Zenefits cuts 250 jobs as compliance investigation continues

The staff reductions mostly will hit Zenefits' San Francisco-based sales department, along with about a dozen employees in recruiting.
Written by Natalie Gagliordi, Contributor

Zenefits said it plans to cut roughly 250 jobs -- or 17 percent of its workforce -- as the embattled HR software vendor faces compliance investigations in several states.

The staff reductions mostly will hit Zenefits' San Francisco-based sales department, along with about a dozen employees in recruiting, CEO David Sacks said in a statement.

"We are letting go of many great people today, and it is not their fault. It is no secret that Zenefits grew too fast, stretching both our culture and our controls," Sacks said. "This reduction enables us to refocus our strategy, rebuild in line with our new company values, and grow in a controlled way that will be strategic for our business and beneficial for our customers."

The layoffs cap off a tumultuous period for the once darling unicorn startup. A BuzzFeed News investigation back in November 2015 claimed Zenefits allowed salespeople to act as insurance brokers in at least seven states despite lacking the proper licenses.

More specifically, some Zenefits brokers are alleged to have padded the hours they said they committed for pre-certification in the state of California. So even though the brokers still had to take (and pass) a broker exam, their licensees would be disqualified without the required pre-licensing classes.

A subsequent BuzzFeed report suggested that 83 percent of Zenefits' insurance deals in Washington state through August 2015 were brokered by employees without the required licenses.

As expected, a few heads had to roll in light of such severe accusations. Earlier this month Parker Conrad, Zenefits' founding CEO, was booted from the company, leading to Sacks' appointment.

Several days later the California Department of Insurance began an investigation into the company's licensing practices.

Zenefits is no stranger to courtroom drama.

Even before Buzzfeed began its cutthroat investigation into the $4.5 billion startup, Zenefits was locked in a public feud with corporate payroll giant ADP.

In a nutshell, Zenefits accused ADP off cutting off its customers. ADP said it cut off Zenefits because of security concerns -- accusations which Zenefits denied. Zenefits then accused ADP as being anticompetitive.

ADP then filed a lawsuit against Zenefits over defamation.

After several months of tug-of-war, ADP dropped its lawsuit against the startup as part of a broader settlement.

Editorial standards