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ADP Sues Zenefits for Defamation (wsj.com)
262 points by cgoodmac on June 10, 2015 | hide | past | web | favorite | 169 comments

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 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.

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.

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.

Take, for example, any Apple product announcement. The front page is filled with "Apple Open Sources Swift" articles from 100 different sources before things settle down. I can remember when I first started reading through HN and it didn't seem like anyone was performing that job... so they took hours or days to go away. Now we have only one thread within minutes.

Thank you.

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

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.

Thank you for the transparency of your decision. It's always welcome from the community.

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.

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.

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.

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.


Transparent? Barely.

The link is still gone from the main site (only available in a comment) and its removal was justified by "we have to pick one".

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?

I, too, have a small company and so far I'm definitely not impressed with Zenefits.

A trivial example: we have roughly fifteen contractors working for us. I had them all sign up for Zenefits so we could pay them (and track 1099's appropriately). Come the first of the month, we tried to pay the contractors, only to discover that we had a cap of $2,500 TOTAL for any given week.

This isn't mentioned anywhere obvious and caused huge problems for us. In the end, we had to Paypal everyone money at the last minute.

Next up was trying to pay a founder as the sole employee in a single state. No matter how much we try, we can't seem to figure out how to make this happen - the Zenefits software assumes that we need a tax ID for the state but the state itself insists that we don't need one (since it's a solo founder, working from his home, there is no LNI and no income tax either).

Then there were the countless issues with email addresses (an infinite loop that seemed to be caused by the fact that I used an email address with a plus symbol on it)

The support people are very nice but so far none of them have managed to actually resolve an issue for me.

Anyway, not impressed.

I too run a small company and am a Zenefits customer. We've now done ~15 payroll runs with Zenefits and only 3 have worked without my manual intervention to fix a problem at the last minute. I don't think this will be the only lawsuit in their future.

Having used both ADP and Peak Payroll at our company in the past we have experienced a lot of manual intervention at both. Usually things get ironed out until some/any out of the ordinary change causes problems that end up taking a payroll or two to correct. Basically I'm saying that all payroll providers seem to have these problems.

We're back on ADP after our company was bought as that is what the parent company uses.

Payroll and benefits management is a classic hard problem.

Now granted, with half a billion dollars and some technical acumen major innovation is possible. But the events of this week and the bearing of the CEO paint a picture of a company that is not aware of and focused on that hard problem.

Have you ever had an insurance broker before? They're like the same thing but without the easy software.

Your local insurance salesperson probably has less bargaining power than Zenefits, so your rates with them could be higher.

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).

We use TriNet, super happy.

We got cheaper rates with a 'boutique' insurance firm that was smaller. You can get even cheaper by going the PEO route, but we decided that wasn't a route we wanted to go down.

Zenefits does not get any special deals; you get the same deal as every other 'small business' broker.

FWIW my experience has been the opposite. No idea why, but the local guys do a great job for me relative to zenefits.

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.)

> 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.

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.

Thats not actually what the client pays for though. The client paid for access to ADP's system according to the Terms of Service that ADP sets. If those terms of service and the rights they engender are not acceptable to the client they are welcome to find another provider.

I've frequently posted my dislike for ADP on these boards and I took my business elsewhere.

>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.

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

No. They do not own this information.

What happened to Aaron is a good reason to give them the finger.

The system in question was clearly built to meet the scale of human users, not synchronization with third-party automation systems. That, to me, is the issue here - not the question of access, but of purpose.

ADP is clearly responding to a capacity issue but Zenefits is attempting to frame it as a competitive one.

>They do need (and deserve) the same level of access as a human working for a client using ADP.

What is the scale of Zenefits' access? Do they function like a human or as a machine? Isn't treating machines differently than humans a well accepted standard of the tech industry? Why else would Robots.txt exist?

well, they have the rights granted within the acceptable use policy agreed upon in their ADP contract, anyway

Similar argument for those who bot in video games, not that it works.

So are you against or defending the defamation lawsuit? Because nothing you said really had anything to do with that.

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?

> You read the glassdoor reviews of Zenefits

Am I the only one that finds it strange their reviews seem to alternate between "worst company ever" and "greatest job ever"?

One of the reviewers wrote:

> Don't "advise" your employees to go to this website and leave good reviews to cover up the truth.

Oh yeah well that explains that.

update: typo

Or they could be outright lying. Like HealthTap. If you read their reviews on glassdoor, every 10-15 you get an honest review. And if you google the ceo, he goes through dev teams like tissue, both in this and in prior startups. But the majority of reviews are glowing.

contrast this: http://www.glassdoor.com/Reviews/HealthTap-Reviews-E453567.h...








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?

I was curious what "chastise an engineer candidate on Quora" meant so I looked it up: 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.

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...

lol I didn't know that.

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

You would have shared publicly that you are revoking someones employment offer because you found them seeking career advice on a Q&A board?

This one is kind of tough. I'd like to think that I'd be better than the Zenefits CEO, but, man, this kid makes it really hard to take his side.

First, it shows really poor judgment on the part of the junior engineer. Dear God, did you think that people can't identify you, specifically? It's not like Zenefits is giving out 10 job offers a day.

Second, you're likely to jump as soon as you get the chance. Neither employer nor employee have any commitment to one another. Okay, fine. But, as an employer, will you completely leave me hanging at a critical time or will you stick a couple of months to complete your task before jumping. Given your lack of discretion, probably you'll leave me hanging.

Third, are you going to air dirty laundry in public? Every company has some, even successful ones. Startups are worse. Again, lack of discretion.

So, yeah, I'd rescind that offer very fast. He'll be lucky if Uber doesn't rescind his offer. I guarantee if I were HR at Uber I'd be trying to pick him out to rescind it.

Would I air that publicly? Probably not.

However, this kid should consider himself lucky that the CEO called him out publicly so he knows what he did wrong. If I were the CEO, I'd probably just rescind his offer without comment. I'd call Uber HR, and they'd rescind his offer without comment.

And, he'd be wondering what the hell happened.

I dunno, I see several posts a week on HN where I think "I bet your cofounder/colleague/boss/investor will know this is you if they read it" questions every week, many of which are far more contentious in subject matter, so this kind of questionable judgement isn't that unusual. The stupider point is that he was seriously considering turning down an apparently better environment and $15k more because Uber gets more mainstream press attention and has a more inflated valuation. But we were all naive about the world of work once...

As a CEO I'd want candidates getting a second opinion privately so they were reassured when they decided to accept my offer, and the only reason I'd see "not ruling out much worse offer from other company" as a major black mark is if being savvy in commercial decisions was an important aspect of the role.

A savvier candidate would probably be trying the "That's great, but I also have an outstanding offer in a similar total comp range from Uber. At this stage I think I'd fit much better into your team, but if you could move a little on the financial side of your offer I'd be much more inclined to confirm without waiting have that followup conversation with the Uber hiring manager" approach anyway. And quite possibly succeeding...

I'll grant you that it showed poor judgment if he really thought he could stay anonymous. That said, I disagree with basically everything else. I think you're reading way too much into that.

Where you work will have an impact on your career (I think that's obvious). Part of that is simply the social proof of which company. It helped my career by working for various YC companies, for instance. Were they necessarily better than non-YC companies? No, of course not, but people put stock in it anyway.

The first company you work for may very well have an outsized impact on your career compared to subsequent positions. You should make that decision carefully.

Most importantly, when I go to work somewhere, they shouldn't expect that I will work there the rest of my life. Staying at a company 2-5 years is pretty normal. That's a short enough timespan that you should be thinking about how the company will impact your career after your time with them is done. Furthermore, part of the behavior of a good manager and company is to encourage and facilitate your career growth, even though they realize that doing so may very well cause you to grow out of your position at that company.

He's also a kid, looking at his first career out of college. Did you know the right things to look for immediately and inherently? Do you now? Did some of the things you looked for then end up getting discounted as you got more experience? Do you maybe think you shouldn't hold it against him that maybe he also doesn't know everything?

So no, I wouldn't say that that kid was wrong for thinking about several different aspects of the opportunities he was presented, name-recognition amongst them, even if I would contend that he should maybe put less of an emphasis on it, but that's just the thing he might have heard when he asked the question. Nor do I think that he's more likely to up and leave the company when the going gets rough.

> Do you maybe think you shouldn't hold it against him that maybe he also doesn't know everything?

The problem isn't that he doesn't understand everything. The problem is that he doesn't seem to understand "discretion".

I'm about to give someone access to very sensitive HR information across multiple companies. Do I really want to do that when he just demonstrated that he can't make a simple job inquiry with enough discretion to not piss the CEO off? Doubly so since it was a GOOD job offer.

Sure, he could certainly say that posting about this was an instance of a lack of discretion (hopefully not on quora itself), but that isn't what he said and what he DID say would certainly be a bit of the pot calling the kettle black with regards to discretion, wouldn't it?

Edit: I still contend you're making a mountain out of a molehill. This kid asked a reasonable questionable in an unreasonable way. He could've avoided a lot by simply redacting the names of the companies; I think we both agree on that. That said, I kind of expect a kid fresh out of college to make a few mistakes with regards to professionalism. An organization hiring those individuals should be set up to mitigate that damage and gently steer them in the right direction, not crucify them publicly. While I expect the occasional flub of professionalism from new employees (and I think on a scale of unprofessionalism, this ranks pretty low), I expect a great deal more from CEOs of corporations with a valuation in the billions. Both messed up with regards to professionalism, but one made a much bigger screw up, and it was the one who I would most expect to behave professionally.

> Third, are you going to air dirty laundry in public?

Zenefits doesn't have an issue with sharing private information with the public.

> However, this kid should consider himself lucky that the CEO called him out publicly so he knows what he did wrong.

This person should consider himself lucky that the CEO did this, so he knew the bullet he dodged.

>But, as an employer, will you completely leave me hanging at a critical time or will you stick a couple of months to complete your task before jumping.

And do you put out a handbook or other disclaimer stating that the employer and employee have zero obligation to each other and can terminate the relationship at any time?

Yes, but I generally also attempt to engage in professional courtesy.

And, yes, this goes both ways.

If I, as a boss, can see the writing on the wall, I will attempt to protect my employees. While that includes internal protection in a political firefight, it also includes calling up friends at other companies to see if they might have a job for people on my team if I can see that it's going to be ugly. I have also helped usher people out of my company because I simply couldn't get them what they were worth.

It's called "being a professional". It's also called "this industry is damn small, don't piss off the good people in it."

Sometimes you get caught completely unaware and get sacked without notice, but it's really rare. Most senior people can tell when things are about to get bad generally a month or two in advance--if not more.

If internal, "hidden", policy is different from public, written, policy...the company can go fuck off.

Professional courtesy would be telling someone you want/need them for the next X months and making a real commitment to the worker instead of having a public policy of 'no obligations' while secretly expecting the worker to 'be a professional' and to show undue loyalty.

Wow. I hope you never become a manager.

It's called "politics". And it occurs when two or more humans get together. There are always hidden agendas, different goals, etc.

Learning to navigate it is an essential prerequisite if you want to accomplish something that requires more than your singular individual skill.

And, for your information, yes, people like you wind up on the short end of the stick because you ignore politics. People like me get new jobs, better opportunities, advance warning, etc. because I have helped out people in the past. The combinations of being both technically qualified and politically savvy is quite powerful.

You don't owe any loyalty to a company, but if you piss off the people, it will bite you in the ass.

The company should correct its image to reflect reality.

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

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...

Smart people don't want to work for fools.

I get where you're coming from, but you have to realize, this guy is a new grad and he's probably pretty scared about which path to take because he doesn't understand the long term implications. He went to quota to discuss it with people and try to figure things out.

It seemed pretty obvious to me that the guy was just trying to make the best decision for himself. The right thing would have been for the CEO to let the guy talk it out and come to the conclusion that Zenefits would be the best opportunity for him, not to attack him publicly for trying to figure out the best career path.

Disagree. Perhaps because I was never an entitled CS grad with the world vying for my attention? I was never scared about whether or not I'd make $120k or $400k. I just wanted to work on something I believed in and be a positive force in this world.

"attack him publicly" - interesting choice of words there.

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...)

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.

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




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.

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;





Everything but the first claim is just dumb.

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.

> 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.

The parent is addressing whether ADP will win a defamation suit; it's possible that Zenefits violated TOS and that ADP shut them down with good reason, but that doesn't mean that Zenefits defamed ADP.

Yeah, but DannyBee's post explicitly mentions that they'll fail based on 4. "That Zenefits failed to use reasonable care to determine the truth or falsity of the statement(s)". I wanted to know if he knows something factually about what went on other than what's been reported here, because if I were a jury member and the facts were that Zenefits used their customers' login credentials (against ADP's TOS) to access ADP's internal systems, and then were shut off for generating 100x more traffic than a normal human user, and then responded to that shutoff with an open letter to their customers alleging bad faith rather than shooting ADP a "Hey, our customers can't access your service through our portal. What's up? Can we work with you to make our customers happy again?" - I would consider that a lack of reasonable care, barring legal instructions (perhaps "reasonable care" has a specific meaning different from the layperson's?) or facts to the contrary.

See the blog post i just posted. In fact, ADP launched a competing products, just as zynamics said they were going to.

This is good enough for reasonable care. :)

Even if it wasn't, ADP would have to prove that Zynamics didn't bother to do any investigation at all before making the statement (IE not quite negligence, but at least something)

This seems "highly unlikely" given the situation.

That's what I was looking for, thanks. The announcement of a competing product looks really bad for ADP; if Zenefits had advance notice of it, I can see why they'd make the moves they made.

What a stupid email the ADP rep sent out!

Zynamics? You have Thomas Dullien on the brain. :)

There's also a good chance that ADP will win. The reasonable cause comes down to the truth or falsity of all of the statements that Zenefits made in its original post, not just the ones that relate to the launching of a competitor.

Basically, Zenefits accuses ADP of blocking access solely because of a single traffic spike. On top of that, it accuses ADP of changing their reasons for cutting off Zenefit's access. They then accuse ADP of "spreading FUD"--and lying--about Zenefits for the purposes of quashing the competition.

That last statement, especially, is pretty dangerous under defamation law as it's pretty close per se defamation, in which case ADP would only have to prove the statement was made in court to win. There's no defense to that except proving that ADP was lying about Zenefits.

Based on what both parties have said, and what we know about how Zenefit's system actually works, a jury could definitely find that Zenefits defamed ADP and I would say, based on prior experience with juries, that there is at worst a 50/50 chance from ADP's perspective if this goes to trial.

And here's the part where ADP likely loses:


If Zenefits had knowledge of this product prior to making their statement (quite likely), then this is nearly certain to be good enough to support the statement they made.

(Note: I really could care less either way, i'm just trying to give an objective legal viewpoint :P)

    > ADP is not likely come close to winning
Are they trying to win the case, or a longer game involving customer confidence?

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".

Quite the contrary. ADP wins a PR coup as long as they keep Conrad talking in public. That's the play you're missing, and it will work -- just look at this thread.

I see the lawsuit as a stretch too but it certainly turned the PR table on Zenefits and rapidly. There is far more cleverness in ADP's strategy than is obvious.

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.

Sure, i know that is what they are going for, but at least in my case, it wouldn't accomplish that :)

Suing competitors rarely makes people think you are wonderful. Suing competitors to create uncertainty is in fact, a great way to end up in a huge antitrust lawsuit.

The complaint[1] includes five claims: (1) Defamation, (2) Intentional Interference with Prospective Economic Relations, (3) Unfair Competition, (4) False Advertising and (5) Lanham Act Violation.

Without getting into the legal contours of each, I'd say the defamation claim is at the bottom of the list of Zenefit's legal concerns here.

[1] http://www.scribd.com/doc/268286803/ADP-v-Zenefits-Defamatio...

>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.

But discovery cuts both ways. They could easily find a Zenefits email that says "lets blast them for this, who cares if it is true or not, it's about perception."

I agree they probably won't win, but never rule out a smoking gun.

"Reading the complaint, ADP is not likely come close to winning."

Maybe it's not about winning the lawsuit though. Could be about a PR play to show that ADP is serious enough about what they said prior to the lawsuit to follow it up with a lawsuit.

Could be about forcing the other side to take what they are asking them to do (retract) seriously and perhaps and take back the negative comments. And so on.

Seems like lawsuit is the only way we'll find out the truth. I'm not inclined to believe Zenefits at this point. Was it really scraping ADP rather than using the normal integration methods made available to all brokers?

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.

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.

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.

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

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.

Great point.

> 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:



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.

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.

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.

It's a shame that it does seem like jerky behavior is at least correlative, if not causative, to success.

What are some of the other missteps Zenefits has made in the past (for the uninformed)?

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.

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.

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.

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?

> 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.

I am leaning to agreeing with you, however (in the spirit of debate) there are many examples of successful CEO's who meddle in seemingly unimportant matters due to their personal obsession/work ethic etc.

It's a not a good sign when your CEO argues with a "junior hire", however if he's successful at growing the company and creating value, it will be painted as part of his winning formula.

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.

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.

If a potential employee was concerned about name recognition with my startup, and I REALLY wanted her join, I'd double down on my pitch of how we're all passionate about making a huge (name-brand-worthy) contribution to the world, and her help will make a difference.

Really? Whenever I discuss my career with my employer (a startup much smaller than Zenefits), they're always the first to bring up potential future employers.

I guess that answered his question, huh?

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.

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.

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.

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.

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.

ADP EZ-Labour - not so EZ, but plenty of labour. There are 20 work days in a month. There are 20 rows in the timesheet form. Every one of them has 8 drop-down boxes, and every one of them needs to be filled with your work status, project code, etc, individually. No group actions. Seriously.

What's so frustrating about benefits front-ends is just how much low-hanging fruit is sitting there uncollected. I'm not asking that ADP implement some awesome canvas-based rendering with AJAX storage and async field update - I just want a lousy 'apply all' button and maybe working tab order between the form controls. Jeebus.

Are you using it for time tracking? Would you be able to use a dedicated time-tracking tool like Toggl [0]? I'm not connected Toggl, just a happy user. It seems to have good reporting and project-granularity for timesheets, better than any I've used before.

0: https://toggl.com/

I'm sure there are several other great time tracking ones, too. Is there a particular reason you must use ADP's timecard tracking?

I don't think that anyone would voluntarily use EZ-labour themselves. EZ-labour is the sort of software that you choose for OTHER people to use. In other words, Enterprise-Grade Software.

Our accounting department uses EZ-labour to keep track of our work on different projects and for registering time-off and vacation. Realistically most of us only work on one project, but accounting wants the time cards filled out anyways.

EZ-Labour is unfit for personal time-tracking. For one thing, the UI is clumsy and repetitive. If I work on one thing consistently for a week, I have 5*8 slowly updating combo box fields to enter at the end of the week.

For another thing, the work categories are defined by the accounting department, not by the users. The categories aren't useful for me - they're useful for accounting.

Also, you can't always fix errors. There's at least one bug in EZ-labour where accidentally entering hours on a weekend can't be removed.

EZ-Labour's front end could probably be improved a LOT, quite easily. But it's Enterprise-Grade Software - no one who made it is using it, no one who is buying it is using it, no one who uses it has an opportunity to fix it, and there's clearly no user-feedback being incorporated into the design. It's bad software being shovelled out by a big, dumb, blind company. That's really what characterized Enterprise-Grade Software - it's produced by a silo-ed organization and there's no opportunity for feedback and iteration, so it never gets past it's shitty v0.1 state.

The ADP front-end isn't the product. front-end is basically an admin screen, the product is the payroll actually hitting your employees bank, and its all the customer service involved if things go wrong before hitting your employees bank account.

This is why people pay them, there user interfaces are bad. However it is bad interfaces over reliable services... there competition in this case offers great interfaces over other peoples services.

Put another way: the people filling out time cards and getting paid aren't the customer.

Yep. Payroll is also hard in the backend. The rules differ by state and by country. I've only written very basic payroll systems and it was a PITA. The UI was the least important thing when it came to paying people properly.

> 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).

Would you rather have something that looks nice or actually works? Especially when it comes to nontrivial things like benefits and payroll? Don't you think it's a bit silly for you as a user to be swayed to use one thing or another by a pretty interface?

We seem to understand never to "judge a book by its cover"...except when it comes to web interfaces.

Why can't I have both? Isn't that the value proposition of Zenefits?

You can, but given the mixed reviews from actual Zenefits customers on here and elsewhere they aren't there yet.

I liken it to tech's war on banks. Everyone loves to make fun of the fact that banks still use "old" technology like mainframes, but when was the last time a bank went down? I will go with a old school bank over a NewCo tech bank any day when it comes to nontrivial things like storing my money.

my banks online banking goes offline all the time sometimes for multiple days, certanly more often than AWS.

Just because you can't see the uptime of non user facing banking backends doenst mean they don't run into problems

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.

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?

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.

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.

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

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...

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

It was a joke dude.

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

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.

Well, yes, it was a joke, but many people are probably confused about that. It's worth noting.

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.

Yeah I agree; even if Zenefits is 100% in the right here ADP has the resources to drag this out for quite some time and cost them a very large amount of money. If Zenefits is in the right I wonder if they can produce evidence and try to use SLAPP regulation (not sure if that works for companies but then again companies are people, right?). I'm obviously not a lawyer :)

ADP will lose this lawsuit very quickly

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

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.

> 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.

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.

"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.

> Then one party or the other will move for reconsideration and it's another six month delay.

Exactly. The exact vagaries of how each clerk sets calendar dates and whatnot wasn't my point. My point was that I have never seen a civil litigation forum in the U.S. where either party doesn't have half a dozen methods that can effectively double the amount of time it takes to get through the same procedure.

Depends on what you deem to be lengthy.

Most defamation suits take around a year or so to get to trial. As a litmus test, the recent Jesse Ventura defamation suit took two years to conclude.

This doesn't include appeals either, which can drag the process out even further.

Depending on where the trial is set, and how expensive Zenefits legal counsel is, this could be a huge financial burden for them to undertake and quickly drain their resources.

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.

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.

You have a link to that WSJ article?

I think he might be referring to this one:


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

This case has been tried before, but in a different industry: 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.

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.

>> 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 )

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.

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?

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...

Are you referring to this 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?

> 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.

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

Even better, they need a CFO

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: http://partners.adp.com . No need to be #ADPeeved."

via https://twitter.com/ADP/status/608455243232387072

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.

Hooli vs pied piper in real life...

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

How do you know?

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?

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).

Is there a link to ADP's technical response?

Yes, thank you.

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.

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


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