"By not letting employees move on to other companies and better their lives, it will have negative effect in hiring talented employees."
You are wrong and extremely niaeve about how key employees are limited by contract agreement if they choose to leave their job for a similar one with another company. That is the way it is with virtually every company; Otherwise less developed companies would steal company secrets from one an other by simply paying an individual more money. I'm surprised that Google would even try such a thing. What it shows is tha Google is a "shit" company.