Yellow Deli will reorganize to comply with state laws
The Yellow Deli and other businesses owned by a North County religious organization will have to reorganize to comply with state laws, including workers’ compensation insurance rules, according to the California Department of Industrial Relations.
The sandwich-and-coffee cafe in downtown Vista is owned by a group called the Twelve Tribes, also known as The Community Apostolic Order.
The deli and the group’s Morning Star Ranch in Valley Center were fined by the Labor Commissioner’s office for operating without workers’ compensation insurance in 2010.
According to a spokesman for the state, the group appealed the fines — which totaled $14,000 and were later reduced to $13,000 — saying the businesses were exempt from workers’ compensation requirements due to the group’s status as a religious nonprofit.
Last week, an attorney for the group said an agreement had been reached with the state in September.
However Peter Melton, a spokesman for the state, said Monday both sides are still working to resolve the matter.
“The situation is not resolved, although the Labor Commissioner’s office is working with (The Community of Apostolic Order) on it,” Melton said in a written statement to the U-T San Diego.
The state also cited in 2008 another business — BOJ Construction, which the group owns — for not paying five workers minimum wages at a construction site in Lake Tahoe. BOJ Construction is based in Massachusetts but has an office in Vista.
All three cases were consolidated into one because they involve the same group, according to a 2012 court ruling provided by Melton to the U-T San Diego.
The Twelve Tribes was recognized as a religious nonprofit 501 (d) by the Internal Revenue Service in 1977, according to case documents filed in San Diego Superior Court. Under IRS rules, a religious organization is allowed to operate businesses for the benefit of its members.
However, the state argued in court that the businesses it fined were listed under the names of individual members, not the group as a whole.
“Basically the San Diego judge agreed with the Labor Commissioner that the Yellow Deli and Morning Star businesses were set up by individuals, with individual owners, and therefore not eligible for exemption under the IRS code 501 (d), religious communal organization,” Melton said.
Jim Peterson, an attorney representing the Twelve Tribes, said Friday that the group agreed in September to dismiss its appeal and to modify the way its businesses were organized.
“It’s no secret that the community owns and operates the businesses,” Peterson said.
The Twelve Tribes opened the Yellow Deli in February 2010. The group also runs another Yellow Deli restaurant in Valley Center, asd well as the Morning Star Ranch, where members grow the fruits and vegetables used in the food sold at the delis.
In June 2010, state inspectors visited the businesses and asked for proof of workers’ compensation insurance. Inspectors were told that there was no insurance policy because the establishments had no employees, only volunteers.
The state issued a $10,000 fine for the Yellow Deli — $1,000 per worker – and a $4,000 fine for the ranch, but the Twelve Tribes appealed the fines saying the businesses were owned by the religious community for the benefit of its members.
The court reduced the fine by $1,000 because it found that one of the individuals at the ranch could not be considered a worker but upheld the rest of the fines.
Melton said the group appealed the court’s decision to the Fourth District Court of Appeals, but has dropped the appeal and agreed to work with the state.
“(The Community Apostolic Order) will need to set up their businesses correctly to comply with California laws and their own bylaws,” Melton said. “Once that’s completed, the businesses will no longer be set up under the names of individual members, but the organization as a whole.”
Depending on how the businesses are reorganized, they may not be required to have workers’ compensation insurance, Melton said.
“If the Yellow Deli and Morning Star Ranch fall within an exemption they will not be required to have workers’ compensation,” Melton said. “If the businesses do not fall within an exemption, or still meet the definition of employer/employee — as opposed, for example, to volunteers for a nonprofit organization — then they will not be exempt.”
