Dive Brief:
- Zenefits has had its share of bad news in the recent past, but a glimmer of hope may be on the horizon. The Tennessee Department of Commerce and Insurance (TDCI) will allow the cloud-based HR startup to pay a $62,500 fine to get right with the state.
- Tennessee had stopped Zenefits from doing business in the state after the startup’s employees sold insurance to companies without having proper licenses, a pattern that Zenefits followed in several other states, including New York, Washington and others, according to Venture Beat. This is the first of several Zenefits’ regulatory settlements.
- In a statement, the TDCI noted that Zenefits launched a new company mandate that all insurance producers complete 52 hours of continuing education courses, including 12 hours of ethics training. It put in controls to prove the brokerage license status of a producer before he or she sells insurance to a potential Tennessee client.
Dive Insight:
Along with those mandated actions, Zenefits CEO David Sacks also reconstituted its Board of Directors, created the position of Chief Compliance Officer and established a compliance team, according to Sacks' blog post.
With the Tennessee situation now on the books, Zenefits and Sacks are entering a critical phase of their comeback. Settling fines from states looking to penalize the company for selling insurance without a license will have a very positive impact on the company's ability to recover and do business in those states.