It would be wrong for him to turn down job applications from one of your two employees [on the grounds that they work for you, not based on their not matching his needs] and then inform you that they applied, allowing you to victimise them while torpedoing their own chances at the other company.
what happened here is much bigger than a deal that goes between two friends who run a startup. it by all means seems like collusion by the overlords to ensure the minions are kept where they are to 'serve' them ( a minor exaggeration). Parts of this story is revolting, like firing and making an example of the recruiter who poached a google employee.This sickens me and is surprising , probably cause, I am not cynical enough..
In summary, these practices are extremely common, and Ben Horowitz recommends them. However, they are technically illegal in California.
Yes.