Itโs gloves off in one of the more tense rivalries in the world of startups. HR company Rippling Monday morning announced a lawsuit against Deel, another big player in the same space. The dramatic 50-page complaint alleges racketeering, misappropriation of trade secrets, tortious interference, unfair competition, and aiding and abetting a breach of fiduciary duty. The lawsuit is largely centered on an employee whom Rippling claims was working as a spy for Deel.
Deel has denied the allegations in a statement to TechCrunch in an equally florid way, setting the stage for the airing of yet more dirty laundry:
โWeeks after Rippling is accused of violating sanctions law in Russia and seeding falsehoods about Deel, Rippling is trying to shift the narrative with these sensationalized claims,โ a spokesperson said in a statement provided to TechCrunch. โWe deny all legal wrongdoing and look forward to asserting our counterclaims.โ
Is this town big enough for the both of us?ย
The HR technology space is highly competitive, featuring not only major incumbents โ SAP, ADP, Workday among them โ but also numerous startups targeting the many different aspects of HR, such as payroll, recruitment, training, compensation and benefits management, and onboarding. Companies like Deel and Rippling aim to provide an all-in-one platform for these services.
When the going is good and the economy is on an upswing โ such as during the pandemic, when organizations scrambled for better tools to hire, fire, and manage people across disparate locations โ the crowded market is less of an issue. But the love-in ends when times get tougher, especially when two companies are as close in size as Rippling and Deel and target the same customers. (One indicator of how directly these two are competing: Ripplingโs valuation is just over $13 billion; Deel was last valued at more than $12 billion.)
Tensions between Deel and Rippling began playing out publicly well before this lawsuit. Last year, Rippling launched a market campaign that took direct aim at Deel, featuring a โSnake Game.โ The game, still accessible, portrays Deel as a snake and accuses the company of charging higher fees than Rippling.
The rivalry took another turn when a Deel sales director visited the site to check out the game, engaged with a chatbot on the page, and then later saw the exchange posted on Twitter by the COO of Rippling. (The troll did not play out as expected, with customers alarmed by what they saw as doxxing by Rippling.)
The feud has also involved allegations concerning compliance with Russian sanctions. Ripplingโs complaint alludes to the claims, though both companies have faced scrutiny as it relates to the issue. (More detail here.)
Slack forensics played a major role in the suit
What is quite notable in the lawsuit is just how much of the evidence for Ripplingโs claims is based around Slack activity.
Ripplingsโ lawyers note that the company keeps a log of what people do in the Salesforce-owned chat platform. โRippling employeesโ Slack activity is โlogged,โโ it notes, โmeaning every time a user views a document through Slack, accesses a Slack channel, sends a message, or conducts searches on Slack, that activity (and the associated user) is recorded in a log file.โ
It was a sudden spike in that logged activity, and specifically how it centered around the word โDeelโ that raised a flag to the (HR?) team that tracks that activity.ย
โBeginning in November 2024, [an employee referred to as] D.S. beginning [sic] previewing channels at a rate orders of magnitude greater than he had before โ both in terms of the number of channels previewed, and in the number of times he previewed each of those channels.โ
The lawsuit states that many of these channels contained confidential sales and business strategy discussions, with particular emphasis on Deel.
โThe channels D.S. previewed during this period have no connection to his payroll operations job responsibilities,โ states the complaint. โWhat they do relate to, however, are all aspects of Ripplingโs business development, sales, and customer retention strategiesโthe most sensitive of the Companyโs Sales and Marketing Trade Secrets and confidential business informationโwith a particular emphasis on a single competitor, Deel.
โLeaving no doubt about the ultimate beneficiary of the brazen espionage scheme, D.S. viewed channels related specifically to Ripplingโs competitive intelligence concerning Deel over 450 times during the course of the schemeโฆ Indeed, D.S.โs top 10 channel previews since November 2024 are all sales-related channels, completely unrelated to D.S.โs role in payroll operations.โย
The lawyers allege the employee also read and downloaded related exchanges and documents in those channels, and worked on helping try to poach people from Rippling.
The drama is real
According to the lawsuit, Rippling set up a โhoneypotโ to prove out its suspicions. The company created a fake Slack channel, then shared its name โ along with the suggestion that it featured embarrassing details about Deel โ with key Deel execs. It then sat back to see if D.S. searched for it. (The execs included Deelโs Chairman, Chief Financial Officer, and General Counsel Philippe Bouaziz; Deelโs head of U.S. Legal, Spiros Komis; and Deelโs outside counsel.) The Rippling employee did, claims the lawsuit.
Things got very heated afterward, per the filing, which says that when an independent solicitor attempted to seize D.S.โs phone by court order, D.S. escaped to the bathroom, โlocking the door behind him and refusing to come out, despite the independent solicitorโs repeated warnings.โ
Rather than comply, it goes on, โD.S. was heard โdoing somethingโ on his phone by the independent solicitor, who also heard D.S. flush the toilet โ suggesting that D.S. may have attempted to flush his phone down the toilet rather than provide it for inspection.โ It did not recover the phone later.ย
Eventually D.S. left the bathroom, says the complaint, and when confronted one more time with the threat that he was violating a court order, said โIโm willing to take that risk.โย
โD.S. then stormed out of the office and fled the scene,โ the lawyers note.
Rippling has not responded to questions TechCrunch has sent asking if it intends to also file a suit against D.S. or whether it can confirm the name.ย
But despite the company giving the alleged spy a set of initials, it has done precious little to hide his identity. Spelling out when the person joined, describing the person as โhe,โ and describing what role he had at the company made it almost too easy to find on LinkedIn the person it suspects of spying. (The person we contacted has since deleted his profile on the site.)
