Zenefits, the troubled purveyor of a online human resources platform for insurance, has agreed to pay nearly $3.7 million to settle charges brought by California state regulators.
The 4-year-old Silicon Valley-based company was dinged for allegedly allowing unlicensed employees to handle insurance transactions and for circumventing insurance agent education requirements, the California Insurance Department announced.
“Our enforcement action has resulted in Zenefits paying substantial monetary penalties for their licensing violations and ensures Zenefits complies with all of California's insurance laws and regulations or they will face additional automatic penalties and sanctions,” Insurance Commissioner Dave Jones said in a statement on the regulator's website.
Zenefits, launched in 2012, has been under both regulatory and media scrutiny since BuzzFeed News last year reported on the licensing controversy. That led to the February resignation of Parker Conrad, the company's co-founder and CEO. Serial tech entrepreneur David Sachs, the former chief operating officer of PayPal and co-founder of Yammer, took over then.
“Zenefits is an example of an Internet-based startup whose former leaders created a culture where important consumer protection laws were broken—a bad strategy that placed the company at risk,” Jones said
The agreement stipulated a $3 million penalty for the licensing violations and a $4 million penalty for “subverting the pre-licensing education and study-hour requirements for agent and broker licensing,” the agency statement said. Another $160,000 was paid to the state to cover its costs for investigation and examination. However, because Zenefits self-reported and had taken remedial actions, including retraining its licensed personnel, the state agreed to cut in half its monetary penalties, suspending the other half, which could be reinstated, if it fails an agreed-upon compliance examination in 2018.
