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Friday, July 17, 2015

Disrupter Disrupted: Tech Startup Homejoy to Shut Down in Wake of Employee Suits

Posted By on Fri, Jul 17, 2015 at 3:31 PM

click to enlarge homejoy_adios.jpg

Home-cleaning startup Homejoy announced its shutdown today. The app that let users summon maids with Uber-like ease will scrub no more. 

"There are still many unresolved challenges in the home serving space," said co-founder Adora Cheung in an exceptionally vague blog post on the Homejoy site today.

In an interview with tech site Re-Code, however, Cheung was more revealing.

She told Re-Code the "deciding factor" to close down came over the four lawsuits the company faced over whether or not to classify its employees as contractors. Homejoy is one of the many startups, like Uber, Lyft, Postmates, and others that view their app as a portal to connect people with independent contractors who charge for their services. 

Homejoy was founded in 2012, and raised $40 million in startup funding via angel investors and all of those tech gobbledygook groups ( like Y-Combinator. What does that even mean?). Homeyjoy had over 1,000 cleaning professionals on its platform. 

As Homeyjoy found out the hard way, contractors are increasingly challenging the fairness of the "gig economy." SF Weekly covered this in our story "Codependent Contracting: Couriers Demand App Company Accountability," which focused on Postmates. 

The straw that broke that camel's back for Cheung, she told Re-Code, was a recent swarm of media coverage around a California labor board's decision to classify an Uber contractor as an employee. 

Cheung, via Re-Code:
“A lot of this is unfortunate timing. The [California Labor Commission’s] Uber decision* … was only a single claim, but it was blown out of proportion,” (she told Re/code). The on-demand space has become a riskier bet for investors in a short amount of time.

Homejoy was able to raise funding, but not enough to grow the company as big as its founders and backers had hoped. “We declined those investments because it wasn’t enough, and we wanted to stay true to our vision,” Cheung said. 
Homejoy workers we've spoken with for previous stories struggled as they paid for their own cleaning supplies and saw their profits eaten away by healthcare costs and taxes – all burdens shifted from employer to employee in the independent contractor relationship.

But companies like Homejoy and Uber have a fair gripe when they say many of their contractors work for multiple apps, and providing full employee status may not make sense due to workers' flexibility of employment options.

Perhaps the employee/contractor debate isn't an either/or proposition, though, as many are increasingly saying. A recent Forbes piece discussed the possibility of a "dependent contractor," which would merge the protections of an employee with the flexibility of a contractor. 

Forbes discussed how the new classification would benefit Uber drivers:
The on demand economy is a place where contractors make a living working for different companies and sometimes even at the exact same time. Many drivers (including myself) know that in order to maximize profits, it makes the most sense to actually be logged in to both apps (Uber & Lyft) and take whichever request comes first.

A new classification of dependent contractors might be the best thing for everyone but these companies aren’t going to willingly sacrifice profits and shift away from the 1099 model unless they have to. 
As it stands now, the independent contractor model works great for companies like Uber but it’s not as great for its drivers. Switching to an employee only model would be bad for both parties though so the only logical step seems to be a compromise of the two that affords drivers some of the benefits of traditional employment but also allows them to retain a semi-flexible schedule. 
As multitudes of lawsuits swirl around the tech industry, resolution for the employee vs. contractor debate may be a long way off. Until then, expect more companies and workers to bear the burdens of disruption.

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Joe Fitzgerald Rodriguez


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