Homejoy

On Friday, Homejoy, a start-up that provides on-demand house cleaners, sent out an email to its users letting them know the company is closing up shop at the end of the month. The three-year-old company, which many called 'Uber for clean homes,' said it had "come far and thrived," but had also "faced challenges." In an interview with Re/code, CEO Adora Cheung said the main challenge was a spate of lawsuits that had been filed against the start-up for treating its cleaners as independent contractors rather than making them employees (and giving them all the protections and benefits that come along with being an employee).

Homejoy had raised nearly $40 million in venture funding, but as predicted, couldn't raise more with the lawsuits looming, Cheung told Re/code.

Shannon Liss-Riordan is the lawyer responsible for one of those worker-classification lawsuits pending against Homejoy, and is pursuing the same type of lawsuit against many other on-demand start-ups, including Uber, Lyft, Handy, Postmates, and, soon, Doordash.

Liss-Riordan says she doesn't know what will happen with the Homejoy lawsuit and that it will depend on whether the company has money or assets left over after the shutdown. (The company had hoped to be acquired, but instead had its technical team hired by Google.)  She wasn't particularly surprised by this outcome, she said by phone; she's seen it before with more traditional cleaning companies in Massachusetts that she had sued for treating workers like independent contractors.

Email from Homejoy to customers

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"In those cases, the cleaning companies shut down and then essentially handed their customers accounts over to the workers," she said, noting that Homejoy is doing the same thing. In its email to customers, it encouraged them to continue working with their Homejoy cleaner if they love them, saying the company is working on a way to put cleaners directly into contact with customers.

"So customers will pay them directly and Homejoy won’t take a cut," said Liss-Riordan. "Then they’ll really be independent contractors."

Liss-Riordan was dismissive of Homejoy's putting the blame on her and others' lawsuits against the company on behalf of workers.

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"Blaming it on lawsuits and the law doesn’t make sense. Employers need to abide by laws," she said. "If they can’t, they shouldn’t be in business. I don’t think we need to mourn the loss of such companies."

In an ominous sign for companies like Homejoy and Uber that have argued that they are like Craigslist, putting customers and workers in touch with each other, rather than like an employer, the California Labor Commission Office ruled in a one-off complaint this year that an Uber driver should have been classified as an employee, and ordered that she get back wages and expenses covered.

"Just because you book a service through a smartphone doesn't mean that rules in places for employers that give protections to employees no longer apply," said Liss-Riordan.

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A few start-ups, including Instacart and Shyp, seem to have already seen the writing on the wall and have started offering contractors the option to become employees.

"We don't need these jobs from companies that don’t play by the rules and put protections into place. The work will still be there. People still need their homes cleaned," said Liss-Riordan. "On-demand companies will survive; the ones that provide the best services and comply with the law will thrive."