Though the startup had struggled to raise enough money to stay in business, CEO Adora Cheung says the “deciding factor” was the four worker classification lawsuits it was facing.
Gig economy companies like Homejoy do not hire the workers who help keep their platforms afloat as employees, which means that they don’t pay employer taxes or have an obligation to pay minimum wage, provide lunch breaks, or compensate workers for time between jobs.
The legality of this setup has been called into question repeatedly of late, due to lawsuits from workers who allege they have been misclassified as independent workers on platforms like Uber, Lyft, and Homejoy competitor Handy.
Some companies are changing their employment structure in response. Grocery delivery service Instacart recently began converting many of its delivery people to part-time employees, while package delivery startup Shyp made a similar move earlier this month. Many new on-demand services, meanwhile, are opting out of contract work altogether in favor of traditional employment–hoping to provide better customer service, maintain good workers, and, perhaps most honestly, avoid Homejoy’s fate.
Update: Handy is offering $1,000 signing bonuses to former Homejoy cleaners. “With the recent news of Homejoy’s closure, we commend Adora, Aaron and team on what they built,” a spokesperson for the company reportedly told Re/code. “We hope that Homejoy professionals take us up on [this] opportunity.”
Google, which expressed interest in the home services business earlier this year, has scooped up 20 or so members of the Homejoy tech team.