Homejoy, the on-demand cleaning-services company, will be shutting its doors July 31, according to a blog post on its site.
Its tech and product team is being lured away by Google, according to Re/Code, and will work on bolstering Google's search to include pairing local professionals to its users.
Although the company was reportedly losing money, the lawsuits pending against the company over its classification of workers as independent contractors was a "deciding factor" in the decision, according to its CEO.
As Uber and Lyft have been fighting their lawsuits in court, Homejoy's decision to shut down is the first major casualty in the 1099 economy debate.
The cleaning company had raised almost $40 million from investors like Max Levchin, Google Ventures and Andreessen Horowitz.
It wasn't enough to fight the lawsuits, and the company was reportedly up for sale or considering a merger with rival Handy in May.
Homejoy, though, isn't the only on-demand company to be facing these problems--just the first one to fall.
After the California Labor Commissioner's Office classified one Uber driver as an employee, more independent contractors are jumping into the ring and bringing cases forward.
The difference between the 1099 workers and W-2 employees, according to the IRS, is that for common-law employees, employers "must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid." The same is not necessarily true for an independent contractor.
In addition, benefits are often extended to employees but not independent contractors, and employers have the right to control how a worker behaves--how to dress, for example, or specific customer interaction protocol--when they're an employee and not an independent contractor.
As more independent contractors seek reclassification, many of the on-demand companies are, indeed, facing these lawsuits. Shannon Liss-Riordan, a Boston-based employment lawyer, has filed both in court and in arbitration class-action cases against Uber, Lyft, Instacart, Shyp, Washio, Homejoy, Caviar, and Postmates.
While its tech workers have found room at Google's headquarters, the cleaners Homejoy hired are left without a home. Handy is offering $1,000 bonuses to Homejoy's contractors if they sign up with the service for the first-time, said a Handy spokesperson.