Pando

Zenefits makes "one-time offer" of cash to former employees, if they promise not to sue over PTO

By Paul Bradley Carr , written on December 3, 2015

From The Legal Affairs Desk

There are storm clouds gathering above Zenefits.

Earlier this year, Zenefits was riding high. According to CB Insights, the company was enjoying the single biggest percentage increase in valuation of any "unicorn" in 2015: 800%.  

Then, late last month, Buzzfeed reported that the HR company is being investigated in Washington and at least six other states for selling insurance services without a license. 

As one source in the insurance industry told Pando: "There's no precedent for something like this, because no one in the history of the health insurance industry has written so much business via unlicensed agents. It happens on a small level occasionally, with tiny 20 person agencies or something, but companies with more than 500 employees wouldn't ever do something like this."

The Wall Street Journal also reports that the company has some HR problems of its own, having reportedly failed to pay departed employees their owed paid time off (PTO), as required by California law. 

On the PTO claim, the company has continually insisted that it doesn't owe employees anything, due to an unlimited time off policy. That kind of policy is popular with many Silicon Valley startups, in part because it seems incredibly generous – choose your own hours! – but can also be used to skirt PTO requirements when employees leave. 

And yet, despite insisting it doesn't owe a dime, the company seems curiously keen to give its money away. Yesterday afternoon an anonymous source forwarded to Pando an email, embedded below, apparently sent to former Zenefits employees.

In the email, the company once again insists that it owes no PTO, and yet offers to make a one-time payment to the former employees, provided they waive their right to make any future claims against the company. The email sets a deadline of next Friday for the former employees to accept the offer.

If you sign this agreement before that deadline, we’ll get you this payment within 5 business days! If you choose not to take advantage of this offer, Zenefits may contest any and all claims that may arise in the future related to this matter. 

I emailed the company to confirm that the email is legitimate, and to ask why – if the company really believes it owes nothing – they would offer to make a payment at all. Doesn't the email, and the short deadline, suggest that they're trying to head off a much larger claim down the line?

Company spokesperson Kenneth Baer responded briefly, channelling his inner Jeff Probst: "Got nothing for you, Paul."

Now I know how all those former employees feel. 

Here's the email, with the source's identifying info redacted:

Hey [redacted]:

We’d like to offer you a one-time payment of $[redacted] (less applicable withholdings).

Why? We’ve been getting a few questions about whether we should have paid certain early employees vacation or PTO when they left Zenefits. As you know, we’ve always had an unlimited flexible time off policy. Parker has reiterated this whenever it has come up and it has been consistently reflected in the YourPeople, Inc. PTO card in Zenefits. We don’t believe vacation or PTO has ever accrued, or was required to be paid out under our policy.

Nevertheless, in order to resolve any issues related to our PTO policy or other wage matters, we’re making a one-time offer. The offered amount is based on your tenure, level, PTO record in Zenefits, and role. To receive this payment, please carefully read the agreement that will be sent to you via DocuSign and electronically sign it before noon on Friday, December 11, 2015. The agreement waives and releases any potential claims that you may have about wages including vacation or PTO between you and the Company. If you sign this agreement before that deadline, we’ll get you this payment within 5 business days! If you choose not to take advantage of this offer, Zenefits may contest any and all claims that may arise in the future related to this matter.

If you have any questions, drop us a note at [email protected].

Update: Buzzfeed's William Alden confirms he has seen a similar email from a source he trusts...