However investigations are still ongoing at Washington, Massachusetts and California. The company will count itself lucky if it can get off as lightly as this.
According to officials from the state of Tennessee, Zenefits must pay the state $62,500 for having violated insurance requirements, thus marking the first settlement by the company with regulators as it tries to redeem itself after revelations of having flouted the law.
“Under the company’s past leadership, compliance with insurance laws and regulations was almost an afterthought,” said Julie Mix McPeak, commissioner of the Tennessee Department of Commerce and Insurance, in a statement.
She went on to add, “Under the old Zenefits model, they were not complying with state laws. Fortunately, new company leadership has demonstrated a dedication to righting the ship.”
According to a source familiar with the matter at hand, Zenefits is likely to continue operating in Tennessee. However, the company’s business practices are being scrutinised in the state of California, Washington and Massachusetts.
Penalties in Tennessee are relatively light in comparison to other states in which the company’s workings are being investigated.
Zenefits provides its free software to businesses and makes its money as a health a health insurance broker for companies such as Anthem Blue Cross.
David Sacks, CEO of Zenefits, has portrayed Tennessee’s decision as a watershed moment which demonstrates that the company “has moved past its historical issues.”
Sacks, a serial entrepreneur, took on the mantle as the company’s CEO after Parker Conrad, founder and former CEO of Zenefits resigned in February midst revelations that employees were not meeting training and licensing requirements to sell health insurance.
Significantly, Zenefits has now reported that Conrad had written a program, called Macro, which helps employees circumvent licensing requirements in the state of California.
After this disclosure, more states have asked Zenefits to hand over more information. As of now, it is unclear as to whether they will impose severe penalties or fine the company.
According to Sacks, the company has now a mandate which requires brokers to complete 52 hours of continuing education courses from the National Association of Health Underwriters, including its 12 hours on ethics training.
A while back, Zenefits was deemed by investors as the fastest growing tech company in Silicon Valley history.
Last month, in a move designed to appease investors, Zenefits, slashed its valuation from $4.5 billion to $2 billion while increasing their combined stake from 11% to 25%.
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