FOR IMMEDIATE RELEASE
February 19, 2013
California Labor Commissioner investigation results in criminal forgery, fraud charges against restaurant owners
San Diego—The owners of a restaurant in San Marcos have been charged with felony counts of workers’ compensation fraud and forgery following a referral by the California Labor Commissioner’s Criminal Investigation Unit to the San Diego District Attorney’s Office.
The District Attorney’s charges, filed in San Diego Superior Court on Jan. 29, allege that Rhythm City Grill owners John Fletcher Johnson and Annette Lucille Thomas each committed two felony counts of forgery of a workers compensation insurance policy and a misdemeanor charge of conducting business without workers’ compensation insurance. Johnson was also charged with an additional felony for submitting a false document to a government agency. He and Thomas were arraigned Feb. 14.
“The Labor Commissioner has reinvigorated enforcement at the Division of Labor Standards Enforcement and is serious about addressing violations of basic labor laws, as well as seeking criminal prosecution of underground employers when egregious violations are brought to light,” said Christine Baker, director of the Department of Industrial Relations (DIR). The Division of Labor Standards Enforcement, also known as the California Labor Commissioner’s Office, is a division of DIR.
“Not only did the owners fail to carry any workers’ comp coverage for their employees, they were willing to lie to authorities to evade the responsibilities that every law-abiding business owner in the state takes seriously,” said Julie A. Su, California Labor Commissioner. “Those businesses that cheat hurt working people and make it costlier for honest businesses. These criminal charges are a signal that this type of behavior has no place in the State of California.”
The Labor Commissioner’s Office launched an investigation at Rhythm City Grill in January 2012 after receiving an anonymous complaint that the restaurant did not have workers’ compensation insurance as required by law. On Feb. 1, 2012, following a visit to the restaurant, the Labor Commissioner issued a civil citation with penalties totaling $18,000 to Johnson and Thomas for failing to insure their 12 employees. A follow-up inspection on Feb. 13 resulted in another notice of labor law violation, after the owners claimed to have coverage but did not produce the documentation.
The case was later assigned to the Labor Commissioner’s Criminal Investigation Unit, which partnered with the San Diego District Attorney’s Office. According to the charges, Johnson prepared a false paper and, with Thomas, forged an insurance certificate showing workers’ compensation insurance that they did not have. They were also charged with failure to secure payment of insurance.
If convicted, Johnson and Thomas face up to 16 years in prison for the felony charges. The failure to secure workers’ compensation insurance carries a misdemeanor charge of 1 year and a fine.
Under state law, businesses not carrying valid workers’ compensation coverage are considered uninsured and face a “Stop Notice and Penalty Assessment” from the Labor Commissioner and fines of $1,500 per employee, up to $100,000. If an injury occurs, the fine increases to $10,000 per employee. A worker injured while working for an uninsured employer can sue for damages and the employer is presumed negligent in such cases.
The Uninsured Employers Benefits Trust Fund (UEBTF), a program funded by user assessments and administered by DIR’s Division of Workers’ Compensation, pays claims to injured workers when illegally uninsured employers fail to pay workers’ compensation benefits. Costs due to illegally uninsured employers exceeded $30 million in fiscal year 2009-10.
The California Department of Industrial Relations’ Division of Labor Standards Enforcement adjudicates wage claims, investigates discrimination and public works complaints and enforces state labor law. Additional information on labor laws and work-related topics are available on our Web site, as well as on Facebook and Twitter.
Employees with work-related questions or complaints may call the California Workers’ Information Hotline at (866) 924-9757 for recorded information on a variety of work related topics.
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