Zenefits withheld $3.4M in overtime

Department of Labor says startup wrongly exempted workers from extra pay

SAN FRANCISCO — In another blow to Zenefits, the human resources software startup must shell out $3.4 million in unpaid overtime to 743 workers who were wrongly classified as exempt from receiving the extra pay, the U.S. Department of Labor said Tuesday.

Investigators found that the San Francisco-based company violated federal law by misclassifying account executives and sales representatives in California and Arizona.

Zenefits also has agreed to be monitored by the Department of Labor to prevent future wage and hour violations.

“We have put money back in workers’ wallets while also working with Zenefits to ensure future compliance with federal labor law,” Ruben Rosalez, the Department of Labor Wage and Hour Division’s regional administrator in San Francisco, wrote in a news release. “This case allows us to level the playing field

for all of the employers who play by the rules. We are dedicated to protecting both workers and employers.”

Zenefits spokeswoman Jessica Hoffman said the company is moving on.

“We are pleased that after the Department of Labor’s review regarding classification of two jobs at Zenefits, there were no penalties, fines or damages,” she wrote in an emailed statement. “Zenefits fully cooperated with the DOL and we are happy to have this issue behind us.”

The bill comes as Zenefits, which provides cloudbased software to help companies manage tasks like payroll and onboarding new employees, is trying to move past a scandal in which its employees were caught selling insurance without completing the proper licensing requirements.

After launching an internal probe, the company found that its co-founder, Parker Conrad, had created a tool that let insurance brokers skip parts of the state’s required 52-hour training course.

Conrad stepped down as CEO and was replaced by David Sacks, who left the company in December — after less than a year — to be replaced by current CEO Jay Fulcher.

California regulators fined Zenefits $7 million for insurance violations in November, with half of the fine suspended because the company took steps to remedy the problem on its own.

So far, Zenefits has settled with more than 40 states, and expects to close deals with the rest soon. The company also has laid off hundreds of workers in the wake of the scandal, and last summer voluntarily halved its own valuation as a concession to investors.

Nevertheless, Zenefits is working to move out from under the shadow of past indiscretions. The startup attempted a comeback in October with the launch of a new suite of “Z2” products during a splashy San Francisco conference of the same name.