A San Diego grand jury indictment has been returned charging 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. Over a two-year period, the defendants hired 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.

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.

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.

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 Avenue 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.

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 five dollars per hour.