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On-demand cleaning startup Homejoy shuts up shop

Hampered by worker-classification lawsuits, the home-service company shuts down. Google is reportedly snatching up about 20 of its engineers.

Homejoy CEO Adora Cheung announced Friday that the startup was closing down. Homejoy

The so-called gig economy took a hit Friday. The on-demand house-cleaning and home-service startup Homejoy announced it was shutting down.

CEO Adora Cheung published a letter to the "Homejoy Community" on the company's website saying, "Although we succeeded in many ways, we also faced obstacles. There are still many unresolved challenges in the home-services space."

Though Cheung didn't mention the lawsuits the company is facing over how it classifies its workers, the executive did tell Recode that this was one of the "deciding factors" in its closure. Homejoy didn't respond to a request for comment.

Homejoy is one of dozens of companies that use an app to pair users in need of something with a contract worker who provides that service. Similar companies include ride-hailing services Uber and Lyft, which connect passengers in need of a ride with a contract driver, and delivery service Postmates, which uses contractors to deliver items. But as more startups adopt this model -- which has created what some call the gig economy -- critics are questioning whether it's fair for the firms to classify these workers as contractors.

Such a classification means a company isn't responsible for all sorts of workers' costs, including Social Security, health insurance, paid sick days and much more. Classification as an employee would mean companies would be responsible for these expenses.

Two major lawsuits were filed against Uber and Lyft in 2013 over how they classify their drivers. Since then, several suits have been filed against other gig economy companies, including Homejoy, Postmates, Handy, Shyp and Washio. In March, the California Labor Commission ruled that a former Uber driver was an employee and not an independent contractor. And earlier this week, democratic presidential candidate Hillary Clinton even weighed in on the debate.

"This on-demand -- or so-called gig -- economy is creating exciting opportunities and unleashing innovation," Clinton said. "But it's also raising hard questions about workplace protections and what a good job will look like in the future."

Cheung told Recode that the four lawsuits Homejoy is facing over worker classification made fund-raising difficult. She defended the contractor classification, however, saying it gives workers more flexibility with their schedules.

Homejoy, which launched in 2012, had raised a total of $40 million. Over the last three years, it grew to an international service operating in five countries. The service will officially shut down on July 31 as it finishes out all of its existing appointments.

In the wake of Homejoy's closing, another company has reportedly started picking up the pieces: Google. The search giant is bringing on about 20 members of Homejoy's product and engineering team to build out software that connects consumers with plumbers, electricians and other home-service professionals, according to Recode, which first reported the news.

Google didn't respond to a request for comment.

For the search giant, the move could indicate an even bigger push into the home-services market. In April, BuzzFeed reported that Google was readying technology that would let people compare prices from home-service professionals. With Homejoy's team, Google may try to streamline the process even further -- by connecting users with home-service professionals directly from its search engine instead of just linking to outside websites.

Google has recently made bigger strides in trying to turn its search engine into a one-stop shop. The company already provides price comparisons for things like car insurance, hotels and flights.