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Elder Care Startup Honor Makes Contractors Full-Time Workers with Equity (techcrunch.com)
82 points by prostoalex on Jan 21, 2016 | hide | past | web | favorite | 30 comments

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.

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... <--- Honor should give those two dudes who stayed jobs!

It's a very challenging industry.

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.

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.

Sorry for your loss. Thanks for sharing. Extended family living arrangements have some sort of class stigma in developed countries, but they are clearly advantageous in many ways.

Death rates rise as unemployment falls. This is concentrated in the elderly, and there is research that suggests that this may be attributed to the increasing difficulty hiring home health aides, nursing aides, etc.


Perhaps giving their workers full time employment and equity will help Honor grow market share at a time when it's harder for other firms to staff.

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... [2] http://techcrunch.com/2015/07/31/why-homejoy-failed-and-the-...

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.

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

If Uber/Lyft were like AirBnB, it would be providing you a car with keys with the occasional optional driver.

With AirBnB, getting "service" beyond the lodging is optional (and less common than it used to be).

However, Uber/Lyft always provides the driver. The fact that the driver is an inseparable part of the service is what is eventually going to cause them to lose.

> Is labor law all that clear on it?

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


"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.

>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.


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


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.

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.

>All those "gig economy" companies are going to be forced to treat their employees as employees.

I wouldn't make that bet. Here's why.

There are 2 paths forward for companies like Uber:

Option 1: Keep all of their "control" rules such as non-negotiated pricing, etc and then be forced by the government to convert all drivers from contractors to employees. Government to Uber basically boils down to: "hey, you CONTROL the drivers too much so you must pay the price by becoming their employer."

Option 2: Tweak some of their control rules so they are closer to the model of eBay's sellers and Apple App Store and iTunes musicians. This avoids the reclassification of drivers to employees.

#2 seems to be a much more realistic option. Currently, ebay's sellers are not employees. Also, the programmers submitting iOS apps and musicians that upload music to Apple iTunes are not employees either. There also doesn't seem to be any political pressure or worker's rights advocates pushing for reclassifying them either.

#1 does not seem financially possible unless Uber drastically raises the fares to pay minimum wages, extra employee taxes and maintain profit margins to provide returns on the capital invested.

Which seems more realistic? Raising fares to become a big employer of drivers like UPS, or relaxing the code of conduct rules for drivers so they are perceived more like eBay/Apple?

The problem is the rules in Option 2 that would enable them to remain classified as a contractor.

Specifically, Uber would have to allow drivers to set their own rates.

From an end user's perspective, that's a big shift from where we are today. The vast majority of people taking Uber/Lyft never took Lyft when you set your own "tip." There is a reason Lyft switched: users hate "tipping", drivers sometimes get screwed, and it is confusing. Humans aren't known for their rational purchasing decisions.

On the other hand, letting drivers set rates now requires users to pay attention whenever they call a car. Rates fluctuate rapidly with wild variation—think how much we love buying airline tickets—so drivers who want to make a living are now in effect playing the stock market.

Maybe that's a good thing, to leave it to the market. Maybe it isn't. Either way, it is a large change in the status quo.

The "gig economy" companies are actually a way of giving more people a chance to make money.

They aren't the bad guys here. The taxi unions, which stifled innovation, forced out all competition with the medallion system, and created a monopoly, which resulted in terrible, overpriced, and outdated systems only hurt the consumer.

Child labour was also a way of giving more families a chance to make money.

Well put. Anyone can find a job and "make money". The issue here, of course, is much broader.

It's worth noting that the NWTA, what most people mean when they say "taxi union" is not by any means a traditional union. Since taxi drivers (in most jurisdictions) are contractors and not employees, they have zero collective bargaining rights.

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...

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.

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.

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.

Some restaurants have gone back on the no tipping policy http://money.cnn.com/2016/01/19/pf/no-tipping-reversed-bar-a...

I would think that the problem they'd have if they didn't do this is that once the family got to know the care worker, they would offer them to work for them w/o Honor's involvement.

Same issue Homejoy had, but in this case, it's even more important who works for you.

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.

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.

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.

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

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

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...

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