More Trouble at Zenefits: Startup Cuts 106 Jobs

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David Sacks speaks during a Bloomberg West television interview in San Francisco, on Dec. 10, 2014.

Photographer: David Paul Morris/Bloomberg

Zenefits, the HR tech startup embroiled in a regulatory compliance scandal, is making another wave of staff cuts. The company said it will eliminate 106 jobs, accounting for about 9 percent of staff.

The San Francisco startup, which makes corporate software and sells health insurance to companies, will close its sales department in Arizona and reorganize its operations group, called Ops. The cuts come just a few months after Zenefits dismissed 250 people, about 17 percent of the workforce at the time.

“This is a painful decision because we have a lot of great salespeople in Arizona and talented people in the Ops organization who will no longer be with us,” David Sacks, the chief executive officer of Zenefits, wrote in an e-mail to employees. “But it is the right thing to do.”

The fall of Zenefits has come almost as quickly as its rise. After becoming a Silicon Valley darling valued at $4.5 billion by investors, Zenefits said in February that it was under pressure from state regulators for compliance issues. Employees had been using software that would have allowed them to skirt training requirements.

Parker Conrad, the founding CEO, resigned during the controversy under pressure from the board. Sacks, then chief operating officer, took his place and promised to clean things up.

In his message to employees on Tuesday, Sacks said the company’s revenue had “not decreased” and that its annual recurring revenue was still more than $60 million. He offered remaining employees who joined before his promotion to CEO on Feb. 8 -- a date Sacks calls “Day One” -- a two-month severance package and four months of health insurance if they choose to leave.

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