Su Alleges Workers’ Comp Fraud Against California Restaurant

February 19, 2013

The owners of a restaurant in San Marcos, Calif. have been charged with felony counts of workers’ compensation fraud and forgery following a referral by the California Labor Commissioner Julie A. Su’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 comp insurance policy and a misdemeanor charge of conducting business without workers’ compe 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.

“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,” Su said in a statement. “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.”

Su’s office launched an investigation at Rhythm City Grill in January 2012 after receiving an anonymous complaint that the restaurant did not have workers’ comp insurance as required by law. On Feb. 1, 2012, following a visit to the restaurant, the Su 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.

According to the charges, Johnson prepared a false paper and, with Thomas, forged an insurance certificate showing workers’ comp 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’ comp 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.

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