Today, Zenefits has reached a compromise agreement with the Washington Office of the Insurance Commissioner (OIC) on how Zenefits will price its services in Washington State. Beginning January 1, at the order of OIC, Zenefits may no longer provide free software services in Washington. As a result, Zenefits will charge all Washington state customers $5 per employee per month for our core HR product.
This agreement arises from OIC’s interpretation of its anti-rebating statute, which prohibits brokers from refunding part of their commission back to clients. These anti-rebating statutes are designed to protect consumers from discriminatory pricing. Unfortunately, the Washington commissioner seeks to use a consumer protection statute to raise prices for Washington consumers, a counter-intuitive decision that we disagree with.
The Washington viewpoint is a decidedly minority view. Since its founding, Zenefits has had conversations with regulators about our business model, which includes some free HR apps. Many states have looked into the issue and concluded that free software from Zenefits is not a problem; in fact, it’s in the interest of consumers. Only one state other than Washington has disagreed. Utah’s department of insurance tried to force Zenefits to raise prices for consumers, and Utah’s state legislature and governor quickly took action, passing a bill to clarify that its rebating statute should not be interpreted to prohibit innovative new business models that deliver value to consumers.
Nevertheless, we do appreciate the efforts of Commissioner Kreidler and the OIC’s staff to reach this compromise agreement with us. This agreement provides a template for Zenefits to do business in states with a minority interpretation of the rebating statute (whereas the short-lived Utah decision would have effectively prohibited us from doing business in the state). But an even better solution would be for all states to interpret the rebating statute in the way it was intended — to protect consumers, not brokers that compete with Zenefits.
We believe that our core HR product is worth the $5 price that we will charge, and we’re going to include our new HR Adviser app as part of the bundle to make this an even better deal for our customers. But that’s not the point. Zenefits and every other company should have the freedom to set prices for our products and services in the way that drives the best value for consumers. We will work with the legislature and other stakeholders in the coming months to uphold this principle.
In the meantime, our customer service teams will be reaching out directly to all our Washington customers to make it as easy as possible for them as we transition to this new pricing structure in Washington.