Zenefits has been under fire for skirting regulation, resulting in the ouster of its previous CEO Parker Conrad and a heavy-duty overhaul underway of the company.
The results of that effort are now seemingly starting to emerge, starting first with a resolution in Tennessee which will cost the company $62,500 and allow it to continue operating. The company continues to have conversations with other regulatory commissions as it works to convince them that it has changed its tenor and is now ready to comply with regulations when it comes to operating its business. The hope here, it would seem, is that Zenefits is setting a precedent that it has left that behavior behind and doesn’t need to be severely punished going forward.
This basically amounts to a slap on the wrist for the company, which previously instituted a program called “the Macro” that helped it skirt regulatory requirements in order to grow more quickly. That, in the short term, helped the company quickly rocket to a $4.5 billion valuation, but a series of reports lifting the veil on that behavior — as well as the company’s party culture — has forced Zenefits to basically make a 180.
“Fortunately, new company leadership has demonstrated a dedication to righting the ship,” Tennessee Department of Commerce and Insurance commissioner Julie Mix McPeak said in a statement. “They have instituted new and enhanced agent training requirements as well as licensing controls to ensure that company employees comply with state licensing laws. They employed a reputable outside firm to help test and confirm these new procedures.”
That started with Parker leaving the company and COO David Sacks taking over, as well as change in the board of directors. It also led to a series of layoffs, including offering employees a generous buyout package for those not interested in sticking around as it works to remake the company’s culture and operations. Around 10% of employees accepted the offer, which amounted to about two months’ severance.
Most recently, Zenefits pared back its valuation to $2 billion and restructured ownership stakes in the company as a continuing effort to reset expectations as it worked to change its direction — and likely the speed of its growth along with it. That decision would help it fend off potential lawsuits from investors who were kept in the dark regarding “the Macro.”

“I also want to thank our employees for doing the hard work of remediation,” Sacks said in a statement. “You have changed our company’s culture and values at a fundamental level. Because of your efforts, Zenefits has reached a watershed moment: not only does this agreement pave the way for us to continue operating in the great state of Tennessee, it also recognizes that Zenefits is a new company that has moved past its historical issues. We look forward to reaching resolution with other states soon.”
Of course, this does not mean Zenefits will get the same treatment in other states. The company is under investigation in a few states including Washington and California, as first reported by BuzzFeed. Those states may seek to impose harsher terms on Zenefits, which has actively tried to investigate and self-report violations as a way to help reduce the potential impact on its business.
