In a dramatic escalation of the rivalry between two major HR tech companies, Rippling has filed a lawsuit against Deel, alleging racketeering, misappropriation of trade secrets, and unfair competition. The 50-page complaint, filed on Monday, claims that Deel engaged in corporate espionage by hiring an employee who worked as a spy to steal Rippling's trade secrets.

The lawsuit centers around an employee, referred to as D.S., who allegedly accessed confidential sales and business strategy discussions on Rippling's Slack channels. The complaint states that D.S. previewed channels at an unusually high rate, focusing on discussions related to Deel, and downloaded related exchanges and documents. Rippling's lawyers claim that this activity constitutes a "brazen espionage scheme" aimed at stealing the company's trade secrets.

Deel has denied the allegations, calling them "sensationalized claims" and stating that they look forward to asserting their counterclaims. The company's spokesperson accused Rippling of trying to shift the narrative, citing allegations of violating sanctions law in Russia and spreading falsehoods about Deel.

The intense rivalry between Rippling and Deel is not new. Both companies are valued at over $12 billion and target the same customers in the highly competitive HR tech space. The market is crowded, featuring major incumbents like SAP, ADP, and Workday, as well as numerous startups targeting different aspects of HR. The competition has led to public spats, including a market campaign by Rippling that took direct aim at Deel, featuring a "Snake Game" that portrayed Deel as a snake and accused the company of charging higher fees.

The feud has also involved allegations concerning compliance with Russian sanctions, which both companies have faced scrutiny over. Rippling's complaint alludes to these claims, but the company has not responded to questions about whether it intends to file a suit against the alleged spy or confirm their identity.

The lawsuit highlights the importance of Slack forensics in the case. Rippling's lawyers note that the company keeps a log of Slack activity, which recorded the unusual spike in D.S.'s activity. The log file showed that D.S. viewed channels related to Rippling's competitive intelligence concerning Deel over 450 times during the alleged espionage scheme.

The drama surrounding the lawsuit has been intense, with allegations of a "honeypot" trap set up by Rippling to prove its suspicions. The company created a fake Slack channel and shared its name with key Deel executives, then waited to see if D.S. would search for it. When an independent solicitor attempted to seize D.S.'s phone by court order, D.S. allegedly escaped to the bathroom, locked the door, and refused to come out, eventually fleeing the scene.

The lawsuit has significant implications for the HR tech space, highlighting the intense competition and high stakes involved. As the market continues to evolve, it remains to be seen how this rivalry will play out and what consequences will arise from these allegations.