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Pennsylvania Contractor to Pay $20.7M In Wage Theft Case

Accounting Support • Sep 02, 2021
Hawbaker was accused of violating the Pennsylvania Prevailing Wage Act and the Davis-Bacon Act. These acts ensure that all contractors working on state or federally
Pennsylvania Contractor to Pay $20.7M In Wage Theft Case

Dive Brief:

  • According to an announcement by state Attorney General, Pennsylvania road and bridge contractor Glenn O. Hawbaker pleaded no contest. He was sentenced in the largest case of wage theft in American history.
  • The charges against Hawbaker were brought in April. In an announcement last week, it was reported that Pennsylvania contractor State College, agreed to pay restitution to workers. The contractor needs to pay $20.7 million in refunds to 2,267 workers.
  • The firm will also have to proceed through five years’ probation period. Furthermore, the organization needs to meet other conditions, such as appointing a corporate monitor.

Dive Insight:

Hawbaker was accused of violating the Pennsylvania Prevailing Wage Act and the Davis-Bacon Act. These acts ensure that all contractors working on state or federally funded projects are protected in terms of wages. The employers must pay the workers at the same wage rates, determined by state and federal agencies. By providing fringe benefits like healthcare and retirement contributions, contractors can satisfy a portion of the required wage.

After a three-year investigation, Hawbaker was charged with four felonies for being involved in wage theft. Defendants who enter a no-contest plea do not plead guilty but receive conviction or sentence as if they had pleaded guilty. 

Shapiro's office said Hawbaker violated the law by contributing to retirement accounts for all workers. The workers include owners and executives. The money in question was for prevailing wage workers' retirement funds. 

In addition, Shapiro accused the company of stealing funds used for workers' health and welfare benefits. Allegedly, they used these funds to subsidize a self-funded plan for all its employees. According to Shapiro's office, the company covered up the scheme by inflating costs by millions of dollars. Further, they claimed credits for prohibited expenses.

During the early investigations in April, investigators determined that Hawbaker's practices had lasted decades. However, because of the statute of limitations, the contractor could only be charged for the last five years. Hawbaker was founded in 1952 and is among the biggest contractors to complete projects for the Pennsylvania government. Over the past 12 years, the company has received $1.7 billion for government contracts.

In a statement to Construction Dive, Hawbaker said that it had followed the advice of its attorneys. Their job practices were reviewed by federal regulators, leading officials to believe they were following all laws. 

“Our company cited its decision to enter a no-contest plea as avoiding protracted litigation. It might have put the livelihoods of our dedicated employees at risk,” said the statement. "We still believe that we followed all requirements related to fringe benefits."

The Bottom Line

The Attorney General accused Hawbaker of diverting money intended for prevailing-wage of workers’ retirement funds - including its owners and executives. The company was also charged for shifting the health and welfare benefits of prevailing wage workers. According to the Shapiro office, “The Hawbaker artificially inflated the millions of dollars each year and claimed credits for prohibited costs”. Shapiro’s office said that Hawbaker received Pennsylvania contracts of $1.7 billion from 2013 to 2018.

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