Homejoy is one of the first casualties of the sharing economy’s legal troubles

We previously discussed the potential consequences for the sharing economy as a result of the California Labor Commission’s decision to classify an Uber driver as an employee instead of an independent contractor. Unfortunately, one of the first casualties of the clash between the sharing economy (more specifically in this case, the “gig” economy) and the current framework of employee vs. independent contractor is Homejoy, a start-up that connected individuals with cleaning skills with those whose homes were in need of cleaning. After facing multiple lawsuits from its workers over the employee vs. independent contractor classification and being unable to obtain enough external investment – which was in-part due to investor uneasiness arising out of the Uber decision – Homejoy made the decision to close its doors on July 31, 2015, about three years after the company was founded.

As this troubling issue continues to barrel down the road – and is likely to do so until the two pending class-action lawsuits against Uber and Lyft (and the inevitable rounds of appeal and possibly even certification with the California Supreme Court) answer the question of employee vs. independent contractor – it’s unclear what further casualties there may be before the issue is finally resolved. It’s also unclear that this conflict can have any real winner, as if companies like Uber or Lyft are ultimately forced to close their doors as a result of the litigation it’s apparent that everyone loses.

Not all is dark on the horizon, however, as the judiciary appears to recognize that perhaps the solution to this issue is the creation of brand new law, rather than trying to fit the sharing economy into the old framework of employee vs. independent contractor. For example, in what is hopefully a prescient statement, U.S. District Judge Vince Chhabria, overseeing the Lyft case, commented that: “[t]he jury in this case will be handed a square peg and asked to choose between two round holes…[t]he test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem.”

Here’s hoping that the courts can construct a round peg in time to save the sharing economy. Until then, however, any company involved with the sharing economy should consider taking a cue from companies like Instacart, who recently classified its workers as part-time employees, and either implement or at least come up with a “Plan B” for the classification of its workers in the current legal environment.

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