Worker Classification Lawsuits Spell Doom For Homejoy Inc.

Homejoy Inc. – the San Francisco-based cleaning business that was started by Adora and Aaron Chung in 2013 — is filing Chapter 11 Bankruptcy.

The company announced on its website five months prior to the Chapter 11 proceedings that it would be closing its doors. Homejoy Inc. raised nearly $40 million in start-up capital from such hefty investors as Google Ventures and First Round Capital. The company initially opened as a home-cleaning service but soon expanded to five countries and added home repairs.

Within a few short months of opening, Homejoy Inc. ran into a number of problems that not even their celebrity pitchman David Hasselhoff could fix. Many of the company’s woes can be traced back to a number of class action lawsuits.

Homejoy’s competitor, Handy, is still humming along despite the onslaught of suits plaguing several service industry corporations. FoundedĀ in 2012 by Harvard University roommates Umang Dua and Oisnin Hanrahan, Handy provides both home-cleaning and repair services in 28 U.S. cities, as well as Toronto and Vancouver. Handy has a seamless booking process and offers competitive salaries to its over 200 workers.

Handy has recently received $50 million in funding and added additional services including plumbing, furniture assembly, painting, moving and electrical. All service professionals are screened and fully vetted. A 100% money-back guarantee is promised to any customer who is unsatisfied with the services.

Unfortunately, companies like Homejoy are being ensnared in similar worker classification lawsuits that have befallen companies such as Lyft and Uber. Workers feel that they should be classified as employees rather than contractors, and companies are resisting because employee classification would drive labor costs up sharply.

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