Last month, Judge Lucy Koh of the Northern District of California rejected a $324 million deal that would have settled a suit brought against Adobe, Apple, Google, and Intel by 64,000 of their former employees. The plaintiffs claim that the companies conspired not to recruit each other’s employees. Actually, it’s not just a claim, since the Department of Justice busted all of those companies back in 2010; the current private lawsuit was brought seeking damages for employees whose employment opportunities were illegally constrained by the cartel. The proposed settlement would have paid an average of $4,000 to the members of the plaintiff class, roughly one-thirtieth the damages they might have won from a jury — but then again they might have lost at trial. Earlier this month, the companies appealed Judge Koh’s rejection of the settlement.
Liquidity moves markets!Follow the money. Find the profits!
In the Northeast, where the business news is dominated by Wall Street and the lawsuits are brought by federal regulators against banks, we cheer when a judge rejects a collusive settlement. In 2011, Judge Jed Rakoff of the Southern District of New York became a folk hero among reformers by rejecting a neither-admit-nor-deny settlement in which the Securities and Exchange Commission sold Citigroup a $285 million indulgence absolving the bank of liability for allegedly fraudulent securities transactions. (Rakoff later reluctantly approved the deal after both parties appealed to the Court of Appeals for the Second Circuit.)
In Silicon Valley, it’s not so clear. For one thing, we tend to admire the defendants in this case — who are together responsible for many of the most valuable and popular innovations in personal computing technology of the current century. For another,
most people have a hard time seeing well-paid computer engineers as an abused class deserving of a large jury verdict.
To see our mixed opinions of the technology industry, we need look no further than Judge Koh’s courtroom. She is in charge of the serial Apple-Samsung patent litigation (score so far: Apple up about $1 billion), in which Apple is clearly the hometown hero; although the two companies battled to a stalemate in court in every other country, in San Jose the jury quickly and decisively ruled for Apple across the board. At the other end of the moral spectrum, Judge Koh is also overseeing a lawsuit alleging that Gmail’s automated processing of inbound emails (from non-Gmail users who never agreed to Google’s policies) constitutes wiretapping.
The secret agreements not to poach each other’s employees, by contrast, aren’t about whether Silicon Valley’s most famous companies are good or bad for the world. This case is about the fact that even Apple and Google are, at the end of the day, divided between labor and management. A decade of hero worship has made most casual observers think of Steve Jobs, Sergey Brin, and Larry Page as benevolent demigods — yet here they are, with Jobs celebrating getting a Google recruiter fired for violating his illegal side deal.
On paper, the executives colluding to suppress their employees’ wages are clearly the bad guys. Yet it is hard to find many commentators who see this case as another example of capital taking advantage of labor. As one economist said, “It would be a mistake to think of these plaintiffs as an oppressed set of victims.” Resentment of the technology industry and its relatively well-off workers is on the rise in the Bay Area, particularly in San Francisco. And it is certainly true that, in a time of stagnant real wages and general economic insecurity, highly skilled software engineers have never had it so good. The market for developers is about as tight as it was in the first Internet boom, but the difference is that now Google and Facebook have completely changed the baseline for what people expect from their employers — free gourmet meals, massages, wifi-equipped shuttle buses, and the like.
The financial prospects of a developer working in the Googleplex have little in common with those of a housekeeper working in a hotel a few miles away on El Camino. But perhaps just as significant is the difference in how people perceive their economic situation and class identity. Decades of free market rhetoric — remember the “everyone is a free agent” rhetoric of boom-era magazines like Fast Company? — have helped normalize the belief that everyone is on her own and the only things that matter are your individual skills and marketability.
Software engineers don’t unionize; they call recruiters.
That’s why it’s so hard to see the highly-paid workers of Silicon Valley as part of the proletariat. But today, especially in the Age of Piketty, this case should remind us that the long-term structural divide is between labor and capital. (As Felix wrote a few months back, even the founders of technology startups count as labor — at least until a few of them strike it rich.)
In European countries with a real labor movement, that movement has historically been led not by the poorest, most downtrodden workers, but by the most skilled, well-paid workers. That’s no accident: valuable job skills gave steel and automobile workers the power to organize the workplace and become a political force. These “elite” unions have often resisted attempts by workers further down the totem pole to make similar gains. But on the whole, if you think there is a general struggle between labor and capital (represented by management) for the fruits of increasing productivity — a struggle that management is overwhelmingly winning—it makes sense that the highest-skilled, most highly-paid workers are the best candidates to represent the interests of labor.
Instead, in a country with an atrophied sense of class consciousness, a lawsuit over whether employers can suppress the wages of their employees parses as yet another squabble among the privileged. That’s not a reflection on the plaintiffs or their lawyers, who never volunteered to stand up for a cause. It’s a reflection on how we think — or don’t think — about class in contemporary America.