In a significant development in the competitive startup arena, HR company Rippling has filed a lawsuit against Deel, another prominent entity in the same sector. The comprehensive 50-page complaint accuses Deel of racketeering, misappropriation of trade secrets, tortious interference, unfair competition, and aiding and abetting a breach of fiduciary duty. Rippling claims the legal action centers on an employee allegedly acting as a spy for Deel.
Deel, in a statement to TechCrunch, has refuted these allegations, asserting that Rippling is attempting to change the narrative following accusations against it for allegedly violating Russian sanctions laws and disseminating false information about Deel. According to a Deel spokesperson, the company anticipates asserting counterclaims against Rippling.
The HR technology industry is fiercely competitive, involving both established giants such as SAP, ADP, and Workday, as well as numerous startups tackling various HR functions, including payroll, recruitment, training, and benefits management. Both Deel and Rippling aim to deliver comprehensive solutions integrating these services. While market expansion and a thriving economy tend to moderate competitive tensions, financial constraints heighten rivalries, especially when companies like Deel and Rippling are similar in size and cater to the same clientele. Rippling’s valuation stands at just over $13 billion, while Deel is valued at more than $12 billion.
Public manifestations of the tensions between the two companies were apparent even before the lawsuit. Rippling launched a marketing campaign targeting Deel, portraying it as a snake in a “Snake Game” and claiming that Deel charges higher fees. The rivalry further intensified when a sales director from Deel engaged with the game and later saw the exchange posted on Twitter by Rippling’s COO, which alarmed customers concerned about potential doxxing.
The lawsuit also touches on allegations regarding compliance with Russian sanctions, scrutinizing both companies’ adherence to regulations.
A notable aspect of the lawsuit is the reliance on evidence derived from Slack activity. Rippling asserts that it maintains logs of employee interactions on Slack, owned by Salesforce, which recorded an unusual spike in activity centered on the term “Deel.”
The lawsuit describes how, starting November 2024, an employee, identified as D.S., accessed Slack channels at an unprecedented rate. These channels contained discussions related to Rippling’s sales and business strategies, with a particular focus on Deel. According to the complaint, these actions were unrelated to D.S.’s responsibilities in payroll operations but rather concentrated on critical business development and competitive intelligence pertaining to Deel.
Furthermore, the lawsuit claims D.S. engaged in viewing, downloading, and sharing sensitive documents, contributing to attempts to recruit employees from Rippling.
To substantiate its suspicions, Rippling created a fake Slack channel, sharing its name with prominent Deel executives, and monitored whether D.S. would search for it. When an independent solicitor attempted to seize D.S.’s phone by court order, the situation escalated, as D.S. allegedly locked himself in a bathroom and resisted.
Eventually, D.S. left the office despite being warned of violating a court order, choosing instead to flee the scene.
Rippling has not responded to inquiries regarding potential legal action against D.S. or confirmation of his identity. However, the details provided in the complaint make it relatively simple to identify the individual alleged to have been spying on LinkedIn. The person contacted has since removed their profile from the site.
