How Facebook avoided costly suits over hiring from rivals

By Dan Levine

SAN FRANCISCO (Reuters) - Facebook Inc has emerged as one of the biggest Silicon Valley players not to have agreed with other technology companies to avoid poaching each other's employees, saving the social-networking giant years of costly litigation.

According to court filings unsealed last week, Sheryl Sandberg had just been installed as Facebook's chief operating officer when one of her former colleagues from Google emailed her. Facebook's aggressive recruitment of Google employees had heightened tensions between the two companies to "Defcon 2," top Google executive Jonathan Rosenberg told Sandberg in August 2008.

"Fix this problem. Propose that you will substantially lower the rate at which you hire people from us," Rosenberg told Sandberg in an email. "Then make sure that happens."

But Sandberg deflected Rosenberg's entreaties, saying she thought Google only had limited no-hire agreements with companies with whom it shared board members, not blanket no-hire policies with other companies.

That response has made Facebook a witness, rather than a defendant, in a massive antitrust lawsuit brought by tech workers against the largest players in Silicon Valley.

Plaintiffs say companies like Apple Inc , Google Inc and Intel Corp drove down wages by agreeing to avoid soliciting employees from each other.

"I declined at that time to limit Facebook's recruitment or hiring of Google employees," Sandberg wrote in a sworn declaration submitted by the plaintiffs in court.

Representatives for Facebook and Google could not immediately be reached for comment.

In past statements, Google said it has always "actively and aggressively" recruited top talent.

Harry First, a professor at New York University School of Law who specializes in antitrust, said the exchange between Sandberg and Rosenberg at a minimum confirms how board relationships between the tech companies initially drove the agreements not to solicit from each other, which then expanded from there.

"That does not look good to the jury," First said.

However, the defendants can also argue that the refusal of companies like Facebook to limit hiring shows that any alleged conspiracy couldn't have impacted the broader job market and wages in general.

In 2010, Google, Apple, Adobe Systems Inc, Intel and others agreed to a settlement of a U.S. Justice Department probe that barred them from agreeing not to poach each other's employees.

The companies have since been fighting the civil antitrust lawsuit. They argue the plaintiffs cannot successfully prove an overarching conspiracy to impact wages.

The civil case in U.S. District Court, Northern District of California is In Re: High-Tech Employee Antitrust Litigation, 11-cv-2509.

(Editing by Bernadette Baum)