Insights
Publications

Private Company Enforcement: Bay Area Tech Company Designs Tech Solution to Its Compliance Problems

7/22/2016 Articles

The brightest minds in Silicon Valley work 24/7 to disrupt existing systems and industries. No one can argue that Uber and Lyft haven’t fundamentally altered transportation, that AirBnB hasn’t changed the way we travel, or that Netflix hasn’t rendered brick and mortar video rental stores obsolete. Can those same minds harness the innovative energy of the region to make it easier for regulated industries to comply with state and federal laws? At least one Silicon Valley company thinks so, and is exploring new ways to marry its technological expertise with its compliance obligations.

Zenefits, a San Francisco company valued at $4.5 billion, aimed to disrupt the health insurance and Human Resources market by providing small businesses with, among other things, health care brokerage services. The company recently found itself in hot water after BuzzFeed News revealed that the company failed to ensure that those of its employees acting as health insurance brokers were licensed to do so. Because Zenefits operated in all 50 states, it routinely had brokers assigned to projects for clients in states in which those brokers weren’t licensed to sell health insurance. Further reporting revealed that the company even created a special software program that let employees in California skip the mandatory 52 hour training sessions required for state certification. The ensuing scandal led to the resignation of the company’s CEO in February of this year and a leadership shake-up across the company.

The new Zenefits team faced their compliance problems head on. Redemption began with a comprehensive internal investigation, the results of which were reported to all 50 states, but perhaps the most lasting impact of this compliance failure will be an embrace of technology to provide a long-term solution to regulatory headaches.

In late June, Zenefits announced that it had developed an app that can verify each broker’s licensure status and will direct accounts to only those brokers able to sell products in the relevant jurisdiction. The app not only assigns brokers to only those projects they can legally work on, but also, by verifying licensing statuses using the National Insurance Producer Registry database, confirms that a broker can work at all.

Zenefits’ app is an innovative solution to a widespread and complicated compliance problem. If technologies like this one prove successful, and as Silicon Valley aims to “disrupt” more and more regulated industries, this kind of innovation will play a larger and larger role in bolstering compliance with existing regimes.

Firm Highlights

News

Farella Names Carolina de Armas and Hilary Krase As Leadership Council on Legal Diversity Pathfinders

Carolina de Armas and Hilary Krase
Read More
Publication

Nonprofit Basics: Document Retention Policies and Subpoenas, and a Conversation With Aviva Gilbert on Why Good Policies Matter

Welcome to EO Radio Show – Your Nonprofit Legal Resource . This Nonprofit Basics episode covers record retention policies, document destruction schedules, and why they matter. You may have noticed that the IRS Form...

Read More
News

Aviva Gilbert Named a Leadership Council on Legal Diversity Fellow

Aviva Gilbert Headshot at Farella Braun + Martel
Read More
Publication

A Primer for Corporate Directors: Maximizing Internal Investigation Effectiveness and Efficiency

In corporate America and across the globe, allegations of wrongdoing within companies are increasingly common, and the high cost of internal investigations continues apace.  In 2021, in an anonymous survey of more than 1,330...

Read More
Publication

Internal Investigations for Nonprofits: A Means of Identifying and Addressing Misconduct Before the Regulators Come Calling

The worst nightmare for most nonprofit board members is a complaint that sparks an investigation of misconduct at the organization. The ember may have been burning for some time before the board becomes aware...

Read More
Publication

Maximizing Internal Investigation Effectiveness & Efficiency

In corporate America and across the globe, allegations of wrongdoing within companies are increasingly common, and the high cost of internal investigations continues apace. Companies are now also routinely investigating allegations beyond violations of...

Read More
News

Sarah Good Appointed to California State Bar Board of Trustees

Read More
Publication

Cybersecurity Regulation: Key Takeaways From an Unusual FTC Order That Will Follow CEO for a Decade

The FTC recently issued a proposed order that would settle an enforcement action against Drizly, LLC and its co-founder and CEO, James Rellas, arising from data breaches in 2018 and 2020 that affected over...

Read More
Publication

Uber’s Former Chief Security Officer Found Guilty of Obstruction For Coverup of Data Breaches

On October 5, 2022, after a monthlong jury trial, former Uber Chief Information Security Officer Joseph Sullivan was found guilty of obstructing proceedings of the Federal Trade Commission (FTC) and misprision of a felony...

Read More
Publication

The Humility To Prepare and the Confidence To Pull It off With Doug Young

Mike Herring interviews past ACTL President Doug Young in this episode of  Trial Tested: A Podcast by the American College of Trial Lawyers . S3E6: The Humility To Prepare and the Confidence To Pull It off With...

Read More