Zenefits has become the latest startup to face regulatory scrutiny in a market it serves, as it now faces opposition from the Utah Insurance Department. The department is taking the company to task essentially for giving its cloud-based HR software away for free, which the regulator says violates local laws and is unfair to traditional insurance brokers.

The Utah Insurance Department began looking into Zenefits in June and released the findings from its investigation just a few weeks ago. In a letter sent to the company’s law firm on November 20, Utah Insurance Commissioner Todd Kiser said Zenefits violated the state’s rebates and inducement law by giving away its software for free.

Zenefits provides a cloud-based dashboard to HR departments designed to help small businesses manage hiring, termination and all the benefits and payroll details necessary in-between those events. The product is offered for free and enables its users to…

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