According to sources speaking with TechCrunch, Apple and Google agreed not to "cold hire" each other's employees. The agreement was apparently in place during Eric Schmidt's recent tenure on the Apple board of directors but may or may not still be enforced by the two companies. The report also states that the agreement was not an official written policy but was followed by both companies.
The agreement specifically prevented Apple or Google from directly recruiting employees from the opposing company. A worker was however free to apply themselves. This agreement was apparently in place because of loose California non-compete enforcement. The New York Times spoke with an industry lawyer who believes as long as the agreement was not in writing it is not illegal.
This New York Times also reported several months ago that the Justice Department was looking into the hiring practices of many Silicon Valley tech businesses for fear of being anti-competitive. It is interesting to note however that the industry has still seen several high profile employees poached to different businesses. Several Apple employees were pilfered by Palm for work on the Pre, and several argue that this is one of the reasons the Pre and iTunes sync so well together. The Justice Department has not yet released any information on this ongoing investigation and neither Apple nor Google was available for comment to TechCrunch or the New York Times.