Homejoy’s Closure May Signal A Turn for the On-Demand Economy
By Rachel M. Cohen | Jul 20, 2015
On Friday Adora Cheung, the co-founder and CEO of Homejoy, announced she will be closing down the app-based cleaning service by the end of July. Homejoy, which started in 2012, relies entirely on contract labor and is commonly referred to as the “Uber for house cleaning.”
Cheung told Re/code that the “deciding factor” to shut Homejoy down was the four lawsuits her company faces over whether Homejoy workers were misclassified as independent contractors. These controversial lawsuits have made it even harder for Homejoy to raise funds in Silicon Valley. As Re/code’s Carmel DeAmicis put it, “The on-demand space has become a riskier bet for investors in a short amount of time.”
Just days earlier, David Weil, the head of the Wage and Hour division at the Department of Labor, issued new guidelines for interpreting when an independent contractor should actually be considered an employee. Weil stressed that the scope of the employment relationship under the Fair Labor Standards Act is “very broad.”
The debate over worker misclassification is shaping up to be a contentious point in the 2016 election. Though Hillary Clinton’s campaign told TechCrunch that Clinton has not taken a stance on whether Uber drivers should be labeled contractors or employees, she did recently say that the “so-called gig economy” was “raising hard questions about workplace protections and what a good job will look like in the future.”
On the other hand there’s Jeb….
— Jeb Bush (@JebBush) July 17, 2015
It looks like many employers aren’t waiting around to see where the next president will land on the on-demand economy and worker classification. More companies, like Homejoy, may close up shop in light of costly litigation they can’t afford. Others may follow the lead of Instacart—the “Uber for groceries”—which recently announced that its “personal shoppers” could become part-time employees if they so choose.
Buzzfeed labor reporter Caroline O'Donovan suggests that maybe what Homejoy’s closure signifies is that the on-demand model is simply unsustainable for smaller companies. “Homejoy’s closing isn’t necessarily an indication that the on-demand economy is doomed,” she writes. “It might instead be the beginning of an opportunity for bigger players like Amazon and Google, which have pockets deep enough to stay alive when the classification issues wends its ways through the courts.”
Indeed, the day Cheung announced Homejoy would be closing down, Google quickly scooped up 20 members of the Homejoy product and engineering team to help the Internet search giant enter into the home services market.
Fusion’s Kevin Roose made a similar argument back in June, predicting that, “in the next six to 12 months, we will see a significant consolidation in the on-demand industry.” While companies like Uber aren’t going away, he thinks “lots of small and mid-sized companies will be washed out of the market.”
Looks like some Silicon Valley entrepreneur will need to innovate the “Uber for saving smaller Ubers”—stat.