Following a three-year investigation concerning what Pennsylvania Attorney General Josh Shapiro called a “complex and well-disguised sleight of hand,” contractor Glenn O. Hawbaker, Inc. was recently charged with four felony counts as the Attorney General’s office alleged that the company had stolen from its workers for decades.

Notably, Shapiro claimed that Hawbaker’s charges amount to “the largest prevailing wage criminal case on record — under Pennsylvania prevailing wage law and across the United States under federal law.”

Prevailing Wages in Pennsylvania: What Contractors Need to Know

“Employers across this Commonwealth, you are on notice: if you steal from your employees, if you misclassify workers, if you violate our labour laws, we are going to find out, we are going to hold you accountable, and we will do all we can so Pennsylvania workers receive the wages and benefits owed to them under the law,” Shapiro said.

The Attorney General’s office claimed that Hawbaker stole close to $20,600,000 in owed benefits from its employees from 2015 to 2018. Shapiro added that despite the office believing that this theft extends farther back than 2015, statutes of limitation held back the state’s charges.

In discussing the state’s plan moving forward, Shapiro said “My focus now is on holding Hawbaker accountable for breaking the law, and getting these workers their money back.”

According to reports, the investigation began after a whistleblower contacted the state, leading to a warranted search of the company’s headquarters in June 2018.

A release from the Attorney General’s office noted that Hawbaker has long been one of the largest-funded contractors working on behalf of Pennsylvania, receiving an estimated $1.7 billion in contracts from the state through 2021.

Accusations stretch far, and charges could affect similar cases

Shapiro claims that Hawbaker was “engaged in a massive, unprecedented fraud on two distinct fronts.”

As per the Attorney General’s press release, Pennsylvania has multiple laws — Pennsylvania Prevailing Wage Act and the Davis-Bacon Act — meant to protect workers and ensure that all contractors working state or federally-funded projects pay the same wage rates. 

Learn more: How Do Prevailing Wage Laws Work in Construction?

These rates are set by state and federal agencies, and contractors are allowed to satisfy a portion of the required wage by providing “fringe benefits” to their employees. This portion of the wages is referred to as a “fringe benefit credit,” which is calculated by determining the hourly equivalent of the value of the benefit to the contractor.

However, as the charges claim, the company used wage workers’ retirement funds to pay into retirement accounts for all other Hawbaker employees — “essentially taking from one group of workers to pay for the rest of the company,” as Shapiro noted.

In addition, the investigation into Hawbaker’s practices found that the company artificially inflated “its records of benefit spending by millions of dollars each year and [claimed] credit for prohibited costs. Those measures created the appearance that it provided employees with benefits that far exceeded the cost of those that it actually did,” according to a statement.

The Attorney General’s office claims that though Hawbaker “boasted that it provided great employee benefits, in actuality, the company was stealing its workers’ retirement, health, and welfare money.”

As a result of these longstanding practices, Shapiro says that individual workers lost tens of thousands of dollars from their retirement: “Hawbaker used its workers’ fringe benefit funds to lower their costs, and thereby increase profits for the Hawbaker family.”

According to Shapiro, in 2018 the company claimed it spent $18.65 an hour to cover prevailing wage workers’ health and welfare costs — however, the actual amount spent was $6.67.

“Keeping this money allowed them to do the following: They could underbid honest companies by using the money they were stealing from workers to offset their other costs,” Shapiro added.

Shapiro claims that the Attorney General’s office will continue to investigate these types of payment issues, as well.“This is the third in a series of prosecutions related to wage theft and misclassification over the last few months – and it isn’t the last.”

“Too often, the workers that get stolen from are underpaid, have been denied benefits, and have been put into dangerous situations without appropriate training. My Office is committed, with our partners in law enforcement, to keep fighting until workers are treated right,” said Shapiro.

Pennsylvania has dealt with a number of construction issues at the state level in 2021 outside of the Hawbaker case. As an interstate construction project continued to be set back by delays and cost overruns, State Senator Kristin Phillips-Hill recently accused Maryland-based Cherry Hill Construction, Inc. — a subsidiary of Tutor Perini Corporation — of “change order scheming.”

Following this, Senator Phillips-Hill brought a bill to the state’s legislature on May 11, 2021, that would seek to curb “change order scheming” in future Pennsylvania highway construction projects.

The Hawbaker case isn’t the only recent one regarding prevailing wage law violations in Pennsylvania, either. In March 2021, Goodco Mechanical pleaded guilty to theft charges after being accused of intentionally misclassifying workers on prevailing wage jobs in order to pay lower rates.

The Attorney General’s office intends to continue soliciting information from affected workers, both in this case and in relation to any similar wage theft issues. Shapiro noted that “[the Attorney General’s office] learned what Hawbaker was doing from folks with their boots on the ground, keeping a close eye on how contractors pay workers and making sure workers get paid the wages that they earned.”

“I recognize that thousands of people across Pennsylvania are finding out for the first time that they were a victim to this company’s crimes,” Shapiro added. “If you are a worker and you believe that you may have lost out on benefits because of this company’s actions, we want to hear from you.”

Hawbaker maintains level of innocence, hopes for “swift resolution” as its work continues elsewhere

Shapiro noted that Hawbaker was complying with the state’s investigation. According to investigators, the company had previously claimed that it had “relied on bad advice of former counsel” in developing its wage practices.

“Upon learning of the Attorney General’s investigation in 2018, we have cooperated fully. While we believe that we have always acted in accordance with all state and federal laws, in an abundance of caution, the company immediately changed its prevailing wage practices [when the investigation began],” a statement from Hawbaker said.

The company’s attorneys added that “These changes remain in effect today as we continue to do what’s right for our employees, both past and present.”

“These changes remain in effect today as we continue to do what’s right for our employees, both past and present. Our company will continue to work constructively with the Attorney General’s office to reach a swift resolution. Since 1952, Glenn O. Hawbaker’s mission has been to build, serve and advance local communities, and that will never change.”

Hawbaker still has projects in progress in the state, as well. The company is serving as the primary contractor for an $8.9 million project in Turbotville, Pennsylvania which includes significant mill and resurfacing work on interstates in the area, with work expected to be completed by the end of November.