The death of a hero…a ‘HomeHero,’ that is

Home care startup HomeHero is hanging up its cape, blaming a contentious issue that has been roiling the tech industry for years — should on-demand workers be independent contractors or employees?

The Santa Monica-based company, which let users go online to book same-day appointments for in-home care, on Friday announced it’s shutting down. In a blog post, the 4-year-old startup said it will cease all operations, remove itself from the home care industry and turn its focus to an undisclosed “new healthcare venture.”

It’s not the first company to shut down after facing pressure to turn its independent contractor workers into employees. San Francisco-based on-demand cleaning service Homejoy shut down in 2015 after being sued multiple times by contractor workers unhappy with their status. Zirtual, a San Francisco-based personal assistant company, briefly shut down after its costs soared when it switched to employees — and was bailed out by a buyer at the last minute.

HomeHero also says the beginning of the end came when it stopped using independent contractors as caregivers and began hiring them as employees — a more costly business model.

“Almost exactly one year ago, HomeHero lost its core identity when we were effectively forced to terminate our working relationships with 95% of our 1099 caregivers and required to adopt an inferior employment business model,” Founder and CEO Kyle Hill wrote in the blog post published on Medium. “In the process, HomeHero also lost a majority of its competitive differentiators in price, speed and scalability that allowed us to be so disruptive in 2014 and 2015, and it had nothing to do with competition.”

The independent contractor business model has sparked pushback from fair labor advocates who argue it denies workers essential protections such as minimum wage, overtime pay and reimbursement for work expenses. Lyft, Uber and other on-demand startups have faced lawsuits over their use of independent contractors as drivers and couriers, and many other companies have grappled with how to classify their workers.

“The independent contractor model was under attack and we felt intense pressure to change,” Hill wrote.

Hill and many companies argue using independent contractors instead of employees has clear benefits. HomeHero was charging clients between 30 and 40 percent less than the industry average, Hill wrote, and was paying caregivers 25 percent more.

But in 2015, the U.S. Court of Appeals upheld a ruling extending employee benefits to almost 2 million home care workers — essentially forcing HomeHero to convert to an employee business model.

“Rather than continuing to push the boulder up the hill and risk a spectacular failure,” Hill wrote, “we will attempt to leverage our talented team, unique experience and technology IP to build a more sustainable healthcare business outside of home care.”

HomeHero, which offered service throughout the Bay Area, as well as in Orange County and San Diego, had raised more than $23 million in funding, according to the Crunchbase data platform.

Photo: A HomeHero caregiver and a client. (Courtesy of HomeHero)

 

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  • Vitaly Gashpar

    This is definitely something I have been thinking about. Primarily that current U.S. employment laws are ill-equipped to handle this new, on-demand service economy. Yes, workers should be protected and shielded from abusive employment practices; but at the same time they should not be prevented from participating in the labor force because the company cannot lawfully deal with them in a way optimal to all. Another concern is that depending on the industry, we also need assurances that where necessary, those who are providing services need to carry insurance and be adequately trained. Many interests need to be balanced, but if the state legislators don’t come up with something soon, the courts will start on their own.

 
 
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