Easy the company A 'lays off' 20 employees and company B 'agrees to hire' 20 employees at the same salary. You present it to the employee as a yes/no choice, you want to work in the new company or not at all. It often saves the laying off company from paying any form of severance and is only modestly disruptive on the lives of the employees. (although at the hiring company you have to manage these people who come in really angry/confused.)

Well, they're essentially buying the employees from the company, which is different than normal hiring.

But why would you want/need to do that? I'm not an expert on labor law, but AFAIK the company doesn't have any legal ownership claim to the employees or their services; employment in the US is at-will (http://en.wikipedia.org/wiki/At-will_employment), so if Apple and a Color employee come to an agreement that the Color employee will go to Apple, Color doesn't have much say in the matter. There's no Reserve Clause (http://en.wikipedia.org/wiki/Reserve_clause) in tech.

Maybe the employees signed a non-compete agreement, and what Apple is buying from Color is a waiver on those agreements? Non-competes don't have a great record of standing up in court, but OTOH $2 million split 20 ways isn't that much money per person either; might be considered cheaper than the risk of a legal challenge. I dunno.

The reporting on this story could definitely do with some additional detail, but given how rapidly the story's been changing we may just have to wait an hour or two for that detail to be uncovered :D

The acquihire is traditionally done by converting unvested options from one company to the next, quite often with a 15-20% retention bonus for employees that stick around for 12 months.

The employees, of course, are free to walk away from those unvested options and retention bonus, should they chose to do so.

Employee non-compete agreements aren't enforceable in California.

In America everything is for sale, except people, see 13th Amendment.