An Old Beef Haunts Zenefits

Tensions between the HR startup and industry giant ADP boiled over in mid-2015. Now, as Zenefits lays off more staff, ADP sees an opportunity.

An old foe of Zenefits has wasted little time in trying to capitalize on the human resources startup's recent struggles.

Within hours of a BuzzFeed News report on Tuesday that Zenefits would lay off 106 more employees and shutter its remote sales office in Arizona, current and former staffers received messages from ADP, the payroll services giant that got into a public brawl with Zenefits last year.

ADP is hiring in Arizona, the messages said, and will run a special round of interviews just for Zenefits people who have lost their jobs.

"We were very sorry to hear the news regarding the layoffs at Zenefits today," said the notes from Kerry Sipkovich, a recruiter at ADP. "I wanted to reach out to let you know that ADP are actively hiring for sales staff in the Phoenix area and will be holding interview days this week and next week, exclusively for Zenefits employees affected by the office closure."

"We'd love to speak with you and your colleagues about joining our motivated and growing team," she added.

The beef between San Francisco-based Zenefits and ADP goes back to mid-2015, when Zenefits was the toast of Silicon Valley, a freshly minted "unicorn" with a $4.5 billion valuation. Zenefits, which opened its doors in 2013, gives away software to help small businesses manage their employee benefits, though it makes its money as an insurance broker by selling those businesses health insurance. It didn't offer payroll services, instead partnering with companies like ADP, a behemoth founded in 1949.

ADP, for what it later said were security reasons, cut off Zenefits' access to some of its data. Zenefits, in response, took the opportunity to cast itself as David to ADP's Goliath, pitching its side of the story to tech reporters and publicly accusing ADP of trying to hurt a smaller player by spreading “fear, uncertainty, and doubt about the new market entrant.”

ADP sued Zenefits for defamation, and Zenefits asked a court to dismiss that lawsuit. The legal battle ended with a settlement in October. (While Zenefits appears to have deleted its blog posts about ADP, a cached version of one can be found here.)

On Twitter, love for Zenefits poured in. Tech people used the hashtag #ADPeeved to show their support for the startup.

The old economy cannot be allowed to scare off new innovation. Don't sue; compete! #ADPeeved

So @ADP is so threatened by @Zenefits they are starting a scorched earth campaign against them-- & ADP's own clients!

Even the celebrities Jared Leto and Ashton Kutcher — investors in Zenefits — chimed in.

Amazing that 50+ yr old @ADP is so threatened by 2-yr @Zenefits. #disruption #ADPeeved

Giant corps should compete like everyone else. Tell that to @ADP. #ADPeeved

Since then, Zenefits has become engulfed in scandal after a BuzzFeed News report revealed it apparently flouted insurance laws by allowing unlicensed brokers to sell health insurance. Its founding CEO, Parker Conrad, was forced to step down in February after colleagues learned that he had created software to let employees cheat on the insurance broker licensing process in California.

On Tuesday, the new CEO, David Sacks, announced what was the startup's second major overhaul this year. Zenefits is trying to remake itself after growing quickly and missing its own revenue target, and in February announced about 250 jobs would be cut. The latest layoffs amount to 9% of the company's workforce.

The ADP recruiter, Sipkovich, sent Zenefits employees a link to a calendar where they could schedule an interview.

Among the perks of working at ADP, she said, would be "President's Club trips and accolades." Zenefits held its own President's Club weekend for top sales reps in Las Vegas last year, featuring poolside partying and champagne showers at the Encore Beach Club.

An ADP spokesperson, Dick Wolfe, said in an email that company was "actively recruiting" for sales roles in the Phoenix area, adding that it was "always on the lookout for experienced, reliable talent."

A Zenefits spokesperson, Jessica Hoffman, declined to comment.

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