What’s business without a little competition? Since the inception of the United States’ current economic structure at the dawn of the Industrial Revolution, early economic thinkers and philosophers like Adam Smith and Antoine Augustin Cournot were writing about the importance of competition in the marketplace. Of course, despite its presence and arguable necessity, competition can still be a source of headaches for many business owners. Just imagine it: you spend months and months developing this new product; you pour an endless amount of time, money, and labor into developing a perfect product, but right as you’re about to release it, your competitor announces a similar product that is just so slightly better than yours. It’s back to the drawing board, then.
While not all businesses have maybe experienced the exact scenario above, they are certainly familiar with the stress of having to consistently stay one step ahead of the competition. At Payday HCM, we want to be a source of knowledge not only for our current and potential clients but for everyone—competitors included. Of course, there are methods where you can absolutely ensure you’re staying one step ahead of your competitors, but it could be at the risk of legal action. Something like this made headlines recently as HR software provider Rippling announced a lawsuit against fellow HR software provider and competitor Deel for engaging in acts of “corporate espionage.”
So, in this article, we’ll be breaking down the lawsuit that Rippling has filed against Deel. We’ll start by briefly covering the services that each company provides. Then, we’ll unpack the information available regarding the lawsuit and the actions Rippling alleges Deel has partaken in. After that, we’ll go over the potential implications that this lawsuit may have on the world of HR software providers.
In this article, you will learn:
- Background: Who Are Rippling and Deel?
- Details Of Rippling’s Lawsuit Against Deel
- The Potential Impacts of the Rippling, Deel Lawsuit
Background: Who Are Rippling and Deel?
Before we go over the details that we know about the lawsuit between Rippling and Deel, we’ll first start with some background information about the two companies.
Rippling And Deel: Comprehensive HR and Payroll Solutions
Co-founder and CEO Parker Conrad first started Rippling after he left TriNet Zenefits, another human resources information system company, after David Sacks replaced Conrad as CEO. From 2016, Rippling would continue to grow into the company that it is today, seeking to combine not only HR and payroll processes on to one platform but IT and finance as well. Rippling was most recently valued at $13.5 billion.
Deel was founded by MIT graduates Alex Bouaziz and Shuo Wang in 2019 having been inspired by their friends’ difficulties finding jobs post-graduation. Deel’s particular focus lies in helping businesses hire and manage remote teams, striving to make it easier to navigate global rules and regulations. Deel was recently valued at $12 billion.
The Events Leading Up To Rippling’s Lawsuit Against Deel
Rippling and Deel have been close competitors for some time now—both companies have previously acknowledged their rivalry and even have dedicated webpages just for comparing their services against one another and a snake game from Rippling depicting Deel as a snake that charges higher fees. This includes other actions as well, like Rippling previously barring former employees who went to work for a competitor—including Deel—from participating in a tender offer stock sale.
Deel Co-founder and CEO Alex Bouaziz. Photo courtesy of Deel.
This isn’t the only instance of legal action taking place involving Rippling and Deel either. An investor in Rippling is currently involved in a different lawsuit in Florida that accuses Deel of violating certain Russian sanctions. Both companies, though, face scrutiny regarding this matter.
Details Of Rippling’s Lawsuit Against Deel
Now that we understand a bit more about both companies and their relationship with each other, we’ll go into more detail regarding Rippling’s lawsuit.
Rippling Accuses Deel of ‘Corporate Espionage’
On Monday, Rippling filed a lawsuit against Deel that alleges the company hired an employee of Rippling’s at their Dublin office to conduct searches into their sales efforts and employee information. The lawsuit was filed in the Northern District of California, San Francisco Division. The lawsuit explains Deel used the information to gain an unfair market advantage in:
- “Deel’s Sales and Marketing functions to target the competitor’s leads and pipeline;
- Deel’s Customer Retention function to leverage stolen pricing proposals to lock in Customers;
- Deel’s Recruiting function to exploit the competitor’s internal phone directory to attempt to poach key personnel; and
- Deel’s Communications and PR functions to combat and distort negative press cycles.”
The lawsuit states that the alleged mole searched for the term “Deel” within internal Rippling Slack channels at an unusual amount starting in November 2024. Rippling first began to suspect something suspicious when Deel attempted to hire 17 Rippling employees via WhatsApp, a messaging platform that would require Deel to know the Rippling employees’ phone numbers.
In a statement provided to media outlets like the New York Times and TechCrunch, Deel responded to the lawsuit and denied any wrongdoing: “We deny all legal wrongdoing and look forward to asserting our counterclaims.” Officially, Rippling is claiming Deel violated the 1970 Racketeer Influence and Corrupt Organizations Act.
How Rippling Discovered The Alleged Spy
Now, if you’ve seen other coverage of the lawsuit (us included), you’ve probably noticed the phrase “corporate espionage” (a phrase used in the lawsuit) and allusions to spy films and television shows. This largely is a result of how Rippling uncovered the alleged mole by using a “honeypot trap.”
In short, Rippling sent out information to Deel executives about a fake Slack channel that supposedly contained embarrassing information about Deel. Rippling then waited to see if the suspected spy searched for the fake Slack channel, which Rippling claims they did.
Rippling then received a court order that would force the person to turn over their phone (an independent solicitor presented the court order). When this happened, though, the suspected mole locked themselves in the bathroom and refused to come out. The solicitor reported hearing the person doing something with their phone and then flushing the toilet. The person came out and fled the office; the phone was not recovered.
The Potential Impacts of the Rippling, Deel Lawsuit
Now that we understand more about the details of the lawsuit between the two HR and payroll system providers, we’ll dive a bit deeper into the potential impacts the lawsuit may have.
The Waiting Game
As of right now, it’s a bit too early to tell to list out the real ramifications that this lawsuit will have. The suit is currently in the pleading stage, meaning that the plaintiff has officially filed the suit. The defendant, in this case, Deel, will now need to respond to Rippling’s suit. The case will then go through the discovery phase and then, potentially, to trial.
Any number of things could happen between now and when the suit is finally settled. Deel and Rippling could opt for a non-trial solution like an out-of-court settlement or arbitration. Certain motions may also lead to the case being dismissed entirely, so it will be important to keep an eye out for any updates regarding the lawsuit.
What Should I Do If I Am Currently A Client Of Deel?
If you currently use Deel, there aren’t any legal barriers for you when it comes to continuing to use their services. The lawsuit could inspire a conversation among leadership around whether Deel is still the best solution for your business or not. This decision should be made with the business’s best interests at heart.
Again, it’s too early to say whether or not companies should take any action in regards to Deel or Rippling. The RICO Act does outline a number of criminal penalties when it comes to violations involving criminal charges, but businesses should wait and see what might arise in terms of this civil suit.
The Name’s Resources—Human Resources
Whoever thought that human resources and payroll management could be so intense? In all seriousness, though, competition can be a healthy part of owning a business. Of course, this doesn’t mean it’s going to be entirely stress-free. Pushing your business to deliver the best service to your clients—to be the premier operators in your sector—is something you constantly have to work towards, and it’s not always easy. Keeping the information provided in this article in the back of your mind, we hope you’ll continue to strive towards the best possible version of your business (legally, of course).
Choosing the right HRIS for your business is only one step of the process—a smooth implementation process is also crucial for ensuring long-term success for your business. Learn more about the common roadblocks businesses face when implementing a new HRIS.
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