Paycheck services provider ADP recently shut off Zenefits access to client information needed to run payroll, claiming the startup was gleaning this information in an unauthorized manner and posed a security risk. Zenefits shot back in a blog post that ADP was actually shutting off access because it had developed a competing service to Zenefits.
ADP took issue with that accusation and filed a lawsuit against both Zenefits and its CEO Parker Conrad.
The filing argues that ADP is violating California’s anti-SLAPP (Strategic Lawsuits Against Public Participation), a statute that protects an individual’s free speech and provides means to seek a dismissal of a lawsuit if that lawsuit might infringe on their right of petition or free speech.
“I’ve seen this story before,” Yammer founder turned Zenefits COO David Sacks told TechCrunch over the phone. “When a large market incumbent feels threatened by a competitive product, the incumbent tries to throw every legal roadblock they can.”
Sacks didn’t face this sort of trial during his time at Yammer, but did mention Uber, Airbnb and Tesla as examples of young tech companies that have faced similar trials when entrenched corporate entities felt a competitive threat.
“The old economy is all about telling people they can’t have their choice and that’s exactly what ADP did. When we then complained that ADP was taking these actions ADP sued us for defamation,” Sacks said.
Zenefits believes ADP is an entrenched incumbent that is resorting to frivolous litigation and spreading “fear, uncertainty, and doubt” to try to silence and stop a disruptive new competitor.
“We have no issue competing with ADP. We do, however, have an issue with a Fortune 500 company using its army of lawyers to stop us from telling the truth to our customers, and fighting for their right to use whomever they want to help administer their payroll, benefits, and HR. We call on the court to quickly dismiss this frivolous lawsuit,” Conrad said.
We’ve reached out to ADP for comment on the motion to dismiss but so far have not heard back.