Glenn O. Hawbaker, Inc. v. Commonwealth. Dep't of Transp.

• Court: Pennsylvania Supreme Court
• Writing for the Court: JUSTICE BROBSON
• Citation: Glenn O. Hawbaker, Inc. v. Commonwealth. Dep't of Transp., 304 A.3d 1067 (Pa. 2023)
• Docket Number: 20 MAP 2022,No. 20 MAP 2022
• Decision Date: 22 November 2023
• Parties: GLENN O. HAWBAKER, INC., Appellee v. Commonwealth of Pennsylvania DEPARTMENT OF TRANSPORTATION, Yassmin Gramian, Individually and Michael Carroll, in His Capacity as Acting Secretary of Department of Transportation, Melissa J. Batula, P.E., Individually and in Her Capacity as Acting Executive Deputy Secretary for the Department of Transportation, Appellants

304 A.3d 1067

GLENN O. HAWBAKER, INC., Appellee v. Commonwealth of Pennsylvania DEPARTMENT OF TRANSPORTATION, Yassmin Gramian, Individually and Michael Carroll, in His Capacity as Acting Secretary of Department of Transportation, Melissa J. Batula, P.E., Individually and in Her Capacity as Acting Executive Deputy Secretary for the Department of Transportation, Appellants

No. 20 MAP 2022

Supreme Court of Pennsylvania.

Argued: April 18, 2023

Decided: November 22, 2023

Reconsideration/Reargument Denied: December 21, 2023

Joshua Martin Bloom, Esq., Joshua M. Bloom and Associates, P.C., for Amicus Curiae Pennsylvania Foundation for Fair Contracting.

Thomas Paul Howell, Esq., Pennsylvania Governor's Office of General Counsel, Jason Michael Wolgemuth, Esq., Governor's Office of General Counsel, for Appellant.

Sarah Ann Hyser-Staub, Esq., James William Kutz, Esq., Diane Marie Tokarsky, Esq., McNees Wallace & Nurick LLC, Matthew David Lee, Esq., Fox Rothschild. LLP, for Appellee.

TODD, C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, JJ.

OPINION

JUSTICE BROBSON

The Commonwealth of Pennsylvania, Department of Transportation; Yassmin Gramian, individually; Michael Carroll, in his capacity as Acting Secretary of the Department of Transportation; and Melissa J. Batula, P.E., individually and in her capacity as Acting Executive Deputy Secretary for the Department of Transportation (collectively, PennDOT) appeal from an order of the Commonwealth Court that denied, in part, and granted, in part, a "Motion for Adjudication of Civil Contempt or in the Alternative ... Motion for a Preliminary Injunction" (PI Motion) filed by Glenn O. Hawbaker, Inc. (Hawbaker). Pertinently, the Commonwealth Court's order preliminarily enjoined PennDOT from proceeding with any action for the debarment of Hawbaker as a prequalified bidder on PennDOT construction contracts based upon criminal charges filed against Hawbaker or Hawbaker's subsequent entry of a corporate nolo contendere plea to those criminal charges. We reverse.

I. BACKGROUND

This procedurally and substantively complex matter implicates a multitude of statutory and regulatory frameworks. To begin, the State Highway Law (SHL) ¹ tasks PennDOT with "construct[ing] or improv[ing], and thereafter maintain[ing] and repair[ing], at the cost and expense of the Commonwealth, the highways forming the plan or system of the State highways, in the several counties and townships." Section 401 of the SHL, 36 P.S. § 670-401. In connection with this obligation, the SHL empowers PennDOT to establish and maintain a regulatory "system for the qualification of competent and responsible bidders on highway projects." Section 404.1 of the SHL, 36 P.S. § 670-404.1. ² PennDOT's regulations implementing this directive, which we discuss in detail below, are set forth in Chapter 457 of Title 67 of the Pennsylvania Code, 67 Pa. Code §§ 457.1 - .17 (hereinafter referred to as the "Prequalification Regulations"). Hawbaker—a highway construction contractor based in State College, Pennsylvania, with approximately 1,000 employees—has been prequalified to bid on PennDOT construction contracts for decades and regularly performs such contracts throughout the Commonwealth.

On April 8, 2021, following an investigation, the Pennsylvania Office of Attorney General (OAG) filed a criminal complaint against Hawbaker, charging Hawbaker with four counts of theft by failure to make required disposition of funds received in violation of Section 3927(a) of the Crimes Code, 18 Pa. C.S. § 3927(a). Section 3927(a) of the Crimes Code defines this theft offense as follows:

A person who obtains property upon agreement, or subject to a known legal obligation, to make specified payments or other disposition, whether from such property or its proceeds or from his own property to be reserved in equivalent amount, is guilty of theft if he intentionally deals with the property obtained as his own and fails to make the required payment or disposition. The foregoing applies notwithstanding that it may be impossible to identify particular property as belonging to the victim at the time of the failure of the actor to make the required payment or disposition.

The OAG based the criminal charges upon Hawbaker's alleged withholding of fringe benefit payments from its employees in violation of prevailing wage laws, including the Pennsylvania Prevailing Wage Act (PWA) ³ and the federal Davis-Bacon Act, ⁴ during calendar years 2015 through 2018.

By way of further background on Hawbaker's alleged violation of state prevailing wage laws, we observe that the PWA directs "all workmen employed on public work" to be paid by contractors "[n]ot less than the prevailing minimum wages as determined" under the PWA. ⁵

43 P.S. § 165-5. The PWA's attendant regulations ⁶ define "[g]eneral prevailing minimum wage rates, prevailing wage rates, minimum wage rates and wage rates" as "[r]ates as determined by the Secretary [of the Pennsylvania Department of Labor and Industry (L&I)], as payable in the locality in which the public work is to be performed, for the respective crafts and classifications, including the amount of contributions for employe benefits as required by the [PWA]." 34 Pa. Code § 9.102 (emphasis omitted). The PWA regulations further define "[c]ontributions for employe benefits" as " ‘[f]ringe benefits’ paid or to be paid, including payment made whether directly or indirectly, to the workmen for sick, disability, death, other than Workmen's Compensation, medical, surgical, hospital, vacation, travel expense, retirement and pension benefits." Id. (emphasis omitted).

Of additional note, while the OAG brought criminal theft charges against Hawbaker premised upon Hawbaker's alleged noncompliance with the PWA, the PWA itself is administered and enforced by L&I.⁷ 500 James Hance Court v. Pa. Prevailing Wage Appeals Bd. , 613 Pa. 238, 33 A.3d 555, 557 (2011) ; see also 43 P.S. § 165-14 (empowering Secretary of L&I "to prescribe, adopt, promulgate, rescind and enforce rules and regulations pertaining to the administration and enforcement of the provisions of the [PWA]"). The PWA places several duties on the Secretary of L&I—as well as public bodies and contractors—that are particularly relevant here. For instance, Section 11(a) of the PWA, 43 P.S. § 165-11(a), requires public bodies to notify the Secretary of L&I when a contractor fails to pay prevailing wages in connection with public work performed for the public body. Whenever the Secretary of L&I receives such a notification, "or whenever any workman employed upon public work ... file[s] a timely protest objecting that he has been paid less than prevailing wages as required by the [PWA]" as permitted under Section 11(b) of the PWA, the Secretary of L&I is to conduct an investigation that entails "an appropriate hearing upon due notice to interested parties." 43 P.S. § 165-11(b) - (c). Additionally, the Secretary of L&I is to "determine whether or not there has been a failure to pay the prevailing wages and whether such failure was intentional or otherwise." 43 P.S. 165-11(c).

If the Secretary of L&I determines after notice and a hearing that a contractor has unintentionally failed to pay prevailing wages, the Secretary of L&I "shall afford [the contractor] a reasonable opportunity to adjust the matter by," inter alia , making the required payments. 43 P.S. § 165-11(d). If the Secretary of L&I determines after notice and a hearing that a contractor has intentionally failed to pay prevailing wages, the Secretary of L&I is to "notify all public bodies of the name" of the contractor and "no contract shall be awarded to such [contractor] ... until three years have elapsed from the date of the notice to the public bodies." 43 P.S. § 165-11(e). Also, in the event of a contractor's intentional violation, the PWA imposes civil penalties upon the contractor and provides that the Secretary of L&I "may ... request the Attorney General to proceed to recover the penalties for the Commonwealth of Pennsylvania." 43 P.S. § 165-11(e) - (f). Section 12 of the PWA, 43 P.S. § 165-12, further provides that, "[i]n any case where the [S]ecretary [of L&I] shall have determined that any person or firm has failed to pay the prevailing wages under subsections (e) and (f) of section 11 ... , he may direct the public body to terminate, and the public body may terminate, any such contractor's right to proceed with the public work." ⁸

Returning to the facts of the present matter, in light of the criminal charges levied against Hawbaker by the OAG, PennDOT issued a Notice of Immediate Suspension (Suspension Notice) to Hawbaker on April 19, 2021, suspending Hawbaker from contracting with, bidding on, or participating in the award of contracts for Commonwealth-supervised or Commonwealth-funded highway construction work. PennDOT took this action pursuant to Section 457.13 of its Prequalification Regulations, 67 Pa. Code § 457.13, which provides that PennDOT "may" suspend or debar ⁹ a contractor on grounds including, inter alia , a contractor's "[c]omission of ... theft" or other offenses, as well as a contractor's "[v]iolation of a State or Federal law regulating ... prevailing wage standards":

§ 457.13. Suspension or debarment.

(a) Reasons for suspension or debarment . [PennDOT] may temporarily suspend or may debar, for a set period or permanently, a contractor, subcontractor or individual from bidding on or participating in State supervised or funded highway construction work for any of the following reasons:

(1) Commission of ... theft[ ] ....

(2) Commission of fraud or a criminal offense or other improper conduct or knowledge or approval of, or acquiescence in these activities by a contractor or an affiliate, officer, employe or other individual or entity associated with either obtaining, attempting to obtain or performing a public contract or subcontract. The contractor's acceptance of the benefits derived from the conduct

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