San Francisco-based HR tech unicorn Deel is facing allegations of corporate espionage, including stealing trade secrets and conspiring to violate the RICO Act. According to a lawsuit filed this week, Deel cultivated a spy within competitor Rippling, who conducted thousands of suspicious searches and obtained confidential business intelligence. Rippling’s security team raised the red flag when it detected unusual system activity within its network, the suit alleges.
Deel and Rippling are prominent players in HCM software, offering solutions to large global organizations. Both have experienced rapid growth, particularly during the COVID-19 pandemic, as businesses worldwide embraced remote work and expanded their global hiring strategies.
Related: Read the full 48-page complaint.
Deel, founded in 2019, has skyrocketed to a $12 billion valuation this year, fueled by its rapid expansion into global payroll and HR solutions, according to TechCrunch. Rippling, which launched in 2016, has carved out its space in the HR-tech arena with an all-in-one platform, reaching a $13.5 billion valuation by 2024, per Reuters.
“This could be a fascinating legal case and/or adapted into a great TV movie,” wrote HR tech analyst Brian Sommer on LinkedIn. “I’ll be watching this one.”
So what happened?
According to the lawsuit, Rippling set a “honeypot” trap with an empty Slack channel called “d-defectors.” When Rippling lawyers sent a letter mentioning this channel to just three Deel executives, the suit says, the suspected spy searched for it within hours, leading to his exposure. The situation culminated in a dramatic confrontation, the lawsuit states. The suspected spy reportedly fled to a bathroom when presented with a court order.
Deel spokespeople have denied all legal wrongdoing and look forward to delivering counterclaims, several sources have reported.
“When companies hit a certain scale, the rules change,” Clark Barron, CEO of cybersecurity marketing agency Ronin, wrote on LinkedIn about the case. “And Deel got caught playing dirty. The question now isn’t ‘Is Deel guilty?’—that’s for the courts.
“The real question is: If Deel was doing this … who else is?”
Pavel Shynkarenko, founder of HR platform Mellow—which supports the engagement between companies and contingent workers—believes this lawsuit will significantly impact the market by drawing attention from four key stakeholders:
Regulators and government agencies
Shynkarenko says that global hiring and contractor management companies already face intense regulatory scrutiny. U.S. authorities closely monitor their compliance with sanctions, worker classification and tax rules, he notes. As businesses grow, they attract stricter audits, new reporting requirements and potential fines. Shynkarenko predicts this incident will increase pressure on the entire industry, potentially triggering heightened oversight across all companies in the space.
Large clients and enterprise businesses
“If the scandal escalates, corporate clients may view [Deel] as a risk and cut ties,” says Shynkarenko. He adds that companies with dedicated compliance teams might develop in-house solutions rather than rely on external vendors with uncertain reputations. Major reputation setbacks—such as this lawsuit—have the potential to impact global HR platforms serving large enterprises significantly, he adds. And that could prompt major market shifts.
Competitors have already begun to use this activity as a way to connect with Rippling and Deel customers, with one posting on LinkedIn: “If you are a Deel or Rippling customer and this debacle has you wishing for a drama-free payroll and benefits provider, give me a shout.”
Teams and solution developers
Global hiring platforms promise borderless, bureaucratic-free work environments, but Shynkarenko says when trust is damaged, talent acquisition becomes significantly more difficult. Employees may question their loyalty, affecting both recruitment and retention efforts. Companies relying on personal branding to promote a positive work culture would particularly struggle during times of reputational risk, he says. “As the company’s image suffers, employee turnover could rise, making it harder to maintain a stable and motivated workforce,” he predicts.
Banks and financial partners
Global HR platforms typically rely on banking structures and partner payment solutions rather than processing payments directly. “If a company’s reputation is at risk, it raises red flags for both clients and banks,” Shynkarenko notes.
He says banks may reassess partnerships to avoid regulatory risks, and losing banking partners could damage the global payroll capabilities that are core offerings for platforms like Deel and Rippling.
Potential outcomes of the Rippling-Deel lawsuit
This legal activity could usher in a turning point for the industry, Shynkarenko says, “reshaping the competitive landscape among global HR platforms.”
If the scandal continues to escalate, he says, both could face reputational and financial losses: “Customer acquisition costs will rise, and closing new contracts will become a longer and more complex process.”
While assessing the long-term industry consequences of the alleged corporate espionage, Shynkarenko predicts a market redistribution that could benefit competitors of Rippling and Deel. Smaller and niche players could make gains if they position themselves as lower-risk alternatives, he says.
Companies focused on specific industries or offering highly specialized solutions may also gain traction, Shynkarenko says. Some of these earning attention right now include BambooHR, which targets SMBs, and Remote and Papaya Global, which both focus on cross-border workforces.
Finally, there could be ramifications outside the courtroom. On LinkedIn, tech attorney Andrew Stevens warns his audience: “Don’t be surprised if, at the end of the line, Rippling has enough leverage to make a legit play at acquiring Deel through this lawsuit.”
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