
ADP Sues Zenefits for Defamation - cgoodmac
http://blogs.wsj.com/digits/2015/06/10/adp-sues-zenefits-for-defamation
======
dang
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.

~~~
pbreit
De-duping like this seems unnecessary. I'd prefer to see do-nothing bias. No
explanations or artificial manipulation needed. Just let the threads compete.
Like life.

~~~
dang
I understand the concept, but HN has never worked that way, and if it did the
results would be so bad that I believe (though I realize it won't convince
you) that even you would recoil in horror. It would also kill HN pretty
quickly in all the ways we care about, though I suppose the numbers would go
up.

~~~
pbreit
Fair enough. In this case, they did seem a bit different and, as you note,
there were some important comments in the killed thread.

~~~
dang
If the stories had really been the same we would have merged the threads and
left a "comments moved to..." post in the other one. But I was worried that
the delta was a bit too great to deprive those comments of their original
context. That particular dilemma doesn't come up all that often, which is good
because we don't have a good solution to it.

------
jonathanmarcus
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?

~~~
joshstrange
> Zenefits doesn't have any intrinsic rights to ADP's system.

Zenefits doesn't want or need intrinsic rights to the ADP system. They do need
(and deserve) the same level of access as a human working for a client using
ADP. They might provide little to no value or be a worthless company but NONE
OF THAT MATTERS. The client paid for ADP access and has every right to use
whatever means they deem necessary to input or output data from the ADP
system.

~~~
neotek
>The client paid for ADP access and has every right to use whatever means they
deem necessary to input or output data from the ADP system.

Surely ADP has a superseding right to determine how information enters and
leaves their system? I'm not suggesting that's good or bad, just pointing out
that it's _their_ system, being a customer doesn't give you carte blanche to
do whatever you like.

Hell, look at what happened to Aaron Swartz.

~~~
eveningcoffee
> Surely ADP has a superseding right to determine how information enters and
> leaves their system?

No. They do not own this information.

------
olafskyansian
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?

~~~
gravity13
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.

~~~
ahlatimer
The worst part of that answer was edited out. He had "(n.b. -- we are revoking
the questioner's offer to work at Zenefits)." Which is a reasonable thing to
do, I guess, if you feel the person isn't all that interested in working for
your company, but it isn't all that reasonable to say in a public forum.

Edit: Here's a link that has the quote about rescinding the offer:
[http://www.quora.com/Zenefits-CEO-Rescinds-Job-Offer-
May-201...](http://www.quora.com/Zenefits-CEO-Rescinds-Job-Offer-
May-2015/Should-Zenefits-CEO-Parker-Conrad-regret-publicly-rescinding-a-job-
offer-on-Quora)

~~~
gravity13
lol I didn't know that.

Meh. It's something I would have done myself in the same situation.

~~~
thrillgore
Really? I would have kept my mouth shut and not removed doubt about my
foolery.

~~~
gravity13
Why? To preserve my "image" with fickle internet communities full of
judgmental people who give me a double standard because my name is known?

This is why I'm glad I'm not famous...

~~~
jasonlotito
Smart people don't want to work for fools.

------
DannyBee
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...](https://www.justia.com/trials-
litigation/docs/caci/1700/1704.html))

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.

~~~
nostrademons
I'm curious, do you know something about the facts of this case that hasn't
appeared on Hacker News before:

[https://news.ycombinator.com/item?id=9679312](https://news.ycombinator.com/item?id=9679312)

[https://news.ycombinator.com/item?id=9688442](https://news.ycombinator.com/item?id=9688442)

[https://news.ycombinator.com/item?id=9686175](https://news.ycombinator.com/item?id=9686175)

It looks like they were asking for users' login credentials to scrape ADP's
frontend, and that Zenefits had never talked directly to ADP. The scraping
broke when ADP added DOS protection to their portal; they claim that Zenefits
was responsible for 25% of their traffic despite serving only 0.25% of their
clients.

I kinda _want_ Zenefits to win here, because I one day dream of having
employees and from what I've seen Zenefits is _much_ easier to deal with than
ADP. But the specific actions they've taken here look really bad. It's as if a
third-party site asked users for their Google logins and then used it to
aggressively scrape personalized search results off the SRP; such usage would
get blocked by DOS protection, and it'd have nothing to do with Google
targeting a competitor and everything to do with them protecting the security
and integrity of their systems.

~~~
DannyBee
Zenefits was not sued for TOS violations, they were sued for defamation.

The case number is 4:15-cv-02560-DMR You can use PACER to get more info

The complaint charges: (1) DEFAMATION;

(2) INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC RELATIONS;

(3) UNFAIR COMPETITION;

(4) FALSE ADVERTISING;

(5) LANHAM ACT VIOLATION

Everything but the first claim is just dumb.

~~~
baakss
From the Zenefits CEO in Emails to customers (calling ADP unethical for
protecting their customers data):

When you originally set up Zenefits, you created an Zenefits admin user in
your ADP RUN payroll account to let Zenefits manage your payroll—set up new
employees, manage deductions, remove departing employees—on your behalf.

Yesterday, without your permission, ADP systematically deactivated these
accounts—accounts that you set up, in your payroll system, to allow Zenefits
to work on your behalf. The reason for this is that ADP believes it can one
day build software to compete with Zenefits, and in the meantime they would
like to do anything they can to impede Zenefits.

ADP is claiming that they are taking this action for “security” reasons—but
this is clearly not true. For years, ADP has let customers add third parties—a
bookkeeper or an accounting firm, for example—to their payroll system to
manage payroll on a company’s behalf. What Zenefits does is no different. In
fact, even today, ADP will let you add a third-party administrator to your
payroll system unless they have a Zenefits.com email address.

What’s high-handed about their approach is that Zenefits is still completely
compatible with ADP payroll. All they’ve done is make it more inconvenient for
you, their customer.

By default, we will start emailing you whenever there are changes that need to
be made to your payroll system. We will detail exactly the changes that need
to be made, and you can make them yourself in payroll. It’s less convenient
this way — and frustrating that ADP has decided to create more work for their
own clients in order to attack Zenefits. But beyond this, nothing will
interrupt your use of Zenefits.

We are also working on other options for restoring automated payroll.
Zenefits’ mission is to make running your business as effortless as possible,
and our support team will follow up shortly with additional information on how
to resolve this issue.

We think it’s outrageous—and unethical—that ADP is making these changes to
your payroll system without your permission, and is creating this complication
for you in their attempt to block Zenefits’ service—essentially treating you
like a pawn in their corporate chess game.

If you’re as upset with ADP as we are, you can sign this Change.org petition.
In addition, if you’re interested in switching from ADP payroll to Intuit
Payroll, we’re paying customers $1,000 and helping them to make the switch.
We’ll include instructions for this in our follow up communication.

We remain committed to working with ADP to find a solution to make this
problem go away for all our mutual clients. In the past, we’ve directed many
payroll customers to ADP, because payroll is not a service we provide. We’ve
tried contacting them, but so far they have refused to return our calls. If
they have any genuine concerns, we are happy to resolve them, but they have
yet to express them to us.

~~~
eveningcoffee
> calling ADP unethical for protecting their customers data

And from who they are exactly protecting their customer data?

> When you originally set up Zenefits, you created an Zenefits admin user in
> your ADP RUN payroll account to let Zenefits manage your payroll

It should be obviously clear for any sensible person that Zenefit would have
access to your data as much as the admin user has.

It is not dissimilar from creating an account for a person and results of this
should be understandable for anyone who has at least some idea about the
management.

------
jusben1369
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.

~~~
protomyth
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.

~~~
notahacker
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
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.

------
tdees40
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
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.

~~~
free2rhyme214
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.

------
USNetizen
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.

------
jgalt212
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
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
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.

------
vladgur
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

------
rubiquity
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
These are two different companies, they just have the first tree letters of
their names in common. Just like ZenDesk.

~~~
dopamean
It was a joke dude.

~~~
realityking
That went totally over my head, my bad. That said, I'm not a native speaker
and humor is sometimes difficult.

~~~
dopamean
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.

------
babar
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.

------
kirinan
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
ADP will lose this lawsuit very quickly

~~~
ceejayoz
ADP's legal department is likely larger than Zenefits itself, and well funded.
They can probably drag it out for quite a while.

~~~
DannyBee
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
> 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.

~~~
mark212
no, actually you can't. It is not possible in ND Cal to "set return dates for
any motions you initiate to the last date permitted." That's just not how
motions work in ND Cal. And responding on the last hour of every filing
deadline is what everybody does all the time. That's why most deadlines are
fairly short (30 days, e.g.).

The real driver of court delay is the judge, not the litigants. I've had
judges routinely sit on motions (fully briefed) for 9 months in ND Cal. Then
one party or the other will move for reconsideration and it's another six
month delay. It's just the nature of the beast; judges in the federal system
carry very heavy caseloads, particularly ND Cal.

~~~
DannyBee
"The real driver of court delay is the judge, not the litigants. I've had
judges routinely sit on motions (fully briefed) for 9 months in ND Cal. Then
one party or the other will move for reconsideration and it's another six
month delay. It's just the nature of the beast; judges in the federal system
carry very heavy caseloads, particularly ND Cal. "

This is precisely why i said why is said. Because the litigants are not often
the cause/controllers of the delay, _despite_ their best efforts :)

Now, certainly, if the judges/etc were more efficient, yeah, you could pull
out a factor of 10x. But the way things are, for a simple defamation suit, i
can't see you getting more than maybe a 2x factor through various tactics.

------
healthnetwork
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
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
You have a link to that WSJ article?

~~~
greenyoda
I think he might be referring to this one:

[https://news.ycombinator.com/item?id=9690775](https://news.ycombinator.com/item?id=9690775)

------
josefresco
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/)

------
DanBlake
This case has been tried before, but in a different industry:
[http://en.wikipedia.org/wiki/MDY_Industries,_LLC_v._Blizzard...](http://en.wikipedia.org/wiki/MDY_Industries,_LLC_v._Blizzard_Entertainment,_Inc).

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.

------
apalmer
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
>> 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 )

------
jecjec
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.

------
boomzilla
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?

~~~
runamok
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...](http://www.quora.com/What-is-the-best-way-to-start-my-career-Uber-
or-Zenefits)

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

~~~
shaaaaawn
Even better, they need a CFO

------
dmritard96
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
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)

------
thinkcomp
The docket is available (free) here:

[http://www.plainsite.org/dockets/2lue6fyli/california-
northe...](http://www.plainsite.org/dockets/2lue6fyli/california-northern-
district-court/adp-llc-v-yourpeople-inc-et-al/)

------
chetanahuja
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.

------
eranation
Hooli vs pied piper in real life...

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

~~~
as27
How do you know?

------
USNetizen
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
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).

------
pgrote
Is there a link to ADP's technical response?

~~~
hatred
Were you referring to this ? : [http://www.adp.com/zenefits/downloads/The-
Facts-About-ADP-an...](http://www.adp.com/zenefits/downloads/The-Facts-About-
ADP-and-Zenefits.pdf)

~~~
pgrote
Yes, thank you.

------
dataker
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.

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

Lol

