One of the more tense rivals in the startup world doesn't wear gloves. On Monday morning, the HR company announced a lawsuit against Deal, another big player in the same space. The dramatic 50-page complaint advocates for supporting and beating assault, misappropriation of trade secrets, unlawful interference, unfair competition, and violations of fiduciary duties. The lawsuit focuses primarily on employees who worked as spies for Deal.
Deel denied the allegations in the statement in a similarly glamorous way in a statement to TechCrunch, setting the stage for an even more dirty laundry broadcast.
“Weeks after Ripples was accused of violating Russian sanctions laws and violating falsehoods about the deal, Ripples is trying to change the narrative with these sensational claims,” the spokesperson said in a statement provided to TechCrunch. “We look forward to denying all legal misconduct and pleading counterclaim.”
Is this town big enough for both of us?
The HR Technology Space is extremely competitive and has not only major current positions like SAP, ADP, Workday, but also a number of startups targeting various aspects of HR, including pay, recruitment, training, compensation, benefits management, and onboarding. Companies like Deel and Rippling aim to provide an all-in-one platform for these services.
When the economy is good and the economy is rising, such as during a pandemic, when organizations scramble for better tools to hire, launch and manage people in different places, busy markets aren't the problem. But love-in ends when it gets tougher, especially when the two companies are wavy and are as close to the size as deals and target the same customers. (One indicator of how these two compete is Rippling's valuation is just over $13 billion. Deel was last valued at over $12 billion.)
Tensions between the deal and the rip ring began to unfold publicly before this lawsuit. Last year, Rippling launched a market campaign aimed directly at deals featuring “snake games.” The still accessible game portrays deals as snakes and accuss the company of charging higher fees than rippling.
The rivalry made more turns when the deal sales director visited the site to check the game and engaged in chatbots on the page, then saw the exchange posted on Twitter by the COO of Ripling. (The trolls didn't unfold as expected, and customers were worried about what was considered Doxxing due to the ripples.)
The feud also includes allegations regarding compliance with Russian sanctions. Rippling's complaints imply a claim, but both companies face scrutiny in relation to the issue. (Click here for more details.)
Slack Forensics played a big role in suits
What is very noteworthy about the lawsuit is how much of the evidence in Rippling's claims is based on Slack activities.
Ripplings' lawyers note that the company records what people are doing on a Salesforce-owned chat platform. “Employee slack activity is being 'logged'.” “Every time a user views a document through a slack, accesses a slack channel, sends a message, or does a search in Slack, that activity (and related users) is logged in a log file.”
It was a sudden spike in recorded activities, specifically how it focused on the word “deal” that flagged it on the (HR?) team that tracks the activity.
“From November 2024 [an employee referred to as] The beginning of DS [sic] Preview a channel at a rate of several orders of magnitude more than before, with the number of channels previewed and the number of times each of them was previewed. ”
The lawsuit states that many of these channels included discussions on confidential sales and business strategy with a particular emphasis on Deel.
“The channel DS previewed during this period has nothing to do with his payroll operations job responsibility,” the complaint states. “However, what they are involved is all aspects of Rippling's business development, sales and customer retention strategy. This is the most sensitive of the company's sales and marketing trade secrets and confidential business information.
“There is no doubt about the ultimate beneficiaries of the Brazen spy scheme. DS has seen channels that are particularly relevant to Rippling's competitive intelligence over 450 times over the course of the scheme.
The lawyers are working to help employees try to poach people out of the ripples, claiming they read and downloaded related exchanges and documents for these channels.
The drama is real
According to the lawsuit, Ripples set up a “honeypot” to prove their suspicions. The company created a fake slack channel, shared its name with Keydeal executives, and sat down to see if the DS searched. (The executives included Deal's Chairman, Chief Financial Officer, and General Counsel Philip Bouadis. Deal's Company Law, Spiros Comis, and Deal's External Attorney.) He argued for the case.
According to the filing, things have become very intense. This states that when an independent lawyer attempts to seize DS's phone on a court order, DS flees to the bathroom, “despite repeated warnings from the independent lawyer, he locks the door behind him and refuses to come out.”
Rather than obey, “DS was asked on his phone that he was 'doing something' by an independent lawyer who heard DS flush the toilet. I didn't collect the phone later.
The DS eventually left the toilet, the complaint said, “I want to take that risk” when he faced another threat that he was violating the court's orders.
“Then DS ran out of the office and ran out of the scene,” the lawyer points out.
Rippling has not responded to questions asking whether TechCrunch intends to file a lawsuit against DS or whether he can confirm the name.
However, despite giving a series of initials to a suspected spy company, there was little valuable to hide his identity. By spelling out when someone joins, describing that person as “he” and explaining what role he played in the company, I no longer find anyone spying on LinkedIn. (The person we contacted later deleted his profile on the site.)