Homejoy, the at-home cleaning service that's one of a new breed of startups serving as a broker of on-demand services, is shutting down, as companies in that category face legal challenges aimed at forcing them to classify freelancers as employees.
In an announcement on Homejoy's site on Friday, CEO and co-founder Adora Cheung cited "unresolved challenges in the home services space."
She did not specifically call out the worker classification issue. But a report in Re/code says the company was having difficulties raising additional funding amidst the concerns. Homejoy did not immediately respond to a request for comment.
Those challenges threaten not just Homejoy but a number of on-demand startups, including Uber and delivery service Postmates, which rely on workers who are not treated as full employees to provide service to their customers. Workers for Homejoy, Postmates, Uber and Lyft have sued the companies, seeking to be reclassified as employees rather than freelancers.
If the workers are found to be employees, companies would be required to provide benefits like health care and unemployment insurance, and reimbursements for workers' expenses. Providing those benefits would add significant overhead expenses, cutting into profits or translating into higher costs for users.
The issue has already surfaced on the presidential campaign trail, eliciting contrasting viewpoints from Hillary Clinton, Rand Paul and Jeb Bush on workers' rights and the future of technology.
But some element of Homejoy's service might live on, in a future Google product. Following Homejoy's announcement, Re/code reported that Google was hiring some of Homejoy's employees in the areas of engineering and product development. The employees would help develop a new home services booking feature at Google, the report said. Google's new service might let users, for instance, search for a plumber and hire that person directly from the search results page.
Homejoy's engineers could hasten Google's entrance into the area of at-home services, which could spell the end for smaller home booking services with fewer resources to compete.
Google confirmed it had hired a portion of Homejoy's technical team but declined to comment on specific plans.
Homejoy's site will be shuttered on July 31, after which users will no longer have access to their accounts. The company is not taking any more bookings.
Homejoy, launched in 2012, let customers hire contractors for home services customized to the user's needs, be it house-cleaning, laundry, or washing walls. The company had grown considerably in three years, launching its service beyond its home market of San Francisco to more than 30 other cities in the U.S. and Canada, and in European countries including Germany and France. It had raised at least US$40 million from prominent Silicon Valley investors.
The company competed with rivals like Handy and TaskRabbit. For a time, its workers provided cleaning services for Airbnb hosts who wanted it.
Recently, Homejoy was said to be looking to be acquired by Handy, which had more funding to support future growth. Those talks apparently broke down.
The site's closure also arrives as larger competitors, including Google, aim to stake a bigger claim in the home services market. These competitors have a larger war chest to battle on the legal front.
Amazon has already taken a leap into the market. In March, the company launched a new home services feature, to let users hire workers skilled in anything from plumbing to home theater installation.