SuperShuttle: A job or a business?

Introduction

Okieriete Enajekpo needs money.

It’s not that the Nigerian-born Maryland resident is unemployed.

But as a driver for the airport van service, SuperShuttle, he must pay the company upwards of $900 a week before he takes home any money of his own.

And going into his fourth day this week in January, Enajekpo is still more than $100 short of paying off his weekly debt and starting to earn cash for himself.

“People back home [in Nigeria] think, ‘Oh you’re in America so you must be doing well,’” he says. “They don’t understand.”

It wasn’t always like this.

Once, drivers of this ubiquitous blue-van airport shuttle service were full-fledged employees, earning a moderate (and dependable) hourly wage. But over the past 13 years SuperShuttle has transformed its cadre of drivers into so-called franchisees — what the company calls independent business owners. In doing so, SuperShuttle has shifted, in its own words, “hard to manage variable costs from the company” to the drivers, making “gross profits more stable and predictable.”

“It was too expensive and, frankly, almost all of our businesses were losing money,” says Thomas LaVoy, chief financial officer of SuperShuttle.

Some drivers say the shift has allowed them greater flexibility and a chance to start their own business. But Enajekpo and hundreds of SuperShuttle drivers across the country say the changes have done more harm than good — and in a series of lawsuits claim the company doesn’t allow them independence and is cheating its drivers out of wages and benefits they should be entitled to as employees.

“It’s really a big racket,” says Mack Green, a Minneapolis driver who is also suing SuperShuttle. “It’s a good company for someone in the company. But the way they have it operating, they could never lose, because the driver is responsible for everything.”

SuperShuttle disagrees. “We offer an opportunity to independent business people who want to be in business for themselves a solid foundation, a good company, association and the means with which to be successful,” says Judy Robertson, head of franchising at SuperShuttle. “How a franchisee operates a business really is dependent on a franchisee, their drive. But I believe we offer a good arrangement.”

Challenges to the model

Good or bad, SuperShuttle is not alone in its business model. Franchising is a growing sector. It added jobs three-and-a-half times as fast as the overall economy from 2001 to 2005, according to the International Franchise Association. Though it has struggled since the recession, the association projects the business sector to return to pre-recession employment levels this year.

This transformation of employees into franchisees and independent contractors has been going on for decades. But it has led to a legal problem known as employee misclassification. That is when a company classifies its workers as contractors or franchisees without giving them the required independence. When that happens, the worker loses some labor protections, and the company is exempt from tax payments such as unemployment and workers compensation — a financial loss state and federal government are feeling in their tax coffers.

Yet defining the boundary between legal franchisee or contractor and employee isn’t entirely clear. There’s no single definition of employee, which means that various state and federal regulators, and even the courts, may allow different standards for one company.

That’s certainly been the case with SuperShuttle. Federal regulators have largely stayed out the fray, with the exception of the National Labor Relations Board. In 2010, the NLRB’s regional office in Denver found that SuperShuttle drivers were employees. That meant drivers were allowed to unionize, and they are now in the middle of contract negotiations.

But two other groups of SuperShuttle drivers that tried to unionize were rejected. In a case from Dallas, an NLRB official determined the drivers were independent contractors. In Enajekpo’s case in Baltimore, the regional office did not reach that issue, finding that even if the drivers were employees, they had supervisory responsibilities and therefore could not unionize. Both cases are now on appeal.

A few state regulators have made small efforts to clarify the relationship. Two unemployment agencies, in Maryland and California, found that SuperShuttle drivers were employees and therefore eligible for unemployment insurance. SuperShuttle has appealed both cases.

This lack of action is why drivers have turned to the federal courts, but even there they’ve had little clarity. Though separate class action suits have been filed in New York, California, Florida, Arizona, Minnesota and Maryland, most have stalled because of a clause in the franchise agreement requiring drivers individually arbitrate their cases with the company. Cases in Florida and Arizona have already settled. A proposed settlement in New York suggests that, while the company won’t admit any fault, it’s willing to compensate drivers the amount of their franchise by arranging to sell it.

SuperShuttle declined to comment on the litigation but in court filings vigorously denies that it misclassifies workers.

A long day’s work

It’s still dark outside when Enajekpo, a 44-year-old father known to his friends as Ola, emerges from his townhouse in a modern cul-de-sac development in Prince George’s County, Md., on a recent Friday morning.

Dressed in slacks, a blue jacket and shirt imprinted with the yellow SuperShuttle logo, Enajekpo begins his morning routine.

Maintenance inspection. Check. Vehicle clean-up. Check. Next up: find the morning’s first job.

Sitting inside his still-frigid van, Enajekpo turns on his Nextel monitor to see what jobs are available this morning. Already, 32 vans are lined up at the airport waiting for passengers. Enajekpo knows it will be a long wait so he hopes to find a group heading from his neighborhood to the airport.

There’s one job at 7:25 a.m. for $64, just minutes from his house. He tries to bid for it but the monitor won’t let him.

“There’s no reason this job shouldn’t be popping up,” he says. “But this happens all the time.”

He shuts down the system, and reboots it, hoping the gig won’t disappear by the time he logs in again. This morning, he’s in luck.

But after he accepts the job, he finds it comes with a slight hitch: one passenger had a coupon, bringing Enajekpo’s take down to $60 because drivers must take all company discounts.

Still, Enajekpo doesn’t complain too much. Any money will help, especially this week when he already owes SuperShuttle $1,054.36. There’s a $197.59 fee to pay down his franchise purchase, a $179.20 fee for his van lease, $144.31 to cover insurance and a weekly $500 system fee for using the SuperShuttle reservations and equipment. He also has $33.35 in other fees SuperShuttle charges him for customer discounts or additional booking fees the company incurs when passengers sign up through third-party websites like Expedia. Enajekpo also owes SuperShuttle $79 from last week, when he didn’t make enough money to cover his debt. On top of all this, he’ll have a couple hundred dollars to pay the company in revenue sharing fees — 10 percent of fares for runs to the airport and 27.5 percent for runs from the airport, which includes an additional fee paid to the airport.

A world of debt

That’s just this week. Enajekpo’s debt began the day he signed up for SuperShuttle in 2004 and bought a 10-year franchise.

It wasn’t difficult. But it wasn’t cheap either. A 10-year franchise costs drivers between $15,000 and $40,000, depending on location, SuperShuttle’s Robertson says. At Baltimore-Washington International Airport, it costs $25,000.

The problem: virtually no driver has the money to pay up front.

So SuperShuttle, owned by the European giant Veolia Transportation, offers a financing system, usually over a seven-year period. It’s this loan that keeps drivers indebted to the company. The interest rates are fixed at a relatively high rate — between 12 and 15 percent, depending on the market — which means drivers can end up paying the company upwards of $60,000 by the time they’re done. (Baltimore drivers pay 15 percent interest.)

Drivers have several other costs. The first is the van. Many do not own one and instead lease a van from a SuperShuttle affiliate, Blue Van Leasing, where interest on the lease can go to 15 percent. Even if drivers do have their own van, SuperShuttle requires them to get a new one about every five years. Green, the Minneapolis driver, says he’d just paid off his van and was finally making money when SuperShuttle forced him to get a new one. “But it was a good, running van and it passed all these inspections,” he says. “They are in the business of selling vans.”

Drivers then rack up a weekly debt for the all-encompassing system fee, which drivers must pay whether or not they work. (They don’t get sick days or vacation days, but they can hire a relief driver to drive for them.) In Baltimore, that means drivers with a 10-year franchise owe the company a minimum $19,500 per year for the system fee alone.

Robertson, of SuperShuttle, says the system fee is important because most airports require SuperShuttle to make a minimum payment to the airport regardless of how much the company earns — an amount she says ranges from $200,000 at small airports to $1.4 million at Los Angeles International Airport.

These fees from franchisees all add up to big bucks for SuperShuttle. In Maryland alone, the company made about half of its 2010 revenue ($4.9 million) from unit franchise sales. Nearly all the rest came from reservations ($5.2 million), according to franchise disclosure documents.

This model has allowed the company to expand from 20 airports in 1999 to 33 airports in 2012, says SuperShuttle’s LaVoy. He says franchising has helped with turnover, once at 185 percent among drivers and now around 10 to 15 percent.

A pro or a con?

For some drivers, the arrangement works well. Pat Alden, 62, lives in Baltimore County, Md., and has been driving a SuperShuttle van since 2004. Alden started off as a relief driver for another franchisee and soon got her own franchise.

“I’m here because I want to be self-employed,” she says. “I chose this because of the flexibility.”

That flexibility is particularly important for Alden, who has spent most of her life running a series of small businesses. As a single mother of three — two with special needs — she often has to help her now-grown children with errands. Just the other week she was able to log in at the airport to wait in line for a job and still make it to the mechanic to get her son’s car fixed.

“I wouldn’t have been able to do that if it was a short wait,” she says. “So, is that a pro or a con?”

Sitting in her van on a recent morning she points out that even though she’d logged in at 3 a.m., she’d gone home to sleep. And while she’s still waiting in her van near the airport at noon, she’s going over papers for her mother’s estate. “So, am I really working now or not?” she says.

Alden estimates that, after expenses, she takes home around $30,000 a year.

“Nobody promises you how much you’ll make when you’re self-employed,” she says. But, she adds: “I feel fortunate that I’m not looking for work. Many people with all sorts of good degrees are unemployed. It’s a tough environment.”

Michael Adenugba, 53, a Nigerian immigrant, agrees. He began driving a SuperShuttle van eight years ago, but since he paid off his franchise he has a driver working it full-time and is leasing a Cadillac taxi run by SuperShuttle that he now drives instead.

“This is not a job that can make you rich — but just for you to survive,” he says.

A laundry list of rules

But drivers like Enajakpo and others who’ve filed lawsuits argue that the company makes it impossible for them to make enough and be independent.

The job certainly comes with a lot of no-can-dos. Drivers can’t use their van to work for any other company. They can’t advertise their services. They can’t refuse a job when they’ve been waiting for hours at the airport and only get one passenger.

There are also a number of musts. They must pay for their own gas and maintenance.

They must keep their van clean and it must look a certain way inside and out. (Which includes painting it blue with the SuperShuttle logo and putting in a laundry list of signs including one saying they accept credit cards and one banning smoking.)

They must wear one of several uniforms. Among the items they can’t wear: a sweater or baseball cap without a SuperShuttle logo.

And they do get penalized. When former Baltimore driver Fred Tinsley was cited on Sept. 17, 2009, for wearing “non-uniform items” including a “white shirt without a tie, shirt tail out, brown sandal type shoes,” he was given three days to comply or lose his franchise.

Too many franchises?

Some drivers also say it’s much harder these days to get enough work. They say that’s because SuperShuttle has been increasing the number of drivers, which hurts their ability to make money.

In Maryland, SuperShuttle had 62 drivers at the end of 2006 and by 2010 had 84. But its revenue has hovered around $10 million for the past few years.

SuperShuttle attorneys wrote in a letter to state regulators that it “does not knowingly or intentionally increase the number of franchisee-drivers beyond the level that it believes can be reasonably sustained over time.”

SuperShuttle’s Robertson adds: “I personally don’t believe that there’s a system set up that requires franchisees to spend an exorbitant number of hours per day working.”

But Enajekpo says that he’s seen the amount of work he gets slowly erode since he first started. It’s 8:30 a.m. when he drops off the two passengers at the airport from his $64 bid. He logs into the system to line up for the next run from the airport. He’s number 36 in line. So Enajekpo pulls up his van to a nearby Shell station and begins to wait.

“It’s going to be a while,” he says, pointing to a row of vans lined up at the same gas station.

Several drivers are sleeping inside their vans. “Some of them have probably been here since 3 a.m.,” he says. (Enajekpo also keeps a blanket and pillow in his van.)

Soon a red car drives by, slowly surveying each of the vans. It’s the manager who comes around to inspect drivers’ vehicles and uniforms, Enajekpo says.

The clock ticks slowly. At 4:10p.m., he’s finally called to pick up passengers. He gets two, and it’s dark again by the time he arrives home at 7:15 p.m. He looks down at the day’s tally: $150 earned in fares and $75 spent on gas.

The long fight

This lack of work is part of why Enajekpo began asking management to limit the number of new franchises.

Drivers across the country were also complaining about this issue. And in 2008, Tom Vitale, chief operating officer for Veolia’s On-Demand Division, wrote drivers a letter responding: “The only way for the company to provide all of this support which is critical to the success of your business as well as ours is to charge fees whether fixed or variable in nature. … The bottom line, yours and ours, is not going to change.”

Then, in 2010, SuperShuttle got a new contract with BWI, which increased airport fees from 15 to 17.5 percent of outbound fares — a difference drivers would have to make up. “We realize this change will be more of a financial hardship for many of you,” the company wrote in a memo to drivers, adding that it needed to raise payments in order to get the contract.

Enajekpo knew that would be hard. Though the company paid him $75,787.18 in 2009, after all his expenses and paying a relief driver Enajekpo was left in the red; His 2009 tax returns showed his income as -$2,665.

At the end of 2010, Enajekpo and colleagues took their case to the NLRB, arguing that they were really employees and should be able to unionize. When they lost, they turned to regulators: the Maryland Aviation Administration, (which spoke to the company but says it wasn’t responsible for labor oversight), the Public Utilities Commission (which says it didn’t have jurisdiction), the state Department of Labor, Licensing and Regulation (where the unemployment claim remains on appeal), and of course, federal court, where he finally settled with the company earlier this year.

John Singleton, a lawyer who has represented the group of drivers before state agencies and the NLRB says: “You’ve got a real problem here because you have different agencies of the state of Maryland, all designed to protect certain groups of people, failing to do their job.”

Enajekpo put it more bluntly in a letter to U.S. Attorney General Eric Holder. The state’s inaction has given the company, he wrote, “carte blanche freedom to exploit minority workers trying to eke a living and fulfilling part of their American dream.”

Correction: An earlier version of this story said that drivers for Super Shuttle earned a salary. In fact, these drivers were paid an hourly wage for each hour worked and not a flat salary regardless of the hours worked.