Two articles on this were at the top of the front page. Since we don't need two, we buried <a href="https://news.ycombinator.com/item?id=9693370" rel="nofollow">https://news.ycombinator.com/item?id=9693370</a> 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.
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.<p>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?
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.<p>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).<p>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?
Reading the complaint, ADP is not likely come close to winning.<p>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.”<p>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).<p>"<p>(california jury instructions for this charge will be here:
<a href="https://www.justia.com/trials-litigation/docs/caci/1700/1704.html" rel="nofollow">https://www.justia.com/trials-litigation/docs/caci/1700/1704...</a>)<p>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.<p>Note the above is the <i>best</i> case. If it's determined to be a matter of public concern, or defamation per quod, ADP's chances go down.
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.<p>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.
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.<p>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 <i>required</i> five pop-up windows. It's just so, so terrible.
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?<p>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.<p>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.
I don't necessarily stand with ADP, but I do stand with the vendors.<p>Zenefits is just a thin wrapper around other companies <i>real</i> products and businesses.<p>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.<p>How else could Zenefits justify their sky high valuation other than for them to be a trojan horse?
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:<p>"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. “<p>"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. “<p>And this is ladies and gents why you should really worry when you base your business on scraping
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...
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.
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.
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.<p>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.<p>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.
Not sure if this link is referenced here but I found it interesting and relevant: <a href="http://blog.zenefits.com/adp-2/" rel="nofollow">http://blog.zenefits.com/adp-2/</a>
This case has been tried before, but in a different industry:
<a href="http://en.wikipedia.org/wiki/MDY_Industries,_LLC_v._Blizzard_Entertainment,_Inc" rel="nofollow">http://en.wikipedia.org/wiki/MDY_Industries,_LLC_v._Blizzard...</a>.<p>Basically MDY made a bot for world of warcraft. It would play the game for you to earn in-game gold.<p>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..)<p>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.
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.<p>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.
The thing about Uber and Lyft operating ina gray legal area is that their products worked perfectly.<p>Zenefits' web application is a shitshow of JavaScript errors. It is amateur hour over there.
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.
The @ADP response to the #ADPeeved Twitter Campaign:
"@parkerconrad @zenefits ADP’s been open for partnership. Secure, API-driven. Apply here: <a href="http://partners.adp.com" rel="nofollow">http://partners.adp.com</a> . No need to be #ADPeeved."<p>via <a href="https://twitter.com/ADP/status/608455243232387072" rel="nofollow">https://twitter.com/ADP/status/608455243232387072</a>
The docket is available (free) here:<p><a href="http://www.plainsite.org/dockets/2lue6fyli/california-northern-district-court/adp-llc-v-yourpeople-inc-et-al/" rel="nofollow">http://www.plainsite.org/dockets/2lue6fyli/california-northe...</a>
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.
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?
Yes, it's terrible for Zenefits, but even worse for ADP.<p>A defamation lawsuit tells a lot about how vulnerable a company is. Take down Zenefits and hundreds of others emerge.