Washington state Insurance Commissioner Mike Kreidler on Thursday ordered Zenefits to stop offering its free insurance software and said it violates Washington state insurance law.
Kreidler issued a press release that explains how Zenefits cannot give away free HR software to companies who also buy insurance on the platform.
From the release:
California-based Zenefits began operations in Washington in 2014, selling online human resources services to businesses. As part of its free software offer, Zenefits provided certain features with a paid commission. To access these premium features, the company required the client to designate Zenefits as its broker of record, then collected the commissions associated with the insurance product sold.
“The inducement law in Washington is clear,” Kreidler said in a statement. “Everyone has to play by the same rules.”
The Wall Street Journal reported that Zenefits has agreed to charge Washington state companies $5 per month for each employee who signs up to use its human resources software.
Zenefits has 90 days to challenge Kriedler’s order. The company is actually hosting its Z2 conference in Seattle next Tuesday where CEO David Sacks and others will speak.
Kreidler previously fined Zenefits $100,000 in October for “employing unlicensed producers to sell insurance in Washington.”
This is the latest blimp for Zenefits, the San Francisco-based company that was once valued at more than $4 billion but has run into several internal and external problems over the past few years. It was just hit with a $7 million fine by California regulators this week.