ADP sues Zenefits for defamation... and then launches a new Zenefits-like product?
So, the battle between payroll management software company ADP and all-in-one HR software platform Zenefits took another strange turn late yesterday.
It seems that shortly after I wrote about the fight between the two companies, which involved ADP shutting off access to its payroll product to Zenefits customers and some pretty harsh accusations lobbed from one company to the other after that happened last week, ADP filed a lawsuit against Zenefits in federal court.
According to a blog post from Zenefits' CEO Parker Conrad, "The central charge of the suit was defamation, specifically that Zenefits defamed ADP by claiming that ADP’s actions to block Zenefits’ users were motivated by competitive reasons. ADP took issue with our statement that we believed ADP was developing a competing product to Zenefits."
Conrad added that the lawsuit specifically said that there was, "“No factual basis," for the claim that ADP had its own product meant to compete with Zenefits' HR offerings, including insurance.
The Wall Street Journal reports that in the lawsuit, ADP alleges that Conrad undertook a “manipulative and malicious public relations campaign, ignoring its own conduct, to defame ADP and drive away ADP’s clients," and "alleged that ADP intentionally sought to cause harm to ADP’s clients solely to gain an unfair competitive advantage against Zenefits.”
Conrad also included an email in his blog post that he claims was sent to a shared Zenefits/ADP client by an ADP sales rep shortly after the lawsuit was filed. In the email, the ADP rep pitches a new ADP product called Opum which is described as "a product to compete with Zenefits, a full service integrated online payroll and benefits solution.”
I did a quick search online and on ADP's website for "Opum," which, oddly, didn't turn up anything. The email seems legit.
In the rest of his post to Zenefits customers, Conrad claims that the blocking of Zenefits by ADP for security reasons, which the company claimed in its fact sheet about the Zenefits/ADP split, was nothing more than an attempt to discredit Zenefits as it prepared to launch its own, similar product. Conrad describes the entire claim of a data spike, which he said couldn't be proved by ADP, was "a pretext for a competitive campaign designed to clear the way for its new bundled product."
Throughout the post, Conrad emphasizes that the entire episode is causing disruptions for the small businesses using both services, putting them in the crosshairs of the disagreement, and distracting small business owners from running their businesses.
The very public fight seems to be getting uglier by the moment, with neither side seemingly willing to back down. Near the end of his post, Conrad takes a swipe at ADP's value system, writing, "We call on ADP to stop making life more difficult for small business customers and live up to its corporate value: “integrity is everything.”
I'm not sure if either company would really like the whole thing to go away. If ADP is launching a new Zenefits-like product, this is as good a way as any to get attention for its launch. And, for a company that recently raised $500 million in funding, Zenefits comes off as the "little guy" startup being bullied by the incumbent power in the entire episode.
I'm sure this isn't the last we'll be hearing about this from either side.