotiations with employers, which would harm their legal rights and interests. At the same time, with of the damage done to the competitive environment, the company itself would also be greatly harmed as this very well could impact its research and development, or slow the pace of technological improvement. Furthermore, this could also jeopardize the consumers’ benefits. The author believes that if the plaintiff’s claims in this case are shown to be true, then the agreement may be taken as a cartel over salaries, which is aimed at controlling the price of the labor market.

Question 2: Are there any relevant provisions in Chinese law limiting salary cartels?

In reality, when the author examines clients’ contracts, he sometimes sees clauses indicating no employment of other companies’ staff. Yet, this kind of clause is different in essence from that made among the American tech giants. First, Chinese companies make these clauses to protect their IPR or trade secrets, but the agreement made by the American tech firms was for the purpose of decreasing labor costs. Second, Chinese companies typically use such a clause when making bilateral agreements with their partners, and these agreements normally not involve salary . The American case, however, concerned a multilateral contract between multiple important companies within the same industry.

Of course, cases similar to the one in America have also been seen in China. For example, Tencent established Gaopeng.com jointly with Groupon, and afterwards poached other companies’ talent with offers of high salaries. Facing this threat, high ranked daily-deal websites signed an agreement to combat the cold-calls from Gaopeng.com. They also promised not to hire those hopping to Gaopeng.com. The essence of this case was also to decrease payment within the industry.

Nevertheless, by the author’s legal knowledge, if a conspiratorial agreement case like the one in America were to occur in China, although there are laws and regulations on this issue, this kind of case would be difficult because it involves company salary cartel issues. This is a weak point at the intersection of the law, so implementing or solving the problem might be difficult.

First, labor laws have no means to handle this kind of case. China’s Labor Law and Labor Contract Law mainly focus on the employee-employer relationship and do not have provisions on the issue of conspiracy to lower salary. Second, the Anti-unfair Competition Law mainly focuses on companies that use unfair tactics to damage other competitors’ interests or disturb the market order to the ultimate detriment of the interests of consumers. Additionally, it has no regulation against conspiracy to harm employees’ interests.

Therefore, the author believes that the only law that can handle this kind of issue is the Antitrust Law. Article 13 of this law forbids competitive entities from concluding agreements or decisions excluding or restricting competition or other monopolistic agreements. Detailed application, however, may only cover the situations regulated in Paragraph 6 of the Article:

“Other monopolistic agreements confirmed as such by the authority for enforcement of the Anti-monopoly Law under the State Council.”

Therefore, because this kind of case involves a Cartel, it is very likely to be judged illegal.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary


“Do Not Hire Agreements” among Google, Intel, Apple and Other Tech Firms Violates Chinese Laws? — 1 Comment

  1. I think this is clearly illegal behavior. Companies agree not to hire employees from their competitors, effectively limiting their freedom to collect the best possible employees and skills for creating more competitive products. As a result, company resources are more limited than without this agreement. If you try do limit resources via e.g. excluding suppliers based on similar kind of agreement, this is instantly illegal activity. Why employee supply would be any different?

Leave a Reply

Your email address will not be published. Required fields are marked *