Silicon Valley Startup Homejoy Using Homeless Contractors As Housecleaners

A well-funded Silicon Valley-based housecleaning startup is using contractors who are homeless.

In a New York Magazine story, Kevin Roose recounts learning that the person who arrived at his doorstep from San Francisco-based Homejoy to clean his apartment, for $19, was living in a homeless shelter.

Soon after, Roose learned that some friends in the Bay Area (Roose doesn’t specify which city) who'd also used Homejoy said the people who arrived to their homes, too, were homeless contract workers. Reading Homejoy’s website might lead one to believe they’re dispatching in-house, salaried employees. In fact, says Roose, Homejoy is merely a “digital middleman” between people who are looking for services with contract workers who will perform them.

As Silicon Valley entrepreneurs become millionaires, housing costs have soared, and even though homelessness is decreasing overall in the U.S., it’s rising in Silicon Valley. According to federal data, San Jose, in the heart of Silicon Valley, has one of the largest homeless populations in the country.

It does not appear that Roose's or his friends' experiences were isolated. A recent Washington Post story presented a day in the life of a D.C.-based homeless Homejoy contractor.

Anthony Walker, 35, started working for Homejoy after he was laid off from a moving company job last year and moved with his daughter to a homeless shelter. As Homejoy clients are often in far wealthier areas, Walker’s commute is significant. A two-hour job secured through Homejoy’s app will pay him $51. First, he drops his daughter off at day care, lugging a suitcase full of cleaning supplies to the bus stop, and then races to the home he is to clean. Some days, jobs are cancelled without notice. For that day’s job, after a five-hour trip back and forth, he earns about $10 an hour – with no benefits.

Homejoy isn't the only startup depending on contract workers – some who may be living in poverty -- to maintain profitability.

In Silicon Valley, venture capitalists are rewarding businesses that can maximize profits by lowering prices and undercutting competition, something they’re often able to do by hiring contract workers who file 1099 tax returns instead of employees who file W-2s. But with everyone trying to get in on the gold rush of what's been described as “the 1099 economy,” there are questions about whether contract workers who are not eligible for health benefits, worker’s comp, or retirement plans -- but who nonetheless seem to have many of the obligations of actual employees -- is a sustainable or ethical business model.

Venture capital firm SherpaVentures estimated that in 2013 alone, venture capitalists have invested $1.6 billion in “on-demand” startsups like Washion, BloomThat and Shyp, companies that are modeled after Uber (valued at $18 billion), the wildly successful San Fran-based ridesharing service that connects passengers with drivers via its smartphone app. These so-called “freelance marketplace” or “managed-service” labor models are often based on the Uber model: Washion is the “Uber for laundry,” BloomThat is the “Uber for flowers,” and Shyp is the “Uber for packages.” And they’re all profiting from using contract workers.

But pushback from Uber employees, and a recent ruling against FedEx for misclassifying its employees as contract workers, suggests that the courts are paying attention, workers are rebelling, and the gold rush of outsourcing work may soon go bust.

Legal issues aside, some businesses are getting away from the "1099 economy” because they see it as better for customers.

MyClean, a New York-based cleaning service, told New York Magazine that almost all of their one-star Yelp reviews came from the era in which they hired 1099 contract workers. Although their labor costs are now almost 40 percent higher than the competition, their customers are more satisfied, and they’ve grown to $8 million in revenue per year in the past two years. Tri Tran, co-founder of San Francisco-based Munchery, a food-delivery startup that raised $32 million in venture-capital funding since its 2012 launch, explained to New York Magazine why they’re using W-2 employees instead of contractors: “We know that delivery drivers are the face of the company. They’re the only human-to-human interactions customers face, and they have to represent us well. When you get contractors to do the work, we tend to get poor results. They don’t really care.”

It’s safe to assume that contractors who have no other means of income care about holding on to their job, however unglamorous it is. But companies who use contract workers without offering them any meaningful support or benefits cannot reasonably expect these workers to worry too much about the business’ image. Some people are just trying to survive.