Shuttle Firm Faces Possible License Loss

A Sun Valley airport shuttle services company faces possible revocation of its license for allegedly violating state law by using independent contractors as drivers, rather than company employees who receive benefits.

The practice has also raised concerns that Prime Time may flood the market with too many drivers, who could improperly solicit customers.

Prime Time Shuttle International Inc., the state’s second-largest airport-shuttle operator whose red vans are a familiar site to San Fernando Valley residents, has been on probation since May 1994 for the same violation.

Firm officials pleaded no contest at that time to three counts of failing to comply with an order by the state Public Utilities Commission and paid a $5,000 fine. A year earlier they paid $80,000 for a similar violation.

But members of the PUC’s compliance staff, testifying at hearings last week before an administrative law judge in San Francisco, contend that Prime Time has continued to use nonemployee drivers.

For a fee, the company allows independent contractors to use its name, logo and reservation and dispatch system. Prime Time thus avoids paying for certain employee benefits, said Larry McNeely, supervisor of the PUC’s passenger compliance unit.

McNeely said Prime Time has about 157 independent contractors as drivers. State law requires that airport shuttle drivers must be “under the direct control and supervision of the prime carrier,” he said.

“We’re faced with a company that violates the law daily.”

McNeely also said Prime Time’s use of contract labor has shifted its source of revenues from passenger fares to sales of the rights to use its name and logo--much the way direct sales companies operate.

“It’s Amway in a van,” McNeely said.

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Prime Time, while acknowledging that it uses independent contractors, contends that the practice does not run afoul of state law. “It really will come down to interpreting the law,” said John E. Kindt Jr., Prime Time’s president.

Kindt argued that the use of independent contractors has made Prime Time’s operation more efficient and has improved its safety record by giving drivers greater incentive and responsibility.

“This is a story about the arrogance of a big bureaucracy,” Kindt said. “The only thing we really did wrong is we didn’t give in to their opinion.”

But in operating this way, the PUC’s McNeely said, Prime Time’s incentive is to continue selling the rights to its name--even when there’s no market demand for additional vans and drivers.

McNeely said Prime Time tells prospective drivers in sales seminars that they can make a profit of $4,000 a month. “From the folks we’ve interviewed, that’s not possible,” he said. For every driver who signs up, Prime Time receives $1,500 for training, plus weekly fees of $600 or more, he said.

When there are too many vans chasing the same customers, McNeely said, it encourages drivers to work more than the minimum number of hours the PUC allows, and to engage in predatory tactics such as soliciting customers from bus stops.

“We’re not roving the airport looking for passengers,” Kindt countered. More than 85% of Prime Time’s passengers make reservations, he said.

Kindt also contends there’s no evidence that Prime Time drivers are working too many hours or that there are too many vans on the road. Prime Time vans are carrying more passengers per shift than they did before the company switched to independent contractor drivers in 1993, he said.

Prime Time, founded by Kindt in 1986, ferries passengers to and from airports in Los Angeles, Burbank, Long Beach, Ontario and Orange County. Over the years, the company has had a bumpy ride because of the statewide recession, fierce industry competition and an ill-timed merger with a rival shuttle company.

In 1992, the company entered Chapter 11 bankruptcy proceedings. Kindt said the switch to independent contractor-drivers helped the company regain its financial footing and emerge from bankruptcy in April 1994.

The hearings will resume Tuesday in El Segundo, where drivers and airport personnel are expected to testify.

When the hearings are finished, Administrative Law Judge Steven Kotz will have 60 days to submit a proposed decision to the five PUC commissioners. The commissioners will then decide if Prime Time’s license should be revoked, or if any other sanction is necessary. McNeely said some action could be taken by April or May.

Prime Time is also the defendant in a lawsuit filed last May in Superior Court in Los Angeles by a group of drivers and former drivers accusing the company of fraud and labor code violations. The complaint contends that Prime Time deducts $37 a week from money owed to drivers to cover workers’ compensation costs.

The plaintiffs are seeking recovery of the costs of workers’ compensation coverage, plus interest, and unspecified punitive damages.

The lawsuit is due to go to trial in May.