Trade Secrets, RICO, And HR Tech: The Legal Fallout Of Cross-Border Talent Wars

What HR leaders and investors must learn from Rippling v. Deel

The ongoing lawsuit between Rippling and Deel highlights the vulnerabilities in compliance and legal frameworks within the fast-evolving human resources (HR) tech space. At the core of the dispute are serious allegations of trade secret theft, racketeering, and unfair competition — a stark reminder of how easily sensitive data can be exploited when internal policies are insufficient or not enforced.

Allegations of Compliance Failures

Rippling’s lawsuit against Deel alleges multiple breaches of trust and legal obligations. At the center of the claims is the misappropriation of trade secrets, with Rippling accusing Deel of gaining access to confidential sales, customer, and competitive strategy data via an employee who exceeded his role’s responsibilities. 

The employee in question allegedly accessed internal Slack channels unrelated to his work in payroll operations more than 450 times, focusing on Rippling’s sales strategies and competitor intelligence — all of which are critical to maintaining a competitive edge.

Adding to the severity of the case, Rippling is invoking the Racketeer Influenced and Corrupt Organizations Act (RICO) violations, which suggests organized, systemic misconduct. Racketeering is a rare allegation in the tech industry, but this underscores the severity of the alleged coordinated effort to undermine Rippling’s position.

Additionally, the lawsuit includes accusations of tortious interference and unfair competition, asserting that Deel knowingly induced Rippling employees to breach confidentiality agreements, undermining its competitors’ operational integrity in the process. This case has made waves regarding how companies can handle compliance in a rapidly evolving regulatory environment.

Ensuring Compliance When Hiring Talent Across Borders

For companies navigating these kinds of challenges, the path to mitigating such risks lies in rigorous compliance measures from the outset. This includes clear and enforceable onboarding protocols, such as comprehensive non-disclosure agreements (NDAs). New hires should be required to affirm that they are not bringing any confidential information or trade secrets from their previous employers into their new roles, particularly when joining direct competitors.

Furthermore, businesses should establish role-based access protocols, ensuring that employees have access only to data relevant to their role. Special precautions must be taken with former employees of competitors, especially those with high-level strategic insights, to minimize the risk of exposing sensitive information.

Cross-border operations demand an additional layer of scrutiny. International data transfer laws, like the General Data Protection Regulation (GDPR) in the EU, require companies to be vigilant about how they handle sensitive data. Compliance with labor, data protection, and intellectual property regulations in all jurisdictions where a company operates must be closely monitored, especially when talent moves between countries with different legal frameworks governing ownership and transfer of sensitive information.

Are Current Regulations Adequate?

Current regulations, while extensive, are not equipped to handle the speed and complexity of modern tech disputes, particularly in cross-border scenarios. Existing frameworks like the Defend Trade Secrets Act (DTSA) in the U.S. and the EU Trade Secrets Directive provide some legal foundation, but these laws struggle to keep up with the evolving nature of data theft and corporate espionage.

The issue is compounded by the increasing reliance on cloud tools like Slack, Salesforce and Google Drive, which many companies fail to monitor adequately for unauthorized access. While these platforms facilitate collaboration, they also present significant challenges in tracking and controlling the flow of sensitive information. Without clear internal policies for logging and monitoring activity, companies are left vulnerable to exploitation by malicious actors.

Moreover, cross-border legal action remains sluggish and complicated. As seen in this case, the difficulty of serving legal documents to individuals in foreign jurisdictions or the use of cryptocurrency payments to obfuscate financial transactions only adds layers of complexity to what should be straightforward legal matters.

The Critical Role of Documentation and Policy Enforcement

In defending against such claims, detailed documentation is indispensable. The evidence that Rippling presented in its lawsuit, including Slack activity logs and job responsibility records, played a pivotal role in substantiating their allegations. By maintaining comprehensive logs of employee actions within sensitive systems, businesses not only safeguard against internal misuse but also ensure they can effectively defend themselves against external accusations or litigation risks.

Moreover, clear internal policies on access to confidential information, regular audits of employee behavior, and stringent incident response protocols will help companies avoid the kind of pitfalls that led to this case.

Case Implications for Investor Due Diligence and M&A Activity in HR Tech

For investors, the Rippling–Deel lawsuit serves as a stark reminder of the risks inherent in the HR tech sector, particularly regarding the handling of sensitive data. Moving forward, investors are likely to demand greater transparency into a company’s compliance infrastructure, particularly regarding the protection of sensitive business information and the management of intellectual property assets.

Investors will increasingly scrutinize internal compliance controls and examine whether a company has robust systems in place to protect against data breaches. Additionally, they will assess whether employees are adequately trained on confidentiality obligations, trade secrets protection, and data handling policies. Due diligence will likely include reviewing historical legal disputes and any patterns of non-compliance that might indicate deeper vulnerabilities.

Furthermore, as more companies expand internationally, due diligence will need to account for cross-border risks, particularly when operating in regions with disparate regulatory standards or where crypto transactions are involved. Investors will need to understand a company’s exposure to such risks and ensure appropriate regulatory reporting mechanisms are in place.

Final Thoughts

The Rippling v. Deel case is not an isolated incident but a cautionary tale for companies in the tech space. As competition grows fiercer and regulatory landscapes evolve, compliance will become more critical than ever. Companies must invest in robust legal frameworks, strict internal controls, and comprehensive employee training to avoid the kind of costly legal battles and reputational damage that have come to define this dispute.

Olga Ermolaeva is the Lead Legal Officer at Mellow, where she oversees legal frameworks supporting operations across multiple jurisdictions. With over 15 years of international legal experience in IT, intellectual property, advertising, and e-commerce, she advises on matters including IP strategy, marketing compliance, advertising regulation, and cross-border transactions.