Zenefits is getting rid of 17% of its employees, or nearly 250 people.
An email sent by CEO David Sacks says the layoffs will focus mostly on the company’s sales divisions.
“When I became CEO of Zenefits, I promised on Day 1 to reset our culture, refocus our strategy on serving small businesses, and create a new beginning for success in the future,” Sacks wrote.
“Today I have to make a very difficult set of decisions about how we do that. In fact, this is the most difficult decision I’ve had to make in my career, but it is necessary for Zenefits to move forward successfully,” he added.
Zenefits has recently come under regulatory attacks for how it was running its business, specifically an internal program called “the Macro” which allowed employees to fake the hours they said they committed for pre-certification in California.
The company also allowed unlicensed brokers to sell health insurance, according to a BuzzFeed report.
It’s believed that up to 80% of the company’s deals in Washington State were completed by unlicensed brokers.
Founder and CEO Parker Conrad was forced to step down from his post and leave his position on the company’s board of directors following the Buzzfeed report.
Zenefits quickly grew to a $4.5 billion valuation over the course of just a few years and now its future is in the hands of Sacks, the former CEO of Yammer, a social enterprises platform that sold to Microsoft for $1.2 billion.
Sacks told employees that the layoffs are necessary at Zenefits because it grew “too fast, stretching both our culture and our controls.”
“This reduction enables us to refocus our strategy, rebuild in line with our new company values, and grow in a controlled way that will be strategic for our business and beneficial for our customers,” Sacks wrote.