Where Things Stand in the Ongoing Battle Between Zenefits and Utah

This would be like Utah banning residents from buying airline tickets on Travelocity or Expedia to protect travel agents.

Unless you’ve been hiding under a rock for the last two months — or you’re a Seattle Seahawks fan in mourning — you’ve heard of the recent controversy surrounding the ban of Zenefits in Utah. It started with a November 20 letter from Utah Insurance Commissioner Todd Kiser — former insurance company owner and broker — to Zenefits, demanding removal of their free, HR-based platform from Utah or force fines totaling close to $100,000 and confiscation of the company’s Utah revenue.

Cue the domino effect: Zenefits responded angrily to a perceived outdated interpretation of a random rebates law and bemoaned the anti-competitive ruling, small business owners in Utah responded angrily to the removal of a useful product, and Utah Gov. Gary Herbert himself waded into the controversy. Many within the tech community — including prominent figures like Josh James and Marc Andreessen — have spoken out against the ban, and over 3,400 people have signed an online petition supporting Zenefits being allowed back into Utah.

If you don’t fully understand why this ruling is so important, let me simplify. As a state that prides itself on being a free-market, business-friendly oasis, Utah’s ruling against Zenefits goes contrary to that — of 50 possible states, Utah is the only one to ban Zenefits. In a recent op-ed published in The Salt Lake Tribune shortly after delivering a keynote address at StartSLC, CEO Parker Conrad gave an impassioned plea to the Utah government asking for re-entrance into the state.

“The irony here is that Utah — which has worked hard to build a reputation as a free-market, pro-business, pro-technology state — is the only state in the country to ban Zenefits in order to protect an incumbent industry from online competition,” Conrad said. “This would be like Utah banning residents from buying airline tickets on Travelocity or Expedia to protect travel agents.”

The months of December and January were basically a stalemate — Zenefits claimed they were explicitly told to not do business in Utah, Lt. Gov. Spencer Cox said, “there was some misunderstanding by Zenefits and their counsel,” to which Zenefits promptly asked for written documentation allowing them back into Utah. As of now, no documentation has been provided.

So where does that leave us? Today, Rep. John Knotwell introduced a bill that will allow Zenefits back into Utah, allowing them to offer free services to everyone as long as purchase of insurance isn’t mandatory. The Utah House and Labor Committee has voted in favor of the bill. It will now be put to a vote on the Utah House floor next week.

While we wait for the House’s vote, and, should it pass the House, the Utah State Senate’s approach to the bill, Zenefits continues its meteoric rise in the tech stratosphere without Utah by its side. The Utah government can change that — in the meantime, let’s keep enjoying our outdated, overpriced way of handling insurance that literally no other state in America embraces.

Published 2/9/2015