Homehero is shutting down | Hacker News Reader

Homehero is shutting down

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67 pointsrcarrigan8782 comments

So the gist is laws were upheld protecting homecare givers - minimum wage and overtime pay - and new mandated increased minimum wage, ultimately led to their decision to abandon their supposedly successful model. Their own internal "surveys", if we should even consider that, supposedly indicate these laws are not good for homecare.

Maybe their business model just depended on exploiting cheap labor?

Or maybe they went the way of Homejoy and are saving face, as many speculated, former employees coming forward, etc. with Homejoy that their customer retention was just really bad.

I guess sites like Homejoy have a fundamental problem: professional/customer meet face-to-face, so when they find a good fit they have an incentive to cut a deal off the site books. The platform ends up littered with bad professionals, abusive customers and lots of complaints to manage.

I aould certainly like to hear the caregiver perspective on this. Is it truly just that the "low end" of the market hs moved away from legal status to "cash under the table"? Are caregivers overall happier (or better off) working fewer hours for less pay and dealing with the increased issues brought about by constant change when caring for a dimensia patient?

or maybe the SEIU exploited their power over politicians to force this state into a similar mess in Illinois (2009) by not only setting wages for private workers but also force compulsory unionization of all such workers. It took a 2014 Supreme Court ruling to stop the forcing of these care givers, which included people merely taking care of family, from paying union dues.

Never expect actions taken by government are always to protect the workers, especially when they start hitting heart strings on the phrasing.

This is about supporting their campaign base, unions push a lot of money into politics and getting such laws passed are their means of getting more into their coffers. Look at the prison story we had on the front page, the costs are almost all due to employee wages and those are driven by the most powerful union in the state .

this was about protecting political interest, they don't care about care givers. this startup simply got caught in the middle.

Nobody likes having their costs more than doubled and having no choice but to pass that on to the customer. I'm all for fair pay and I also think people should be able to afford in-home care for those that need it. It seems evident that the latter is no longer the case.

It's a hard line to walk.

Caregivers are getting paid more, but demand is much lower.

> Maybe their business model just depended on exploiting cheap labor?

How do you say that they were exploting cheap labor, when they claim that their business model enabled them to pay their caregivers 25% higher than industry average.

> The 1099 independent contractor model, below, is very attractive as it removes excess cost and restrictions for employers. We were charging clients 30–40% less than industry average, and we were paying caregivers 25% higher than industry average. Both sides were winning.

To me, it looks more like the Union Bosses at SEIU made a calculated -- and eventually successful - move to pull strings and get laws passed that would stifle HomeHero as they seem to be disrupting that Industry the same way Uber or AirBnB distrupted a different industry.

> On Oct 15th 2015, the entire home care industry got rocked. The Department of Labor upheld a federal ruling stating that over 2 million home care workers would qualify for the Fair Labor Standards Act —essentially requiring all home care workers to be treated as W-2 employees and receive overtime benefits. This was viewed as a huge win by the controversial and outspoken labor union SEIU, as well as the “Fight for $15” crowd in California.

Not saying it's the right (or ethical) thing to do, but if they'd had the funds, they should've gotten in front of that Act (before it got signed into law) and poured resources -- lobbyists, ads -- into killing it. They could've also asked the people receiving the service to write to their reps / senators / congressmen stating the Bill / Act would increase costs to them.

Just like Uber and Lyft have done so in the past.

Last year, when state officials tried to roll out a regulation the company didn’t like, Uber emailed their drivers and customers telling them to oppose it. The response flooded regulators’ inboxes and the state backed down.

> In just the last month, the ride-hailing giants have secured a string of victories at the Capitol, killing or delaying legislation and regulations they didn't like and shepherding in new rules favorable to the industry.

SourceL http://www.latimes.com/politics/la-pol-sac-why-uber-is-winni...

> How do you say that they were exploiting cheap labor, when they claim that their business model enabled them to pay their caregivers 25% higher than industry average.

When I read this figure I wondered if they're looking at it on a pre-tax basis. 1099 workers have to pay employment taxes that W-2 workers do not shoulder (because they are paid by the employer). This wouldn't add up to 25% — probably more like 15%. So while I don't think they were "exploiting cheap labor", I think it's possible that the win-win scenario they claim wasn't as big a win for workers as it might seem.

1099 workers also get to expense a lot more stuff from their taxes than employees (I think... please correct me if I'm wrong).

> 1099 workers also get to expense a lot more stuff from their taxes than employees

Correct. As of 2012, deductible expenses can include health insurance premiums, office supplies, auto and travel expenses, a portion of home rent or mortgage payments, and a portion of utility costs.

IANAL/B yes, the HomeHero 1099 caregivers could've reduced their taxable income by rightfully claiming auto and travel expenses to and from the client, and if they were using their residence to do extra work for client (like research or preparing food etc, then they can also deduct business / home-office expenses.

Sure, that's because they're unlikely to be reimbursed, compared to employees.

I believe that employees can get reimbursed for expenses also, but only after the "unreimbursed expenses" exceed a percentage of adjusted gross income. I think it's a 5% threshold, but I haven't checked in years.

On Oct 15th 2015, the entire home care industry got rocked. The Department of Labor upheld a federal ruling stating that over 2 million home care workers would qualify for the Fair Labor Standards Act —essentially requiring all home care workers to be treated as W-2 employees and receive overtime benefits.

I took a few minutes to read Home Care v. Weil and I don't think this is at all an accurate summary.

What the DC circuit found (and SCOTUS, in denying cert, allowed to stand) is that third party employers of home-health workers are required to provide overtime and minimum wage protections for home health workers.

So you can't be the exploitative middleman, but home care workers are still able to work directly for the people in their care, at a rate they both agree on? Seems reasonable to me, provided it doesn't also mean there can't be any kind of marketplace or clearing house that connects workers with people who would like to employ them.

Depends on how hands-on the marketplace is. Something that works like Craigslist is probably fine, something that works like Uber probably isn't.

I think he misses the point entirely.

His business only worked if the country continued to insist that the vulnerable (elderly) can subsists off the backs of the disenfranchised and disadvantaged (home health care workers). Even if he won, the world would be a significantly worse place for it.

The problem is that people are entering their later years without an appropriate safety net. Demanding that a subset of Americans work in poor conditions or at a discounted rate to cover the gap isn't OK.

> Demanding that a subset of Americans work in poor conditions or at a discounted rate to cover the gap isn't OK

No one was demanding anything. Home care workers were working by mutual agreement with their respective employers. "The country" had nothing to do with it.

> Home care workers were working by mutual agreement with their respective employers. "The country" had nothing to do with it.

"The country" can force someone into accepting the "best" bad deal ("by mutual agreement") if all the other options are worse. It's an error to stop your analysis at the agreement without considering the full context in which it was made.

That's true, but it casts the solution here in a weird light. If all of someone's options are bad, removing one of them doesn't help anything.

In the minimum wage debate in general, the response is that demand for workers is kind of inelastic, and that removing low wage jobs will create higher wage jobs. At least in this specific case, it doesn't sound like that is happening? (Though the details matter a lot, and I don't know them.)

What really seems to be happening is the jobs continue to exist as before, but they are driven under the table which is certainly not where we want most people to be working if we truly care about workers' rights. Keep in mind the true incentive of unions like the SEIU which pushed for this change is to improve the wages of their members, even if it comes at the expense of other workers who are 1) willing to work for less, 2) not represented in the union for whatever reason 3) economic progress/productivity on the whole

> Keep in mind the true incentive of unions like the SEIU which pushed for this change is to improve the wages of their members, even if it comes at the expense of other workers who are 1) willing to work for less

This kind of rhetoric is classic divide-and-conquer, which oddly seems to be applied more to labor than employers. I've never heard a company criticized for working in its own best interest and not for the benefit of all employers.

And honestly, I have the least concern for protecting the labor right to work-for-less than the other guy, especially if "less" is a pittance with no benefits.

Denying people without recourse protections is the same as demanding that they accept abuse.

In what sense do they not have recourse? All employment is based on mutual participation. Their recourse is to seek other employment.

If your company was only viable if you could get away with not paying people overtime rates when they work overtime hours, then your company was never viable.

Exactly. Simply not paying people living wages is not a disruptive new idea, it's just exploiting your workers to provide a lower cost to your customers. You're exactly the same sort of scum you're attempting to unseat.

Bring on the downvotes! You can call it whatever you want, "side hustles", "the gig economy", whatever new age bullshit the VC companies are using this week but it's the same thing: ducking labor laws to pay less than living wages to people to do work you don't want to do.

I think the biggest problem here, above anything else, is my first reaction: "Who the hell is Homehero, and why should I care?"

Also: LOL at "The 1099 independent contractor model, below, is very attractive as it removes excess cost and restrictions for employers." Yes, it is very awesome when you get people to perform full-time labor for you without having to worry about giving them insurance or benefits or anything like that!

The typical maid service before all of this is someone you hire off craigslist or word of mouth and pay directly in cash. Who may or may not be an illegal immigrant.

It is pretty much a pure contractor model on it's face. Equivalent to the plumber you hire to fix your pipes, minus the licensure.

Obviously, a startup. And just because you're not in their target market, and so probably wouldn't have heard of them, doesn't mean there isn't something to learn here.

Oh, there's plenty to learn. I just think that agnostic of the labor and regulatory issue he's describing, a much bigger problem was that we're inside of an incredibly niche, startup-focused community here on HN and the overwhelming response so far is "Who the hell are these guys, and why should I care?"

I feel like the way they told their story (being vague about the challenge until halfway down the page) implies that they realize the reason they failed is because they were exploiting contract workers just like Uber does. Good riddance to another "disruptive" company full of "geniuses" making money by throwing some javascript on top of an exploitative labor model.

I was part of a team that was attempting to compete with HomeHero, but based out of Texas. I'm curious why they didn't attempt a geographic pivot if California regulations were truly their main barrier to success in the home healthcare market.

Was going to say, this whole post talks about a challenging regulatory environment in California, and is clearly meant as a "told you so" reaction. However, I see no reason this had to be bound to CA.

You mean other places exist outside the bay area????

> We launched with a workforce of vetted independent contractor (1099) caregivers, who we endearingly referred to as “Heroes”.

How often are pompous titles like that just cheap window-dressing meant to hide some kind of underlying smelly ugliness? I'm getting really skeptical whenever I come across them.

What are some other examples? I know I've seen stuff like this before, but the only other ones I can think of are title/job descriptions like "guru" or "ninja," which are similar but don't quite cover the same space.

It's basically newspeak to make people with absolutely no ties, legal or financial to one company ("independent contractors") feel some allegiance, or some team spirit.

Alienation is getting new worrying meanings every day.

> It's basically newspeak to make people with absolutely no ties, legal or financial to one company ("independent contractors") feel some allegiance, or some team spirit.

"Newspeak job titles" seems like a good name for this phenomenon.

Apple 'Genius' definitely falls in that category.

Subway's "Sandwich Artist"? They're following a formula for assembling a pretty basic roll, and often taking instruction from the other side of the counter. Sounds about as far from artistry as you can get.

I worked at geek squad during college, my job title was "Counter Intelligence Agent".

Are apple geniuses 1099 or w2?

Important to note that we're only getting one side of the story here. It would be nice to get a second opinion, ideally from an actual carer, on the DoL ruling that killed HomeHero's business model. For example, if this ruling (which forced a transition to a W-2 employee model away from 1099) actually ended up getting health insurance to a lot more employees, that could be considered a good thing to some. Of course, that ignores the fact that the regulation did probably end up putting a lot of home carers out of over-the-table work, as Kyle noted.

After the mandated increase in pay and W2 obligation, a lot of people just shuttered their home care businesses. Now the employer is no longer in business, and the employees are left jobless.

Would there be similar results if the minimum wage increased for low-skill jobs? McDonalds employees want $X, but McDonalds can just build those autonomous cashiers which are already all over the place here in Miami. Suddenly no more jobs for people.

My mother is living with my sister in California and we pay I think about $25 an hour for help with eldercare. The person we chose only gets half, the agency gets the other half. Knowing what I know now, we probably should just hire people off of craigslist and give them a lot more money than the agencies give them but that would require a lot more vetting from us. These now unemployed caregivers could go on craigslist but of course without the name/insurance/reputation of some company behind them.

i surance is a big expense for a caregiver. getting a serious one off craiglist means he'll have to pay insurance out of that 25$ and individual bargain for those kind of things sucks. the only alternative would be to get an improvised caregiver, but that's worse under almost every other aspect

Ah, thanks, was wondering what I was missing from the math.

If you are telling them when, where, and how to work they are your employee and you should be paying payroll tax.

> After the mandated increase in pay

Another perspective is that without the mandated pay increase these people were working for a wage below the poverty line. (An assumption on my part, but why else would a pay increase be forced upon a business?)

So what you really mean to ask are we better off paying folks a wage below the poverty line, or force business to pay a livable wage? I think history has provided numerous examples of why labor laws are important.

So, my question to you, are you unfamiliar with history and why labor laws are important?

Once, when I was in Seattle, I witnessed a volunteer cajoling a McDonald's employee to sign up for her Fight for 15 campaign. I was going to tell the fellow that he was about to commit economic suicide, but I let it go.

Fast forward a year, and that McDonald's is now a hole in the ground and a new fancy high rise is going up in its place.

If the cost of an activity exceeds its value, that activity will cease. Of course, if the cost can be passed on it will be passed on. So, if you raised the minimum wage to $1M per hour, a hamburger would cost $300k (or more).

The average McDonald's makes $1.75 million per year in profit for the owner and the average payroll and payroll expenses are in the neighborhood of $500k (according to their franchise information).

Let's assume all of them are making minimum wage, so $15 per hour would basically double it (the average wage is almost definitely higher than $7.50 considering minimum wage in some area).

Now the average profit per year for a McDonalds owner is $1.25 million per year. You think the activity is going to cease?

Of course it may make automation about $500k more appealing, but automation was happening one way or another.

To simplify things, let's say the McDonald's owner owns the property. If his profit drops to $1.25 million per year, but he can sell the property and invest the proceeds so that he earns $1.3 million per year, then the activity will cease. Even if a McDonald's is profitable, something else may be even more attractive when costs change.

The average cost to start a McDonald's is around $1 million.

The rate of return is absurd.

Most franchise owners also become experts running at running a restaurant franchise making them even less likely to move into something else. McDonalds isn't going anywhere when minimum wage goes up.

Your point would have been better if you'd been talking about someone working at a small struggling restaurant that was barley able to stay open.

Even then, you're completely ignoring the effect that moving money from the wealthy to low income earners will have on the economy (read up on velocity of money). There are definitely more efficient ways to do this, but you can't just ignore the effect and state that minimum wage = fewer jobs.

The US has raised the minimum wage multiple times.

Want to read a study of seven decades of historical data about what happens when the minimum wage increases?

http://www.nelp.org/publication/raise-wages-kill-jobs-no-cor...

There is no correlation with decreased employment, in fact most times, there are employment increases, and these increases are bigger in industries more effected by minimum wage like retail and hospitality.

I never said that minimum wage = fewer jobs in all contexts. It will definitely destroy certain employment opportunities in certain circumstances. I suppose I would consider it an accelerant for automation.

You implied that a minimum wage of $15 would eliminate fast food jobs. The numbers indicate that it won't.

>It will definitely destroy certain employment opportunities in certain circumstances.

Sure and a 0.1% sales tax will destroy certain employment opportunities in certain circumstances.

The key is to find a balance. I'd prefer a universal basic income or an increase in the EITC. But I think fighting for a $15 minimum wage that won't kick in until 2024 at the earliest, and will probably be negotiated down to $12, is better than what we have now.

$15 in 2024 will be about $12.50 in 2016 dollars based on projected inflation by the way.

McDonalds franchisees do not own the property. That is how corporate keeps them under control.

Yes, I purposely simplified things. In the case of the corporation, it has to look at the rent it can squeeze from the franchisee versus selling or repurposing the land. In that case, it is even more likely the store will be shut down since the corporation has way more opportunity cost than the franchisee.

Having worked at McDonald's (though nearly three decades ago) I question that number. Thats sounds more like sales. 1.75 million in profit is nearly $5,000 per day. Assuming 10% profit that's almost $50,000/day in sales, which stretches credibility for the average restaurant.

Yeah, I found data on the average Mcdonalds franchise costs vs profit. http://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-profi...

While I understand your argument, your anecdote lacks causality. That fancy new high rise was coming now matter how what McDonald's was paying.

Well, the Starbucks next door is still there, so one business was able to pass on its costs, the other was not. Also, the McDonald's mainly served the elderly and those on fixed incomes, so clearly their customer base wasn't going to pay the price of a latte for a cheeseburger.

Admittedly, though, it is just an anecdote.

If you're talking about First Hill, you're comparing a single story standalone McDonalds in a neighborhood of highrises to a Starbucks taking up a single retail storefront in a full-block hospital complex. Not quite equivalent real estate.

Yes, that McDonald's was fighting an uphill battle.

Working at McDonald's is already economic suicide. Unlikely that they're worse off now unless they are unemployed.

The minimum wage slowly boils away jobs. If it boils them away too quickly, problems result.

https://www.epionline.org/minimum-wage/minimum-wage-teen-une...

It's why you might have a house full of teenagers now, but the mother has to shoulder the entire economic burden while they play Xbox or cause trouble. Pricing people out of jobs and thereby denying them mentorship opportunities and people skills does not leave them better off.

Any job that would pay less than minimum is worthless.

You're better off taking that time and putting it into learning something, anything, than to work 8 hours a day for less than $40 in wages. You're essentially asking lower class workers to be unpaid interns when you pay them that low, but there is zero benefit to being an unpaid intern in mcdonalds.

If it's the teenager working at McDonalds, they deserve a reasonable wage just the same as if it were the mother working there. Denying people the right to earn a fair wage just because you imagine they are teenagers doesn't leave them better off. Most of these people are over 25 years of age. It is not 1970 anymore.

I followed homehero and some of its competitors movements for a bit. Home care is not an easy business, and there are many local vendors in any given community. There's always this argument as to whether going "full stack" (providing the workers, technology - the full solution) is a better option in healthcare than just providing a software product for clients to start using. The argument Kyle makes, that is worth noting, is that existing homecare agencies started deploying software more readily than homehero may have anticipated.

Thay being said, some of the messaging and marketing may have been off as well. I found it odd when they started advertising their workers as W2 heros, or something to that effect.

Can anyone name one of these "gig-economy" startups that treats their contract workers fairly?

So, they have a problem paying $15/hour while claiming to pay better than average and talking about how harmful this was to live-in caregivers. I am reminded of the recent story on HN about a family that had a slave.

https://news.ycombinator.com/item?id=14350059

These guys are too busy trying to figure out how to get rich to take care of their grandmother themselves. Instead, they want to pay people a pittance to do it for them and then whine about how hard it is to find good care givers.

As I said in the discussion about "My Family's Slave," it tends to not work well to pay people to care. That tends to result in paying people to pretend to care.

But, the other side to that is that expecting people to care while you don't care enough about their welfare to make sure they get paid adequately and get adequate time off, etc. is just incredibly broken. It is a horrible form of hypocrisy that has little hope of failing to become abusive.

This is often a gendered issue. Women often do "caring" work and then no one wants to pay them.

On the one hand, I would like to see more marketplaces with 1099 employees that actually work well. On the other hand, I have trouble feeling like this was not an exploitative and ugly model. Why didn't you just go take care of your grandmother yourself instead of creating an entire business to avoid having to do the caring work she required?

Caring about money above all else makes for a poor boss. Or relative.

As somebody with an interest in the space I appreciated the honest breakdown of the challenges and failures, 100% agree that this is a tough market.

But this part stood out:

"We were charging clients 30–40% less than industry average, and we were paying caregivers 25% higher than industry average. Both sides were winning."

Both sides were winning at the expense of Homehero's investors and the viability of the business model.

It is damn easy to grab market share in nearly any price-sensitive marketplace by underpricing service or over-pricing HR but it will ALWAYS ALWAYS catch you.

And while the W2 math / wage wouldn't be completely solve by bringing pricing to parity, it certainly would have had a huge impact and maybe provided enough runway to drive the scale efficiency.

So basically they shut down because the law was forcing their 'employees' or whatever to get paid properly and they could no longer extract surplus value. Sounds like a good thing :)

Maybe if they really wanted to fix things they'd do it as a non-profit.

What added benefit did homehero add to justify their costs? Either way the majority of people who work in this industry do not get paid a lot for what they do. It is hard to argue that they should get paid less to support the middle men

I am intrigued by all the messages pointing out that the business was predicate on unfairly low payments to workers, and when that problem was rectified, their business model stopped working.

What intrigues me is that the common, tired narrative I see on this topic (from nerd friend on FB, typically) is more of a Libertarian/Ayn Rand oriented "the government shut down people who had had the freedom to work below a living wage, as should be their choice."

As it happens I disagree with that libertarian view, but even if I didn't, I'm glad to see a more complex understanding of business models and sympathy for the staff.

I know this is supposed be about unnecessary regulation killing a company that was bringing wins to both homeowners and providers, but... am I reading this right:

"By the Summer of 2015, we had onboarded over 1,200 Heroes, provided care to a few hundred clients ... In June 2015, we raised a $20 million Series A, bringing total funding to $23 million."

So two years and $3 million dollars after they launched, they had only "provided care to few hundred clients". And using those metrics they somehow raised another $20 million dollars?

It seems like they had other problems then a change in the regulatory landscape.

Home care is a really hard business. We aren't just talking about scaling up cab rides. This in putting min wage workers in sick individuals homes. Moving slow is advised.

with 10 heroes per customer it must have been stellar service

Snark is so easy but thoughtful analysis is hard. Marketplace businesses necessitate having adequate supply and demand to keep both sides happy. Rarely can you scale them in lock step.

The supply of skilled, vetted labor exists at the higher regulated prices in most locations. The demand for the service exists in most locations at today's lower prices. Even squeezing out inefficiencies to lower costs and improve convenience/quality/flexibility/coverage, the only way this works is if wages are subsidized. Few people can afford a full time employee, let alone the 3+ needed for 24 in-home hour care.

In case anyone is wondering what they're up to now:

https://news.ycombinator.com/item?id=14501081 https://blog.goharvey.com/homehero-rebrands-as-an-integrativ...

Is there something new here? This is the same post that was posted here 3 months ago.

I'm going to try and address each of the "negative" impacts this person states of the DOL ruling

1.In a survey we conducted internally, the cost for live-in/24-hour care doubled from $250 to $550 per day average in Los Angeles, pushing the price above a skilled nursing facility on a per day basis.

At the rate he mentions of $250 per day, hourly wages would be $10.4 for 24/7 live in care giver. So he was paying less than minimum wage in California. Let's revise that number to meet the minimum wage. It comes to $360. That number of $550 is inaccurate. The correct number is $480 (8 hours of regular pay at $15 per hour if you are in California and 16 hours of $22.5 per hour) So in California the cost went up from 360 to 480. That's a 33% increase not the over 100% increase he states.

2.Families were forced to reduce caregiver hours or fire their agency completely (and go under the table).

This seems to suggest that families were ok with exploiting the care givers even if they had to go "under the table". What kind of care givers will take less than mandated by law? Ones that can be exploited because of their immigration status?

3. Hundreds of thousands of caregivers who were unable or unwilling to be employed as W-2 workers were either removed from their families or let go by their domestic referral agency.

????what?? unable to be employed as W-2? why? Is it because they are not legally allowed to work in the country without a permit? Not willing to work as W-2?? I don't understand why someone would not want to work as a full time W-2. Are they trying to avoid paying taxes? Either ways this is a choice that the caregiver has to make. They would rather make $10.41 and hour than go to $15 or $22.5? Something doesn't smell right.

4. Seniors struggled with “continuity of care” issues as agencies started rotating multiple caregivers in and out of houses throughout the day to avoid overtime costs. This had an especially negative impact on Alzheimer’s and dementia patients.

I get this. I do. My grandmother was bedridden for 12 years and we had a live in caregiver and I know my grandmother would sometimes get confused and scared if we got a replacement when the caregiver was on vacation.

5.The additional rotations in shifts increased gas, parking and transportation costs and added a layer of complexity to scheduling.

This is a problem for the agency. This is where you can have your USP. Don't cry about it. Figure out a kick ass algorithm to reduce scheduling complexity.

6.Caregivers saw their working hours and income reduced, seniors weren’t able to get the 24/7 care they needed, and home care agencies saw a significant a decline in revenue from live-ins.

Caregivers only saw a reduction in working hours and income because agencies didn't want to pay overtime and pass the cost down to the family.

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