
Elder Care Startup Honor Makes Contractors Full-Time Workers with Equity - prostoalex
http://techcrunch.com/2016/01/20/elder-care-startup-honor-makes-contractors-full-time-workers-with-equity/
======
rcarrigan87
Having spent the past 3 years growing a home care business, one of the biggest
lessons early on was to focus on the caregivers. Almost all our caregivers are
black, single women living at the poverty line. Anything you can do to help
them with childcare, making ends meet some months, offering extra hours, etc.
is life changing. Ultimately, the caregivers are your product.

I always wondered about companies like Honor. Their initial pitch was
basically all existing home care companies are still in the stone ages, very
inefficient, still using paper (typical SV storyline).

The reality is there are a few really well built SaaS companies (Clearcare is
the one we use) that can do all the automated scheduling, compliance, billing,
caregiver ratings, family portal, etc.

Elder care is a really tough business. Seniors are extremely susceptible to
abuse and all kinds of things often go wrong. Dispatching caregivers through
an app sounds like a nightmare.

Seems from the article these guys are beginning to learn the ropes of the
business. I hope they figure it out. The growing number of seniors is going to
be an incredible challenge.

~~~
randycupertino
I've also worked in senior care and have seen some incredibly horrific abuse
cases. One caregiver would say he was taking the elder to the park for a walk,
to a cafe for lunch, to the pharmacy to pick up meds and then to the store,
but really he was driving them to his house, locking the elder in the back
with the child proof locks enabled, and leaving him inside the car for hours
while he went in his apartment and watched TV. We only found out because the
elder tapped on the window when someone walked by the SUV (tinted windows) and
that person called the police.

Other things like triple diapering to not have to change the elder more than
1x per shift and massive yeast infections underneath the breasts due to lack
of bathing and not changing clothes.

The worst types of places I have seen are the "board and care" facilities for
mentally disabled adults run by Russians in the east bay. There were a few
rotted/unchanged/septic g-tubes that were absolutely horrific. It's been years
and that specific smell of a rotting gtube is still burned into my brain.

There was also this case in the East Bay where the facility abruptly shut down
and stopped paying their workers and so all the caregiving staff just left
except for the janitor and the cook who stayed on and cared for the seniors
for several days until the fire department and sheriff finally responded:
[http://www.npr.org/2014/11/21/365433685/if-we-left-they-
woul...](http://www.npr.org/2014/11/21/365433685/if-we-left-they-wouldnt-have-
nobody) <\--- Honor should give those two dudes who stayed jobs!

It's a very challenging industry.

~~~
marincounty
I've worked as a IHSS worker. I didn't see the abuses you describe, but don't
doubt they happened.

That said, these workers need to be paid more.

I took care of an old friend. I would have taken care of him for free, but
since I was offered minimum wage; I took it.

I think what bother me most were the people who used the system to get out of
taking care of a parent, or family member. I live among very wealthy
individuals. They are very cheap when it comes to take care of dad, or mom.

Yes, they have busy lives. What am I saying--usually one sits home figuring
out the color palate for the third bathroom remodel--that, "just isn't
right?".

They are shocked to find what Home Heath Care individuals are paid, but go
along with the program. "That life?". When they are offered a someone
qualified, and charges a living wage for the county; they quietly go with the
cheapest option. If the senior is still all there, they always hire the best
help. The problem is when it's up to the kids. They cheap it out. I just don't
get it.

I took care of my friend, until I opened that door, and he was dead on his
cheap, rented hospital bed. (Medical rentals charged $200/month for a bed most
of you would sit on.)

Ah, this is putting me in a bad mood. RIP RB. We had some great times! Those
river trips were legendary. I miss the fun we had. I even miss the weekly
phone calls asking about the new sound your car is making. He was my best
friend.

~~~
randycupertino
I was a paramedic so generally by the time we were called things were
deteriorated pretty badly which is why we saw a lot of horrific cases.

Totally agree about the wealthy being very cheap about taking care of their
parents! I know a "California super lawyer" who lives in a mansion in
Belvedere who was recently kvetching about how his father's medication copays
went up a total of an extra $4 per month. He honestly complained to me that
because of this $4 increase his father wouldn't be able to EAT any more. It
took everything I had not to be like, "I know you drive a Tesla and live in an
$8 million dollar mansion so I think you can swing dad's extra copays!" He
wanted me to try and find his dad government assistance copay relief, which is
a process I'll happily help out with for actually low income patients.

I think a lot of other cultures (Asian, Jewish) do eldercare a lot better than
we do. To this day, if someone asks me for a recommendation of a place to put
mom and dad, I always recommend the Jewish Home for the Aged, they are
fantastic and you don't have to be Jewish to live there. They just have a 3+
year waiting list because everybody knows they are the best in the industry.

I'm sorry about your friend. Sounds like you were a great friend and caregiver
to him.

------
Animats
All those "gig economy" companies are going to be forced to treat their
employees as employees. The main Uber lawsuit goes to trial in June.[1] The
lawyer behind this, Shannon Liss-Riordan, has previously won against
Starbucks, American Airlines, FedEx, and over a hundred other companies on
similar issues.

Uber's attempt to block class action suits and force arbitration failed. US
District Court Judge Edward Chen rejected the validity of the arbitration
clause. He called the clause "both procedurally and substantively
unconscionable."

Uber is going to lose this.

Homejoy already lost, and shut down.[2] Postmates, Shyp, Instacart, Lyft, and
Washio are being sued too, over the same issue. Labor law is pretty clear on
this.

[1]
[http://uberlawsuit.com/Uber%20sued%20by%20drivers%20excluded...](http://uberlawsuit.com/Uber%20sued%20by%20drivers%20excluded%20from%20class-
action%20lawsuit.pdf) [2] [http://techcrunch.com/2015/07/31/why-homejoy-
failed-and-the-...](http://techcrunch.com/2015/07/31/why-homejoy-failed-and-
the-future-of-the-on-demand-economy/)

~~~
graeme
Is labor law all that clear on it? I'm in Canada, so maybe there are
differences, but under our law a case like Uber's seems like a grey area. The
vehicles aren't standardized. Drivers aren't required to drive at any given
times, or at all, I believe.

It's not clear to me what distinguishes Uber drivers from, say, Airbnb hosts,
who are clearly not employees.

(There are factors that point towards Uber workers being employees, but no
single factor is determinative.)

The Homejob article actually focusses on the leakage aspects. I think their
business model was doomed regardless of how they classified their employees.

~~~
maxsilver
> Is labor law all that clear on it?

In the US, I think it's pretty clear that they are employees.

[https://www.irs.gov/Businesses/Small-Businesses-&-Self-
Emplo...](https://www.irs.gov/Businesses/Small-Businesses-&-Self-
Employed/Independent-Contractor-Self-Employed-or-Employee)

"Does Uber control how the worker does his or her job?" \- Yep. "Are the
business aspects controlled by the payer?" \- Yes, almost entirely.

Even if they passed that, there's a special category for workers called
"Statutory Employees", where some contractors are treated as employees even if
they don't meet the normal check, which includes :

"The service contract states that all services are to be provided by them
personally" \- Yep. Uber drivers can't accept a route for someone else, or
vise-versa "The services are performed on a continuing basis for the same
payer." \- Yep. Uber drivers routinely drive for Uber.

If the court respects the current rules as written, I don't see any way Uber
can claim their employees are independent contractors.

~~~
graeme
>The service contract states that all services are to be provided by them
personally" \- Yep. Uber drivers can't accept a route for someone else, or
vise-versa "The services are performed on a continuing basis for the same
payer.

That section you quoted applies _if_ someone is in one of the four categories
for a statutory employee. It's to decide _whether_ to withhold Medicare and
social security taxes from those already determined to be statutory employees.

The closes of the four categories is the first (beverage or food delivery
driver), but it doesn't fit Uber.

Whether or not someone can subcontract is generally an important factor in
employee contractor, but it's not necessarily determinative. In a variety of
personal service cases you wouldn't want your contractor switching with
someone else. However, you wouldn't mind if they hired others to handle the
non-personal aspects of their business. Similarly, Uber doesn't care if
drivers subcontract out cleaning and maintenance of their cars and other non-
driving aspects.

Whereas they would care if "Steve" is in fact "John", because the service
depends on reviews. That's similar to, say, Upwork, where if I hire "Steve" I
want to know I'm talking to Steve. I don't care if he subcontracts, but at
least part of the situation must be handled by him, because he's the one with
reviews.

[https://www.irs.gov/Businesses/Small-Businesses-&-Self-
Emplo...](https://www.irs.gov/Businesses/Small-Businesses-&-Self-
Employed/Statutory-Employees)

Meanwhile, you quoted a line from the financial services section, business
control. But take a look at the factors actually listed in that section:

[https://www.irs.gov/Businesses/Small-Businesses-&-Self-
Emplo...](https://www.irs.gov/Businesses/Small-Businesses-&-Self-
Employed/Financial-Control)

As far as I understand it, Uber drivers have significant investment (their
car), they have unreimbursed expenses (car maintenance, food while driving,
etc.), they can profit and lose money (if they are no good and their expenses
exceed earnings), their services are available in the market (they can drive
for others), and payment is per trip rather than an hourly salary (this last
one is the most ambiguous, there are likely special considerations for the
transport market).

I really don't think it's as clear cut as you're making it out to be.

~~~
graeme
p.s. I'm not saying I'm right. I'm hardly an expert on US labor law. If I'm
missing a major factor, I'm interested to hear what might be decisive in a
case like Uber's.

------
tzier
Former CPA and Zen99 founder here.

Home care givers are a special case under US tax code that requires them to be
employees [1]. As honorable (yuk yuk) as it is that Honor is making them
employees, they would have the worst case out of all the on-demand companies.

Uber, for example, can point to nearly all taxi drivers being independent
contractors. Honor would have to point to other home care individuals, who are
either employees of a staffing agency or employees of the family (note: there
are surely families who aren't complying).

Based on IRS code + the reasons brought against Uber/etc, Honor would have a
very low chance of winning the lawsuit.

Overall, I do think making on-demand workers employees is a potentially smart
move to differentiate. Having the best workers will be the key to winning
longer term, because these are service companies enabled by tech, not tech
companies. Code has no feelings; people do. Right now Uber is winning
ridesharing because it has the most volume and hence most money making
opportunities for drivers; but Lyft is putting up a fight almost purely
because they treat their drivers better.

[1] [https://www.irs.gov/Businesses/Small-Businesses-&-Self-
Emplo...](https://www.irs.gov/Businesses/Small-Businesses-&-Self-
Employed/Family-Caregivers-and-Self-Employment-Tax)

------
JshWright
The title case of the headline (without any punctuation) made this very
difficult for me to parse...

As far as the content goes though, I think this is fantastic. Elder care is a
role that can be _incredibly_ challenging. It's nice to see folks getting the
respect they deserve.

~~~
mfoy_
Yes, I didn't know "Honor" was the name of the startup (Which focuses on Elder
Care) until I opened the article.

On an unrelated note, it's interesting to see that the decision to do this was
less related to the current contract vs full-time debate and more related to
Honor's specific industry and business model.

~~~
bwilliams18
I don't think the full time vs contract debate and the industry and business
model decision are as separate as you'd believe.

It's the same thing in the restaurant world with tipping. Danny Meyer can
assert that he's eliminating tipping because he can more fairly compensate
employees, and I believe that's part of it, but the motivating factor is
certainly the increase in minimum wage and its impact on the economics of the
restaurants.

~~~
robk
Some restaurants have gone back on the no tipping policy
[http://money.cnn.com/2016/01/19/pf/no-tipping-reversed-
bar-a...](http://money.cnn.com/2016/01/19/pf/no-tipping-reversed-bar-agricole-
trou-normand/)

------
tomasien
As always with these things I think it's important to remember that for both
the company and the worker, every situation is different. There are tradeoffs
that both make when deciding to move from 1099 to W-2 and vice-versa. The
implication whenever one of these companies, since as Managed by Q or
Instacart, makes a move like this is they're saying "W-2 is the way to go and
is obviously better". That is not the case. It does make sense here and I
applaud them for being thoughtful and proactive.

------
dr_
My career is as a physician in post acute care settings. From my experience
one of the biggest, if not the biggest, issue regarding home care for seniors
is the cost. The agencies near us are rather expensive for most seniors. It's
covered by Medicaid for those who have it and some insurances provide
benefits, but otherwise if you are a senior who needs care for several hours
to 24 hours a day, you are typically paying about $20 an hour or $200 a day.
Medicare does not cover it, and a lot of people cannot afford it. Which is why
when we discharge people and make the recommendation for home care, and
connect them with an agency, many patients and families do not follow through
with it, beyond what their insurance may cover for a short period of time.
Mind you I realize this doesn't mean the caregiver gets paid anywhere near $20
an hour or $200 a day, so I applaud Honors intentions of making them full time
workers with, I hope, benefits. But the bigger issue is how do seniors pay for
these services? It will probably require a change at the level of CMMS.

------
salmonet
I think this could be a really great competitive advantage if it translates
into them having the best workers and customers know that. One thing I've
noticed in my experience with the home care industry (startup that serves
seniors) is that contractors I meet are either extremely kind and
intrinsically motivated or not at all. I would either love or hate for a given
contractor to care for my own parents.

------
gohrt
If management ever even hints to an employee that the Equity has >$0 estimated
value, which could influence the employee's notion of an appropriate wage,
then this is a scam, even more so than it is with the finally-business-savvy
tech employees

------
kelukelugames
Why can't companies give every employee stocks or equity? Is $100 worth of
stocks useless to someone on ~$40k annual income?

~~~
alphast0rm
Companies with 500+ shareholders have to file reports including audited
financial information with the SEC [1], which would be a problem.

[1] [http://dealbook.nytimes.com/2011/11/29/facebook-may-be-
force...](http://dealbook.nytimes.com/2011/11/29/facebook-may-be-forced-to-go-
public-amid-market-gloom/)

