11 ms·

ADP Sues Zenefits for Defamation

262 points by cgoodmac 11y ago

jusben1369 11y ago
I feel like Zenefits is becoming a case study in everything you don't do when you enter an industry. We'll be switching away because I'm worried who else they won't play nice with in the future. Uber and AirBNB have scared the heck out of huge incumbent industries and cities/governments and had scraps to be sure. But they don't have the consistent missteps as Zenefits. They know when to fight and when to take a lump or two, stay quiet, and bide their time.
- bttf 11y ago
  What are some of the other missteps Zenefits has made in the past (for the uninformed)?
  - rubiquity 11y ago
    I remember the Zenefits founder rescinded a job offer to someone that asked on Quora whether they should accept the offer from Zenefits or some other company.
    - wcummings 11y ago
      I guess that answered his question, huh?
    - josefresco 11y ago
      To be fair, the applicant "slammed" Zenefits by saying that having their name on his resume would be less valuable than others when applying FOR A NEW JOB (my emphasis). If an employee applied to work for my business and one of their "concerns" was how our company would appear on their resume (in contrast to another), I would similarly discard their application.
      - dworin 11y ago
        I disagree. I'm not promising someone a job for life and they're not promising to work for me forever. Part of the value I offer them as an employee is what I can do for their career going forward. Sometimes that's a prestigious name, other times it's by giving them better opportunities to grow. It's one thing to say "I want people who want to work here," it's another to discount people who might want one day want to work someplace else.
        josefresco 11y ago
        Of course nothing lasts forever, however it's somewhat a bad sign to a see an employee actively planning their next move, before they've even accepted an offer. It shows the applicant may be more concerned about career path than they are in doing an excellent job for their current employer. It might be an outdated or romantic view of work, but the ideal situation (employes and ownership working towards a shared goal) is still worth striving for.
      - CPLX 11y ago
        Fine, then don't hire him. The mistake wasn't the hiring decision, clearly it was getting into an argument with a prospective employee in a public internet posting. That shows a serious lack of judgement and poor leadership. And moreover this isn't a photo sharing business he's running, when you're asking people to trust you with their income and their medical coverage you are going to be held to a higher standard.
        josefresco 11y ago
        What if the argument took place privately? Is the mistake the venue, the participation or the action/argument itself? The applicant invited a public debate - should the CEO just avoid the debate and let it play out?
        CPLX 11y ago
        > should the CEO just avoid the debate and let it play out? Yes. Getting into acrimonious debate with a prospective junior hire about their future career prospects is almost the definition of a misplaced sense of priority.
- aaggarwal 11y ago
  I agree. Zenefits had been in the news for last few months, but all for the wrong reasons, first the Quora fiasco and now this.
- protomyth 11y ago
  Also Über and AirBNB are consumer companies. Zenefits has to appeal to enterprise customers. Beyond that we're talking payroll. This is the most conservative part of any business. Lawsuits do not make for good advertising.
  - jusben1369 11y ago
    Great point.
  - notahacker 11y ago
    Plus use of Uber and AirBnB is transactional (at worst, I might have to dispute a downpayment or arrange alternative accommodation at short notice if my AirBnB hotelier has trouble) I'm far more locked into the consequences of the bad decision if I go with the sketchy SaaS provider and employee benefits broker
    - protomyth 11y ago
      Your right, there is no fun on this earth like a failed accounting system change. Ask anyone who has participated in a SAP deployment that has gone wrong.
- sjm-lbm 11y ago
  I'm honestly wondering if half the point of this lawsuit is just to keep Zenefits' professionalism and Parker Conrad's mouth in the news as much as possible. ADP might lose this lawsuit (I have no idea), but Zenefits is already looking much less impressive.
- efuquen 11y ago
  > Uber and AirBNB have scared the heck out of huge incumbent industries and cities/governments and had scraps to be sure. But they don't have the consistent missteps as Zenefits. I feel like AirBnB, and even more so Uber, have had plenty of very public missteps. Both Uber's CEO and execs have come under fire for some dumb things they've said: http://pando.com/2014/02/27/we-call-that-boob-er-the-four-most-awful-things-travis-kalanick-said-in-his-gq-profile/ http://pando.com/2014/02/27/we-call-that-boob-er-the-four-mo... http://www.buzzfeed.com/bensmith/uber-executive-suggests-digging-up-dirt-on-journalists#.pceQPDedl http://www.buzzfeed.com/bensmith/uber-executive-suggests-dig... That clearly doesn't mean you can't be successful, but I wouldn't say Zenefits has done or said anything worse than these other companies have.
  - dylanjermiah 11y ago
    On the topic of that first link, the 'boob-er' story was most likely fabricated. There is no evidence of an interview nor a transcript.
- pbreit 11y ago
  It's a shame that it does seem like jerky behavior is at least correlative, if not causative, to success.
kirinan 11y ago
This won't end well for Zenefits. Its not quite a deathknell for them, but there is zero case where Zenefits doesn't settle outside of court or loses the case. They will need to spend time/resources to raise another round and fight the chance that ADP doesn't build a competitor them in the mean time. This is the kind of momentum shifter that kills startups.
- DannyBee 11y ago
  ADP will lose this lawsuit very quickly
  - ceejayoz 11y ago
    ADP's legal department is likely larger than Zenefits itself, and well funded. They can probably drag it out for quite a while.
    - DannyBee 11y ago
      Maybe? This is an oft-repeated claim, but my experience tells me differently. Contrary to popular tv shows, there is only so much that can happen. Lawsuits drag on whether someone is trying or not :) Barring some outliers, the difference between lawsuits that are dragged out and ones that aren't is not a factor of 10, it's probably a factor of 1.2. State court is kind of a crapshoot, for sure. But you are super-unlikely to get away with this stuff in federal court (which is where ADP filed). Most federal judges get tired of this stuff very quickly, and start sanctioning.
      - CPLX 11y ago
        > Barring some outliers, the difference between lawsuits that are dragged out and ones that aren't is not a factor of 10, it's probably a factor of 1.2. That's crazy talk. You can double the length of a lawsuit in one simple stroke just by having your attorney say "Sorry that week is bad for me can we do [date]" every time there's a continuance or adjournment. You can set return dates for any motions you initiate to the last date permitted, you can meet every filing deadline in the last hour, etc. The legal system has many built-in safeguards and protections for all parties but guaranteeing timeliness just isn't one of them.
tdees40 11y ago
The descent into lawsuits is pretty sad. When customers hate your product (i.e. the ADP front-end) so much that an entire company forms around making something less terrible, you really have to look at yourself in the mirror. I continue to be amazed by the horribleness of benefits web front-ends. I recently did a simple task in our Hewitt system, and it required five pop-up windows. It's just so, so terrible.
- CPLX 11y ago
  It seems to me that being in business for 65+ years and being the undisputed market leader in an industry and then having an incredibly well funded software company with hundreds of employees siphon off only 600 of your customers isn't necessarily a moment for self reflection. I've used ADP myself as a startup founder. Yeah the interface is annoying. So is Craigslist, whatever. That line of argument isn't necessarily dispositive, both of them have been reasonably adept at solving the problem I engaged with them to solve.
  - lukeschlather 11y ago
    Has anyone at ADP been there 65 years? It looks to me like the current CEO started about 15 years ago. I would say if you have as much power as ADP does, everything that happens is a moment for self-reflection.
  - free2rhyme214 11y ago
    I agree it's not a moment of self reflection but that doesn't mean what they're doing is right or Zenefits wouldn't exist. I use ADP and I think their front end is horrible. It works but it's enough of a pain point for others to switch.
- Someone1234 11y ago
  > When customers hate your product (i.e. the ADP front-end) so much that an entire company forms around making something less terrible, you really have to look at yourself in the mirror. Is this really accurate? Doesn't Zenefits exist to merge several services, only some of which ADP provide? And while many people have said that ADP's front end is bad, it seems like you've taken those claims a step further by claiming that people only pay Zenefits to avoid having to use it (rather than cross-platform integration which is their real purpose).
HongQiGong 11y ago
I still cannot believe Zenefits' "integration" with ADP was actually screen-scraping. No wonder ADP's servers were overloaded.
rubiquity 11y ago
If Zenefits isn't happy that they can't access ADP's payroll info on behalf of their customers then why doesn't Zenefits spin off a payroll service and attack ADP from that angle? Maybe Zenefits could name it ZenPayroll. Oh wait...
- realityking 11y ago
  These are two different companies, they just have the first tree letters of their names in common. Just like ZenDesk.
  - dopamean 11y ago
    It was a joke dude.
    - realityking 11y ago
      That went totally over my head, my bad. That said, I'm not a native speaker and humor is sometimes difficult.
      - dopamean 11y ago
        Understandable. Sarcasm is hard over the web and even more so if you're not a native speaker. I should be more sensitive to that.
    - ne0n 11y ago
      Well, yes, it was a joke, but many people are probably confused about that. It's worth noting.
boomzilla 11y ago
Is this the same CEO who said in Quora to the effect of: if you have to ask how it's like to work here, you won't fit in here?
- protomyth 11y ago
  Are you referring to this http://www.quora.com/What-is-the-best-way-to-start-my-career-Uber-or-Zenefits/answer/Parker-Conrad http://www.quora.com/What-is-the-best-way-to-start-my-career... answer by Benefit's CEO? I'm not sure of the connection between that and this story. I guess you could be going for a reckless attitude in one area might translate to lawsuits in another area?
- smileysteve 11y ago
  > if you have to ask how it's like to work here, you won't fit in here? The response was more, if you know that you'll find the work at Uber or another company more exciting, then we wouldn't want you to work here. It was really a matter of phrasing/tact on the applicant's part and hubris on this CEOs part - you want people to be excited about working for you, but you also want the humility to be able to see how it fits in their career path.
- runamok 11y ago
  Yes this is the same CEO but your summary isn't quite right. He was trying to figure out a pros and cons of Uber vs. Zenefits and for instance he asked: "My biggest problem with Zenefits is that it isn't a buzzword like Uber. Most people won't know what Zenefits is (or so I think). I think that this isn't as exciting a brand name to have on your resume when applying to the likes of Google." Full question: http://www.quora.com/What-is-the-best-way-to-start-my-career-Uber-or-Zenefits http://www.quora.com/What-is-the-best-way-to-start-my-career...
wyattjoh 11y ago
> Zenefits overloaded ADP’s computer systems with a flood of digital traffic Lol
DannyBee 11y ago
Reading the complaint, ADP is not likely come close to winning. The defamation they claimed happened is that Zenefits "alleged that ADP intentionally sought to cause harm to ADP’s clients solely to gain an unfair competitive advantage against Zenefits.” Even if you argue this is defamation per se (and not per quod), about a matter of private concern, they'd still have to prove "4. That [name of defendant] failed to use reasonable care to determine the truth or falsity of the statement(s). " (california jury instructions for this charge will be here: https://www.justia.com/trials-litigation/docs/caci/1700/1704.html https://www.justia.com/trials-litigation/docs/caci/1700/1704...) There is a near 0% chance they can prove a lack of reasonable care here. Plus, they open themselves up to discovery on any memos, etc they've written about this decision internally, which almost certainly show the statement is truth. Note the above is the best case. If it's determined to be a matter of public concern, or defamation per quod, ADP's chances go down.
- deleted 11y ago
  [deleted]
- peteretep 11y ago
  > ADP is not likely come close to winning Are they trying to win the case, or a longer game involving customer confidence?
  - DannyBee 11y ago
    Probably the latter, but this is a dumb way to do it :) As a customer, my takeaway would be "If ADP doesn't like what i tell people about it, it's going to actually sue me".
    - jusben1369 11y ago
      I like your posts here but think this one missed the mark. I think as ADP you want "Uncertainty startup Zenefits uncertainty sued Zenefits incumbent ADP uncertainty Zenefits" in the minds of every non startup CFO or VP of HR who was thinking there might be something worth investigating with Zenefits raising $500 mil at a huge valuation.
olafskyansian 11y ago
I have a lot of respect for what Zenefits has done to date in shaking up the insurance space, but you have to REALLY question what the heck is going on with Parker's leadership there. What is going on that the founder/CEO has enough time to chastise an engineer candidate on Quora and put out factually inaccurate posts on topics like healthcare reform (he had something out on LinkedIn a few weeks back) but doesn't have the foresight to build a "real" integration with a payroll vendor that has one available (and an established track record of integrating with competitors in many cases mind you). You read the glassdoor reviews of Zenefits and you get this picture where no one knows what they are doing. All symptomatic of a company in hyper-growth mode, I get that. The questions becomes, does Parker have the leadership chops to see this through?
- iamshs 11y ago
  First thing that came to my mind was; where I work, if employees do not get paid on time, company will have to deal with quite a lot of grief and substantial monetary loss due to the work arrangement company has. I am sure something like this exists in other jobs/industries/countries too. How come such a critical component was not taken care of? Also, I had to wean off from using the Mint app because I was concerned about violating my bank's TOS by giving login credentials to a third party, and if something happens in future my claim will be a bit weak. So are SMBs not violating ADP's TOS by providing them login info?
- deleted 11y ago
  [deleted]
- gravity13 11y ago
  I was curious what "chastise an engineer candidate on Quora" meant so I looked it up: http://qr.ae/7IErH1 http://qr.ae/7IErH1 Sounds like a perfectly reasonable answer to me. Especially after reading the question. It gives me a bad taste, I wouldn't want to work with that guy. He's the annoying guy at the table who is like "I work at x" and wants everybody to go "oooh," not "wtf is zenefits?" It reeks of the almost ubiquitous entitled tech engineer stench. If anything, this makes me appreciate the integrity of Conrad.
pgrote 11y ago
Is there a link to ADP's technical response?
- hatred 11y ago
  Were you referring to this ? : http://www.adp.com/zenefits/downloads/The-Facts-About-ADP-and-Zenefits.pdf http://www.adp.com/zenefits/downloads/The-Facts-About-ADP-an...
  - pgrote 11y ago
    Yes, thank you.
deleted 11y ago
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dataker 11y ago
Yes, it's terrible for Zenefits, but even worse for ADP. A defamation lawsuit tells a lot about how vulnerable a company is. Take down Zenefits and hundreds of others emerge.
jgalt212 11y ago
I don't necessarily stand with ADP, but I do stand with the vendors. Zenefits is just a thin wrapper around other companies real products and businesses. I suspect Zenefits true business plan is a trojan horse. Get between a business and its clients, replicate the wrapped business and whamo you put the existing vendor out of business and grab all their revenues. How else could Zenefits justify their sky high valuation other than for them to be a trojan horse?
- mark212 11y ago
  all of this kind of insurance is sold through brokers (i.e., a thin wrapper around other companies' real products). That's what Zenefits is competing with -- mom & pop independent insurance brokers, not benefit providers themselves. And entrenched incumbents like ADP who are slow moving and ossified.
  - jgalt212 11y ago
    fair enough, but I'm arguing that a simple insurance broker can't justify a $4.5B valuation. They have to go for a much bigger piece of the pie.
apalmer 11y ago
This is just a minor skirmish really, honestly this is just Zenefits being welcomed into the big leagues. Zenefits should be ware of biting the hand that feeds them at this point, they shouldnt be 'cowed' but you dont start a war with providers you are dependent on. Basically ADP wont 'win' this court case, it wont even stretch out too long. However, both companies will probably have to feed the lawyers 5 million for this... which is not a big deal for one, and is probably 10% of capital on hand for the other. Its more a statement than a lawsuit with an expectation of success.
- hatred 11y ago
  >> 10% of capital on hand for the other. Well , they just raised $ 500m, so looks like just 1% of the new capital raised ( or wasted , whatever way you put it )
eranation 11y ago
Hooli vs pied piper in real life...
twinspop 11y ago
ADP was taken offline today for 65 minutes with a massive DDOS. Coincidence?
- as27 11y ago
  How do you know?
josefresco 11y ago
Not sure if this link is referenced here but I found it interesting and relevant: http://blog.zenefits.com/adp-2/ http://blog.zenefits.com/adp-2/
thewhizkid 11y ago
Zenefits needs a head of PR. Or a new one if they already have one.
- shaaaaawn 11y ago
  Even better, they need a CFO
jonathanmarcus 11y ago
We're a very small company (10 FTEs), but we have been anything but impressed with Zenefits as a customer. We only use them for medical and dental insurance, but in reality, they provide very little, if any value. The Zenefits software is really nothing special, and in fact, the onboarding UI is pretty poor. Now that we have our insurance, Zenefits adds zero value to us. We deal directly with United and Zenefits collects a 10% commission on our monthly premiums. Its a genius business model, and little else. Zenefits doesn't have any intrinsic rights to ADP's system. Twitter killed off plenty of companies when it decided to shut down the 3rd party ecosystem. Facebook obviously maintains similar strategic control over it's API. How many case studies must there be for companies to understand that building on another company's platform always carries business and strategic risks?
- randall 11y ago
  Have you ever had an insurance broker before? They're like the same thing but without the easy software.
  - geori 11y ago
    Your local insurance salesperson probably has less bargaining power than Zenefits, so your rates with them could be higher.
    - imh 11y ago
      FWIW my experience has been the opposite. No idea why, but the local guys do a great job for me relative to zenefits.
    - chetanahuja 11y ago
      Nope. In our experience, Zenefits has no special deals and absurdly high pricing for health insurance for small companies. You're far better off going with a PEO (e.g. Trinet etc.)
    - babar 11y ago
      For small businesses, Zenefits and other brokers offer almost exactly the same rates, which are the list rates of the insurance companies. The negotiation only comes in to play with larger companies (currently 50+ employees, next year it will be 100+, I think). For us, Zenefits seemed slightly more expensive, but it is hard to tell since they didn't give us good comparison data based on employee ages and coverage. If you want to leverage the large company rates as a small company, you need to explore the PEO model, which Zenefits does not support, but ADP does (and several others).
deleted 11y ago
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babar 11y ago
I'm not really a big fan of ADP, but if Zenefits really did refuse to work with ADP to implement a real integration, I don't have much sympathy for Zenefits. They have enough funding they should be able to do things the right way now. I think Zenefits is trying to solve a real problem for small businesses, but we chose not to use them because the cost and the service level didn't make up for their nicer UI.
vladgur 11y ago
Reading over the ADP filing(obviously one-sided), it amazes me that a company like Zenefits would do something that would make any tech professional cringe: "Zenefits also asked the ADP client to take a screenshot of the temporary username/password screen for the account and email it to a Zenefits email. “ "ADP identified several potential concerns with Zenefits’ approach, including clients granting Zenefits admin user credentials to allow Zenefits access to the clients’ employee and company data in a manner that may not meet ADP’s security standards, and allowing Zenefits to make changes requiring a payroll admin level access. “ And this is ladies and gents why you should really worry when you base your business on scraping
chetanahuja 11y ago
Seeing comments in the recent Zenefits threads, it seems like we dodged a bullet when Zenefits bungling around with our onboarding process led us to use a different providers for our payroll/insurance services.
healthnetwork 11y ago
The health insurance and benefits industry needs innovation, badly, but as one person said on this thread, don't bite the hand that feeds you. The Hub and Spoke model that Parker often refers to will not work if you are too aggressive with trying to force (your version) of change on these companies you have no choice to work with in some capacity. Disruption is one thing, destruction is another. There's a lot of focus on Zenefits bombastic personality, and the whole "we're gonna drink your milkshake" rhetoric. That will scare huge incumbents into moving into very defensive positions quickly. Offering to spend $600,000 getting companies to drop ADP in favor of Intuit or another payroll company doesn't help either. One thing I find curious was that I thought that Zenefits had 10,000+ businesses using the service as of three or four months ago. According to what's been reported, 600 ADP connected business have been cut off, which was stated as being 10% of their total business. That math doesn't back out.
- gamblor956 11y ago
  The WSJ reported this morning that many startups (and distrubingly, many HN-backed startups) are using fuzzy math when it comes to reporting financials. Generally, they're using non-GAAP measures that they "feel" better reflects their "growth" and "income potential" rather than actual financial measures that everyone else uses. I wouldn't be surprised if the "10,000+" businesses included prospective businesses, companies that tested Zenefits out without committing to it, and former customers.
  - healthnetwork 11y ago
    You have a link to that WSJ article?
    - greenyoda 11y ago
      I think he might be referring to this one: https://news.ycombinator.com/item?id=9690775 https://news.ycombinator.com/item?id=9690775
dang 11y ago
Two articles on this were at the top of the front page. Since we don't need two, we buried https://news.ycombinator.com/item?id=9693370 https://news.ycombinator.com/item?id=9693370 as a dupe. That's not entirely fair, since the other link contains Zenefits' response, but anyone who wants to can go read it. Since we have to pick one it seems best to keep the third-party article.
- ghayes 11y ago
  Thank you for the transparency of your decision. It's always welcome from the community.
  - larrys 11y ago
    Agree and even better would be that type of information under the story header so anyone who was following the thread knows that it has been closed and the reason as well.
    - dang 11y ago
      That's something we've discussed at length and will probably implement someday. It's pretty challenging, though, to do it the way we want, and other stuff has to get rolled out first.
      - larrys 11y ago
        Quick and dirty would be to manually update and append "Thread Closed [n]" to the header with a message like this: ADP Begins to Roll Out a Zenefits Competitor; Thread Closed [n] Where "n" is simply a number that is listed elsewhere that describes the reason for closing. Note that can scale to any number of reasons or explanations either existing or new as if it's a footnote.
- borski 11y ago
  I was actually really concerned when I saw the other one had been buried, and was worried HN was going to turn into a "do not slam our companies" love-fest. I'm glad you're being so transparent, and even happier about the fact that legitimate controversy still gets to be played out and discussed. Thanks.
DanBlake 11y ago
This case has been tried before, but in a different industry: http://en.wikipedia.org/wiki/MDY_Industries,_LLC_v._Blizzard_Entertainment,_Inc http://en.wikipedia.org/wiki/MDY_Industries,_LLC_v._Blizzard.... Basically MDY made a bot for world of warcraft. It would play the game for you to earn in-game gold. Blizzard did not like this and had forbidden it in their ToS (Just like ADP has disallowed certain aspects of what Zenefits does- automated access, etc..) Blizzard won the case. The main element was 'tortious interference' - MDY was interfering with the relationship between blizzard and its customers. It does not matter if the customer wanted to use the bot or not- MDY was encouraging the user to violate blizzards ToS.
thinkcomp 11y ago
The docket is available (free) here: http://www.plainsite.org/dockets/2lue6fyli/california-northern-district-court/adp-llc-v-yourpeople-inc-et-al/ http://www.plainsite.org/dockets/2lue6fyli/california-northe...
jecjec 11y ago
The thing about Uber and Lyft operating ina gray legal area is that their products worked perfectly. Zenefits' web application is a shitshow of JavaScript errors. It is amateur hour over there.
dmritard96 11y ago
Pretty surprised all these savvy investors that do due diligence before investing didn't see Zenefits' reliance on ADP as a gigantic risk. With 500M you should be able to build a better ADP to some degree but still, makes me wonder how much independent thinking goes on in the VC world right now. Feels like a company with a YC stamp of approval getting a free pass in the valley. Anyhow, I hope its sorted out as I actually really like the tenants of Zenpayroll.
shaaaaawn 11y ago
The @ADP response to the #ADPeeved Twitter Campaign: "@parkerconrad @zenefits ADP’s been open for partnership. Secure, API-driven. Apply here: http://partners.adp.com http://partners.adp.com . No need to be #ADPeeved." via https://twitter.com/ADP/status/608455243232387072 https://twitter.com/ADP/status/608455243232387072
USNetizen 11y ago
I had a horrendous experience with the Zenefits platform (and management team), so I may be a little biased. Their software quality is/was horrendous (it is/was riddled with errors and defects). But, even from the beginning, I was leery of the way they did the ADP "integration" and thought it was only a matter of time before it was cut off. I mean, they took a back door into harvesting sensitive employee information on a competitor's platform, what else should they expect? A welcoming party? After conversing with the Zenefits CEO on twitter, it seems to me there is a culture of smugness at Zenefits and feeling amongst their management that they can seemingly do no wrong. Heaven forbid you complain about their poor platform quality or mention that they are growing at an unsustainable rate thereby letting quality and service fall by the wayside - then they just kick you off or tell you to go away. Well, that has changed thanks to ADP (who I have had actually GREAT experiences with). Zenefits sort of deserves it in this case, in my humble opinion.
USNetizen 11y ago
Love how my comment, and many others, mentioning serious quality issues with the Zenefits platform and rude management interactions gets immediately pushed to the bottom of the stack here. Bias much?
thrillgore 11y ago
I really find it increasingly hard to be sympathetic to ADP, the devil you know, and Zenefits, the devil you don't (read: the Quora outburst).

262 points by cgoodmac 11y ago

I feel like Zenefits is becoming a case study in everything you don't do when you enter an industry. We'll be switching away because I'm worried who else they won't play nice with in the future. Uber and AirBNB have scared the heck out of huge incumbent industries and cities/governments and had scraps to be sure. But they don't have the consistent missteps as Zenefits. They know when to fight and when to take a lump or two, stay quiet, and bide their time.

bttf 11y ago
What are some of the other missteps Zenefits has made in the past (for the uninformed)?
- rubiquity 11y ago
  I remember the Zenefits founder rescinded a job offer to someone that asked on Quora whether they should accept the offer from Zenefits or some other company.
  - wcummings 11y ago
    I guess that answered his question, huh?
  - josefresco 11y ago
    To be fair, the applicant "slammed" Zenefits by saying that having their name on his resume would be less valuable than others when applying FOR A NEW JOB (my emphasis). If an employee applied to work for my business and one of their "concerns" was how our company would appear on their resume (in contrast to another), I would similarly discard their application.
    - dworin 11y ago
      I disagree. I'm not promising someone a job for life and they're not promising to work for me forever. Part of the value I offer them as an employee is what I can do for their career going forward. Sometimes that's a prestigious name, other times it's by giving them better opportunities to grow. It's one thing to say "I want people who want to work here," it's another to discount people who might want one day want to work someplace else.
      - josefresco 11y ago
        Of course nothing lasts forever, however it's somewhat a bad sign to a see an employee actively planning their next move, before they've even accepted an offer. It shows the applicant may be more concerned about career path than they are in doing an excellent job for their current employer. It might be an outdated or romantic view of work, but the ideal situation (employes and ownership working towards a shared goal) is still worth striving for.
    - CPLX 11y ago
      Fine, then don't hire him. The mistake wasn't the hiring decision, clearly it was getting into an argument with a prospective employee in a public internet posting. That shows a serious lack of judgement and poor leadership. And moreover this isn't a photo sharing business he's running, when you're asking people to trust you with their income and their medical coverage you are going to be held to a higher standard.
      - josefresco 11y ago
        What if the argument took place privately? Is the mistake the venue, the participation or the action/argument itself? The applicant invited a public debate - should the CEO just avoid the debate and let it play out?
        CPLX 11y ago
        > should the CEO just avoid the debate and let it play out? Yes. Getting into acrimonious debate with a prospective junior hire about their future career prospects is almost the definition of a misplaced sense of priority.
aaggarwal 11y ago
I agree. Zenefits had been in the news for last few months, but all for the wrong reasons, first the Quora fiasco and now this.
protomyth 11y ago
Also Über and AirBNB are consumer companies. Zenefits has to appeal to enterprise customers. Beyond that we're talking payroll. This is the most conservative part of any business. Lawsuits do not make for good advertising.
- jusben1369 11y ago
  Great point.
- notahacker 11y ago
  Plus use of Uber and AirBnB is transactional (at worst, I might have to dispute a downpayment or arrange alternative accommodation at short notice if my AirBnB hotelier has trouble) I'm far more locked into the consequences of the bad decision if I go with the sketchy SaaS provider and employee benefits broker
  - protomyth 11y ago
    Your right, there is no fun on this earth like a failed accounting system change. Ask anyone who has participated in a SAP deployment that has gone wrong.
sjm-lbm 11y ago
I'm honestly wondering if half the point of this lawsuit is just to keep Zenefits' professionalism and Parker Conrad's mouth in the news as much as possible. ADP might lose this lawsuit (I have no idea), but Zenefits is already looking much less impressive.
efuquen 11y ago
> Uber and AirBNB have scared the heck out of huge incumbent industries and cities/governments and had scraps to be sure. But they don't have the consistent missteps as Zenefits. I feel like AirBnB, and even more so Uber, have had plenty of very public missteps. Both Uber's CEO and execs have come under fire for some dumb things they've said: http://pando.com/2014/02/27/we-call-that-boob-er-the-four-most-awful-things-travis-kalanick-said-in-his-gq-profile/ http://pando.com/2014/02/27/we-call-that-boob-er-the-four-mo... http://www.buzzfeed.com/bensmith/uber-executive-suggests-digging-up-dirt-on-journalists#.pceQPDedl http://www.buzzfeed.com/bensmith/uber-executive-suggests-dig... That clearly doesn't mean you can't be successful, but I wouldn't say Zenefits has done or said anything worse than these other companies have.
- dylanjermiah 11y ago
  On the topic of that first link, the 'boob-er' story was most likely fabricated. There is no evidence of an interview nor a transcript.
pbreit 11y ago
It's a shame that it does seem like jerky behavior is at least correlative, if not causative, to success.

kirinan 11y ago

This won't end well for Zenefits. Its not quite a deathknell for them, but there is zero case where Zenefits doesn't settle outside of court or loses the case. They will need to spend time/resources to raise another round and fight the chance that ADP doesn't build a competitor them in the mean time. This is the kind of momentum shifter that kills startups.

DannyBee 11y ago
ADP will lose this lawsuit very quickly
- ceejayoz 11y ago
  ADP's legal department is likely larger than Zenefits itself, and well funded. They can probably drag it out for quite a while.
  - DannyBee 11y ago
    Maybe? This is an oft-repeated claim, but my experience tells me differently. Contrary to popular tv shows, there is only so much that can happen. Lawsuits drag on whether someone is trying or not :) Barring some outliers, the difference between lawsuits that are dragged out and ones that aren't is not a factor of 10, it's probably a factor of 1.2. State court is kind of a crapshoot, for sure. But you are super-unlikely to get away with this stuff in federal court (which is where ADP filed). Most federal judges get tired of this stuff very quickly, and start sanctioning.
    - CPLX 11y ago
      > Barring some outliers, the difference between lawsuits that are dragged out and ones that aren't is not a factor of 10, it's probably a factor of 1.2. That's crazy talk. You can double the length of a lawsuit in one simple stroke just by having your attorney say "Sorry that week is bad for me can we do [date]" every time there's a continuance or adjournment. You can set return dates for any motions you initiate to the last date permitted, you can meet every filing deadline in the last hour, etc. The legal system has many built-in safeguards and protections for all parties but guaranteeing timeliness just isn't one of them.

tdees40 11y ago

The descent into lawsuits is pretty sad. When customers hate your product (i.e. the ADP front-end) so much that an entire company forms around making something less terrible, you really have to look at yourself in the mirror. I continue to be amazed by the horribleness of benefits web front-ends. I recently did a simple task in our Hewitt system, and it required five pop-up windows. It's just so, so terrible.

CPLX 11y ago
It seems to me that being in business for 65+ years and being the undisputed market leader in an industry and then having an incredibly well funded software company with hundreds of employees siphon off only 600 of your customers isn't necessarily a moment for self reflection. I've used ADP myself as a startup founder. Yeah the interface is annoying. So is Craigslist, whatever. That line of argument isn't necessarily dispositive, both of them have been reasonably adept at solving the problem I engaged with them to solve.
- lukeschlather 11y ago
  Has anyone at ADP been there 65 years? It looks to me like the current CEO started about 15 years ago. I would say if you have as much power as ADP does, everything that happens is a moment for self-reflection.
- free2rhyme214 11y ago
  I agree it's not a moment of self reflection but that doesn't mean what they're doing is right or Zenefits wouldn't exist. I use ADP and I think their front end is horrible. It works but it's enough of a pain point for others to switch.
Someone1234 11y ago
> When customers hate your product (i.e. the ADP front-end) so much that an entire company forms around making something less terrible, you really have to look at yourself in the mirror. Is this really accurate? Doesn't Zenefits exist to merge several services, only some of which ADP provide? And while many people have said that ADP's front end is bad, it seems like you've taken those claims a step further by claiming that people only pay Zenefits to avoid having to use it (rather than cross-platform integration which is their real purpose).

HongQiGong 11y ago

I still cannot believe Zenefits' "integration" with ADP was actually screen-scraping. No wonder ADP's servers were overloaded.

rubiquity 11y ago

If Zenefits isn't happy that they can't access ADP's payroll info on behalf of their customers then why doesn't Zenefits spin off a payroll service and attack ADP from that angle? Maybe Zenefits could name it ZenPayroll. Oh wait...

realityking 11y ago
These are two different companies, they just have the first tree letters of their names in common. Just like ZenDesk.
- dopamean 11y ago
  It was a joke dude.
  - realityking 11y ago
    That went totally over my head, my bad. That said, I'm not a native speaker and humor is sometimes difficult.
    - dopamean 11y ago
      Understandable. Sarcasm is hard over the web and even more so if you're not a native speaker. I should be more sensitive to that.
  - ne0n 11y ago
    Well, yes, it was a joke, but many people are probably confused about that. It's worth noting.

boomzilla 11y ago

Is this the same CEO who said in Quora to the effect of: if you have to ask how it's like to work here, you won't fit in here?

protomyth 11y ago
Are you referring to this http://www.quora.com/What-is-the-best-way-to-start-my-career-Uber-or-Zenefits/answer/Parker-Conrad http://www.quora.com/What-is-the-best-way-to-start-my-career... answer by Benefit's CEO? I'm not sure of the connection between that and this story. I guess you could be going for a reckless attitude in one area might translate to lawsuits in another area?
smileysteve 11y ago
> if you have to ask how it's like to work here, you won't fit in here? The response was more, if you know that you'll find the work at Uber or another company more exciting, then we wouldn't want you to work here. It was really a matter of phrasing/tact on the applicant's part and hubris on this CEOs part - you want people to be excited about working for you, but you also want the humility to be able to see how it fits in their career path.
runamok 11y ago
Yes this is the same CEO but your summary isn't quite right. He was trying to figure out a pros and cons of Uber vs. Zenefits and for instance he asked: "My biggest problem with Zenefits is that it isn't a buzzword like Uber. Most people won't know what Zenefits is (or so I think). I think that this isn't as exciting a brand name to have on your resume when applying to the likes of Google." Full question: http://www.quora.com/What-is-the-best-way-to-start-my-career-Uber-or-Zenefits http://www.quora.com/What-is-the-best-way-to-start-my-career...

wyattjoh 11y ago

> Zenefits overloaded ADP’s computer systems with a flood of digital traffic Lol

DannyBee 11y ago

Reading the complaint, ADP is not likely come close to winning. The defamation they claimed happened is that Zenefits "alleged that ADP intentionally sought to cause harm to ADP’s clients solely to gain an unfair competitive advantage against Zenefits.” Even if you argue this is defamation per se (and not per quod), about a matter of private concern, they'd still have to prove "4. That [name of defendant] failed to use reasonable care to determine the truth or falsity of the statement(s). " (california jury instructions for this charge will be here: https://www.justia.com/trials-litigation/docs/caci/1700/1704.html https://www.justia.com/trials-litigation/docs/caci/1700/1704...) There is a near 0% chance they can prove a lack of reasonable care here. Plus, they open themselves up to discovery on any memos, etc they've written about this decision internally, which almost certainly show the statement is truth. Note the above is the best case. If it's determined to be a matter of public concern, or defamation per quod, ADP's chances go down.

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peteretep 11y ago
> ADP is not likely come close to winning Are they trying to win the case, or a longer game involving customer confidence?
- DannyBee 11y ago
  Probably the latter, but this is a dumb way to do it :) As a customer, my takeaway would be "If ADP doesn't like what i tell people about it, it's going to actually sue me".
  - jusben1369 11y ago
    I like your posts here but think this one missed the mark. I think as ADP you want "Uncertainty startup Zenefits uncertainty sued Zenefits incumbent ADP uncertainty Zenefits" in the minds of every non startup CFO or VP of HR who was thinking there might be something worth investigating with Zenefits raising $500 mil at a huge valuation.

olafskyansian 11y ago

I have a lot of respect for what Zenefits has done to date in shaking up the insurance space, but you have to REALLY question what the heck is going on with Parker's leadership there. What is going on that the founder/CEO has enough time to chastise an engineer candidate on Quora and put out factually inaccurate posts on topics like healthcare reform (he had something out on LinkedIn a few weeks back) but doesn't have the foresight to build a "real" integration with a payroll vendor that has one available (and an established track record of integrating with competitors in many cases mind you). You read the glassdoor reviews of Zenefits and you get this picture where no one knows what they are doing. All symptomatic of a company in hyper-growth mode, I get that. The questions becomes, does Parker have the leadership chops to see this through?

iamshs 11y ago
First thing that came to my mind was; where I work, if employees do not get paid on time, company will have to deal with quite a lot of grief and substantial monetary loss due to the work arrangement company has. I am sure something like this exists in other jobs/industries/countries too. How come such a critical component was not taken care of? Also, I had to wean off from using the Mint app because I was concerned about violating my bank's TOS by giving login credentials to a third party, and if something happens in future my claim will be a bit weak. So are SMBs not violating ADP's TOS by providing them login info?
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gravity13 11y ago
I was curious what "chastise an engineer candidate on Quora" meant so I looked it up: http://qr.ae/7IErH1 http://qr.ae/7IErH1 Sounds like a perfectly reasonable answer to me. Especially after reading the question. It gives me a bad taste, I wouldn't want to work with that guy. He's the annoying guy at the table who is like "I work at x" and wants everybody to go "oooh," not "wtf is zenefits?" It reeks of the almost ubiquitous entitled tech engineer stench. If anything, this makes me appreciate the integrity of Conrad.

pgrote 11y ago

Is there a link to ADP's technical response?

hatred 11y ago
Were you referring to this ? : http://www.adp.com/zenefits/downloads/The-Facts-About-ADP-and-Zenefits.pdf http://www.adp.com/zenefits/downloads/The-Facts-About-ADP-an...
- pgrote 11y ago
  Yes, thank you.

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dataker 11y ago

Yes, it's terrible for Zenefits, but even worse for ADP. A defamation lawsuit tells a lot about how vulnerable a company is. Take down Zenefits and hundreds of others emerge.

jgalt212 11y ago

I don't necessarily stand with ADP, but I do stand with the vendors. Zenefits is just a thin wrapper around other companies real products and businesses. I suspect Zenefits true business plan is a trojan horse. Get between a business and its clients, replicate the wrapped business and whamo you put the existing vendor out of business and grab all their revenues. How else could Zenefits justify their sky high valuation other than for them to be a trojan horse?

mark212 11y ago
all of this kind of insurance is sold through brokers (i.e., a thin wrapper around other companies' real products). That's what Zenefits is competing with -- mom & pop independent insurance brokers, not benefit providers themselves. And entrenched incumbents like ADP who are slow moving and ossified.
- jgalt212 11y ago
  fair enough, but I'm arguing that a simple insurance broker can't justify a $4.5B valuation. They have to go for a much bigger piece of the pie.

apalmer 11y ago

This is just a minor skirmish really, honestly this is just Zenefits being welcomed into the big leagues. Zenefits should be ware of biting the hand that feeds them at this point, they shouldnt be 'cowed' but you dont start a war with providers you are dependent on. Basically ADP wont 'win' this court case, it wont even stretch out too long. However, both companies will probably have to feed the lawyers 5 million for this... which is not a big deal for one, and is probably 10% of capital on hand for the other. Its more a statement than a lawsuit with an expectation of success.

hatred 11y ago
>> 10% of capital on hand for the other. Well , they just raised $ 500m, so looks like just 1% of the new capital raised ( or wasted , whatever way you put it )

eranation 11y ago

Hooli vs pied piper in real life...

twinspop 11y ago

ADP was taken offline today for 65 minutes with a massive DDOS. Coincidence?

as27 11y ago
How do you know?

josefresco 11y ago

Not sure if this link is referenced here but I found it interesting and relevant: http://blog.zenefits.com/adp-2/ http://blog.zenefits.com/adp-2/

thewhizkid 11y ago

Zenefits needs a head of PR. Or a new one if they already have one.

shaaaaawn 11y ago
Even better, they need a CFO

jonathanmarcus 11y ago

We're a very small company (10 FTEs), but we have been anything but impressed with Zenefits as a customer. We only use them for medical and dental insurance, but in reality, they provide very little, if any value. The Zenefits software is really nothing special, and in fact, the onboarding UI is pretty poor. Now that we have our insurance, Zenefits adds zero value to us. We deal directly with United and Zenefits collects a 10% commission on our monthly premiums. Its a genius business model, and little else. Zenefits doesn't have any intrinsic rights to ADP's system. Twitter killed off plenty of companies when it decided to shut down the 3rd party ecosystem. Facebook obviously maintains similar strategic control over it's API. How many case studies must there be for companies to understand that building on another company's platform always carries business and strategic risks?

randall 11y ago
Have you ever had an insurance broker before? They're like the same thing but without the easy software.
- geori 11y ago
  Your local insurance salesperson probably has less bargaining power than Zenefits, so your rates with them could be higher.
  - imh 11y ago
    FWIW my experience has been the opposite. No idea why, but the local guys do a great job for me relative to zenefits.
  - chetanahuja 11y ago
    Nope. In our experience, Zenefits has no special deals and absurdly high pricing for health insurance for small companies. You're far better off going with a PEO (e.g. Trinet etc.)
  - babar 11y ago
    For small businesses, Zenefits and other brokers offer almost exactly the same rates, which are the list rates of the insurance companies. The negotiation only comes in to play with larger companies (currently 50+ employees, next year it will be 100+, I think). For us, Zenefits seemed slightly more expensive, but it is hard to tell since they didn't give us good comparison data based on employee ages and coverage. If you want to leverage the large company rates as a small company, you need to explore the PEO model, which Zenefits does not support, but ADP does (and several others).

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babar 11y ago

I'm not really a big fan of ADP, but if Zenefits really did refuse to work with ADP to implement a real integration, I don't have much sympathy for Zenefits. They have enough funding they should be able to do things the right way now. I think Zenefits is trying to solve a real problem for small businesses, but we chose not to use them because the cost and the service level didn't make up for their nicer UI.

vladgur 11y ago

Reading over the ADP filing(obviously one-sided), it amazes me that a company like Zenefits would do something that would make any tech professional cringe: "Zenefits also asked the ADP client to take a screenshot of the temporary username/password screen for the account and email it to a Zenefits email. “ "ADP identified several potential concerns with Zenefits’ approach, including clients granting Zenefits admin user credentials to allow Zenefits access to the clients’ employee and company data in a manner that may not meet ADP’s security standards, and allowing Zenefits to make changes requiring a payroll admin level access. “ And this is ladies and gents why you should really worry when you base your business on scraping

chetanahuja 11y ago

Seeing comments in the recent Zenefits threads, it seems like we dodged a bullet when Zenefits bungling around with our onboarding process led us to use a different providers for our payroll/insurance services.

healthnetwork 11y ago

The health insurance and benefits industry needs innovation, badly, but as one person said on this thread, don't bite the hand that feeds you. The Hub and Spoke model that Parker often refers to will not work if you are too aggressive with trying to force (your version) of change on these companies you have no choice to work with in some capacity. Disruption is one thing, destruction is another. There's a lot of focus on Zenefits bombastic personality, and the whole "we're gonna drink your milkshake" rhetoric. That will scare huge incumbents into moving into very defensive positions quickly. Offering to spend $600,000 getting companies to drop ADP in favor of Intuit or another payroll company doesn't help either. One thing I find curious was that I thought that Zenefits had 10,000+ businesses using the service as of three or four months ago. According to what's been reported, 600 ADP connected business have been cut off, which was stated as being 10% of their total business. That math doesn't back out.

gamblor956 11y ago
The WSJ reported this morning that many startups (and distrubingly, many HN-backed startups) are using fuzzy math when it comes to reporting financials. Generally, they're using non-GAAP measures that they "feel" better reflects their "growth" and "income potential" rather than actual financial measures that everyone else uses. I wouldn't be surprised if the "10,000+" businesses included prospective businesses, companies that tested Zenefits out without committing to it, and former customers.
- healthnetwork 11y ago
  You have a link to that WSJ article?
  - greenyoda 11y ago
    I think he might be referring to this one: https://news.ycombinator.com/item?id=9690775 https://news.ycombinator.com/item?id=9690775

dang 11y ago

Two articles on this were at the top of the front page. Since we don't need two, we buried https://news.ycombinator.com/item?id=9693370 https://news.ycombinator.com/item?id=9693370 as a dupe. That's not entirely fair, since the other link contains Zenefits' response, but anyone who wants to can go read it. Since we have to pick one it seems best to keep the third-party article.

ghayes 11y ago
Thank you for the transparency of your decision. It's always welcome from the community.
- larrys 11y ago
  Agree and even better would be that type of information under the story header so anyone who was following the thread knows that it has been closed and the reason as well.
  - dang 11y ago
    That's something we've discussed at length and will probably implement someday. It's pretty challenging, though, to do it the way we want, and other stuff has to get rolled out first.
    - larrys 11y ago
      Quick and dirty would be to manually update and append "Thread Closed [n]" to the header with a message like this: ADP Begins to Roll Out a Zenefits Competitor; Thread Closed [n] Where "n" is simply a number that is listed elsewhere that describes the reason for closing. Note that can scale to any number of reasons or explanations either existing or new as if it's a footnote.
borski 11y ago
I was actually really concerned when I saw the other one had been buried, and was worried HN was going to turn into a "do not slam our companies" love-fest. I'm glad you're being so transparent, and even happier about the fact that legitimate controversy still gets to be played out and discussed. Thanks.

DanBlake 11y ago

This case has been tried before, but in a different industry: http://en.wikipedia.org/wiki/MDY_Industries,_LLC_v._Blizzard_Entertainment,_Inc http://en.wikipedia.org/wiki/MDY_Industries,_LLC_v._Blizzard.... Basically MDY made a bot for world of warcraft. It would play the game for you to earn in-game gold. Blizzard did not like this and had forbidden it in their ToS (Just like ADP has disallowed certain aspects of what Zenefits does- automated access, etc..) Blizzard won the case. The main element was 'tortious interference' - MDY was interfering with the relationship between blizzard and its customers. It does not matter if the customer wanted to use the bot or not- MDY was encouraging the user to violate blizzards ToS.

thinkcomp 11y ago

The docket is available (free) here: http://www.plainsite.org/dockets/2lue6fyli/california-northern-district-court/adp-llc-v-yourpeople-inc-et-al/ http://www.plainsite.org/dockets/2lue6fyli/california-northe...

jecjec 11y ago

The thing about Uber and Lyft operating ina gray legal area is that their products worked perfectly. Zenefits' web application is a shitshow of JavaScript errors. It is amateur hour over there.

dmritard96 11y ago

Pretty surprised all these savvy investors that do due diligence before investing didn't see Zenefits' reliance on ADP as a gigantic risk. With 500M you should be able to build a better ADP to some degree but still, makes me wonder how much independent thinking goes on in the VC world right now. Feels like a company with a YC stamp of approval getting a free pass in the valley. Anyhow, I hope its sorted out as I actually really like the tenants of Zenpayroll.

shaaaaawn 11y ago

The @ADP response to the #ADPeeved Twitter Campaign: "@parkerconrad @zenefits ADP’s been open for partnership. Secure, API-driven. Apply here: http://partners.adp.com http://partners.adp.com . No need to be #ADPeeved." via https://twitter.com/ADP/status/608455243232387072 https://twitter.com/ADP/status/608455243232387072

USNetizen 11y ago

I had a horrendous experience with the Zenefits platform (and management team), so I may be a little biased. Their software quality is/was horrendous (it is/was riddled with errors and defects). But, even from the beginning, I was leery of the way they did the ADP "integration" and thought it was only a matter of time before it was cut off. I mean, they took a back door into harvesting sensitive employee information on a competitor's platform, what else should they expect? A welcoming party? After conversing with the Zenefits CEO on twitter, it seems to me there is a culture of smugness at Zenefits and feeling amongst their management that they can seemingly do no wrong. Heaven forbid you complain about their poor platform quality or mention that they are growing at an unsustainable rate thereby letting quality and service fall by the wayside - then they just kick you off or tell you to go away. Well, that has changed thanks to ADP (who I have had actually GREAT experiences with). Zenefits sort of deserves it in this case, in my humble opinion.

USNetizen 11y ago

Love how my comment, and many others, mentioning serious quality issues with the Zenefits platform and rude management interactions gets immediately pushed to the bottom of the stack here. Bias much?

thrillgore 11y ago

I really find it increasingly hard to be sympathetic to ADP, the devil you know, and Zenefits, the devil you don't (read: the Quora outburst).