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College Area restaurant accused of not paying employees for time worked

SAN DIEGO -- A grand jury indictment charges two defendants with a total of 21 felony counts in an ongoing payroll scheme at a College Area restaurant that violated minimum wage laws and California theft laws, San Diego County District Attorney Bonnie M. Dumanis said today.

Over a two-year period, the defendants are accused of hiring more than 20 servers and cooks, many of them college students, to work at State Street Grill but refused to pay them after a week of work or offered them a wage that amounted to less than $5 per hour.

“The defendants in this case repeatedly took advantage of victims who were in desperate need of income and who accepted an offer to work during a ‘trainee period,’” Dumanis said. “The estimated loss in this case exceeds $350,000 and we’re encouraging any additional victims of this heartless scheme to come forward.”

David Dadon, 61, and his son Barry Dadon, 27, have both been charged with workers’ compensation premium fraud, payroll tax evasion, sales tax evasion and grand theft of labor from 23 victims. David Dadon was also indicted on one count of the fraudulent removal of property under a lease and two counts of attempted extortion.

If convicted of all the charges, David Dadon faces up to 21 years in prison and Barry Dadon faces up to 18 years and possible restitution to the victims. Barry Dadon pleaded not guilty at his arraignment on April 4 and was released on a $200,000 bail. The elder Dadon will be arraigned today, April 9, at 1:30 pm in Dept. 12 of the Superior Court downtown.

The case was originally referred to the DA’s Insurance Fraud Division from the California Labor Commissioner, whose Criminal Investigation Unit launched an investigation of State Street Grill, located at 5131 College Ave., Suite F in San Diego. The investigation revealed wages earned but not received by at least 23 individuals. As many as 50 potential additional victims are being encouraged to come forward.

The DA’s Office worked closely with the Labor Commission to investigate the case. The Labor Commissioner's office, also known as the Division of Labor Standards Enforcement (DLSE), is the state agency charged with labor law enforcement in California.

“This is wage theft, pure and simple,” Labor Commissioner Julie A. Su said. “All workers in California are entitled to a just day's pay for a hard day's work, and in this case, dozens of employees had their wages stolen right out of their pockets. With this case, we are sending a clear message that such cases will be treated as the crimes that they are.”

The men advertised on Craigslist for immediate placement of server and cook positions. They would offer the applicant the position if they accepted to work without pay for the first seven days. This was considered to be the “training period.” If, after the first seven days of unpaid work, the Dadons were satisfied by the employees’ performance, they indicated the workers would be “put on the schedule” and paid wages. In desperate need of income, many accepted the offer. The trainees described working in excess of 40 hours per week (many 50 to 60) and were never paid. In addition, the Dadons took some of the tips the workers earned.

Employees who were hired after the training period continued to work 50 to 60 hours per week and were fired if they refused to accept a $400 semi-monthly salary. Based on the number of hours worked many employees were working for less than $5 per hour.

“The defendants in this case took advantage of students and others who needed jobs and exploited these victims’ desperate need for income for their own personal gain,” Board of Equalization vice chair Michelle Steel said. “They further victimized their community by taking $108,000 in sales tax collected from their customers and keeping it for themselves. The counts of criminal tax evasion the defendants are facing should send a strong message that defrauding California taxpayers and abusing employees is unacceptable.”

This is believed to be the first case in California where wages stolen from employees that were then not reported to the insurance company as payroll is being used as the basis to charge premium fraud. This unscrupulous practice gives the defrauder an unfair advantage over legitimate business owners because it significantly reduces the normal cost of doing business. This case is another example of the District Attorney’s commitment to prosecute workers’ compensation premium fraud, tax evasion and other crimes such as wage theft which help to maintain a level playing field for honest business owners.

State Street Grill closed in December 2012 after being evicted by the San Diego State Research Foundation.