A large wage theft case that unfolded in a Southern California federal court, offers a picture of the car wash mogul’s businesses and raises ethical question concerning his lawyers at Littler Mendelson, the nation’s largest management-side employment firm. At the center of the case is the companies owner, Vahid David Delrahim.
Through one of his companies, Platinum Energy, which is headquartered in Agoura Hills, Delrahim was named last November as the buyer of a $9.1 million home in Hidden Hills, the neighborhood that also houses Kim Kardashian and Miley Cyrus.
The U.S. Department of Labor announced that the workers at Delrahim’s two dozen Southland car washes will receive the back pay under a consent agreement reached with Delrahim and filed in Los Angeles federal court. The car wash magnate has been ordered to pay $4.2 million in back wages and damages to more than 800 employees.
According to the complaint filed in a Los Angeles federal court, Delrahim’s mostly Latino employees were required to report to work at a certain time but directed not to clock in until customers arrived. And when business slowed down, they were told to clock out but remain on the job.
The Delrahim investigation, which began in June 2015 with 63 current and former workers of a single facility, the Brea Car Wash & Detail Center, turned into a fierce legal slugfest. Three of his Agoura Hills-based companies are also defendants: Southwest Fuel Management, Goldenwest Solutions Group and California Payroll Group.
Prosecutors added Delrahim’s daughter, Shannon Delrahim, as a defendant. Littler Mendelson had argued that Shannon was a 21-year-old “part-time marketing intern,” enrolled full time at Pepperdine University. But documents subpoenaed from Pepperdine showed that Shannon was actually 26, had listed her job as HR director for her father’s companies since 2009, and attended classes only at night and on weekends.
An employment law “wage theft” case can also be viewed as a scheme to avoid workers’ compensation insurance premium. Since premium is based on payroll, an illegal reduction in payroll by wage theft, also reduces the workers’ compensation premium that otherwise would have been paid. In cases such as this one, the potential to recover unpaid premium has yet to be fully developed by the worker’s compensation insurance industry.
In August 2016, investigators requested that the 58-year-old Delrahim and his company manager produce evidence such as surveillance footage, text messages and emails that related to employee work hours, wages, schedules, guidelines and gross business income. The defendants failed to provide the requested material.
Court documents showed that Delrahim and his manager, Martin Lizarraga, admitted they deleted emails and texts – and that company surveillance footage was not stored beyond 30 days. The defendants testified that the deletions were a regular occurrence and not a deliberate attempt to rebuff the Department of Labor’s request. Their lawyers stated that the video footage was “too burdensome and expensive to retain.”
Retired judge Rosalyn Chapman was appointed by the court to evaluate the claims. She ruled that Delrahim had purposely destroyed video evidence and that Littler Mendelson, the law firm representing Delrahim, was “deliberately and willfully stonewalling on discovery.”
Over the course of the case, Delrahim and Littler Mendelson have been sanctioned by the court five times for withholding documents and other “not substantially justified” delaying tactics. They have been ordered to reimburse the government $23,850 in legal fees.
The car wash industry has one of the highest levels of wage theft and workplace violations recorded by the California Division of Labor Standards Enforcement. In the past five years, inspectors have issued 1,423 citations for failing to pay workers compensation, minimum wage and overtime, refusing to provide itemized pay statements, denying rest and meal breaks and operating without a license.
In 2012, California Attorney General Kamala Harris announced a $1 million settlement in a lawsuit against a company that owned car washes in Santa Monica, Venice, Irvine, Laguna Niguel, Laguna Hills, Folsom, Fair Oaks and San Ramon. According to investigators, more than 80 workers were denied minimum wage, overtime, rest and meal breaks. The owner created false records.