EMPLOYER MAY HAVE BEEN NEGLIGENT, BUT STIFF PENALTY WAS UNWARRANTED

September 15, 2004

Steven P. Garmisa
Hoey & Farina Attorney
garmisa@hoeyfarina.com
1-888-425-1212

A penalty of $100 a day accumulates indefinitely when an employer fails to send in child support money that was deducted from an employee's pay.

Despite a long and commendable record of compliance with the support law, for example, a downstate employer, Danny Diener, was slammed with an $87,300 judgment for missing a few deadlines on sending in some of the $77 support payments that were taken from the pay of one of his employees, Jerry Jean.

Reversing, the Illinois Appellate Court majority distinguished a 1995 case where the court upheld a stiff statutory penalty against an employer under the Support Act. Because Diener was merely negligent on a few occasions -- he had a solid record of complying with his obligations under the act -- the majority concluded that the hefty penalty was unwarranted. Thomas v. Diener, 2004 WL 1783782 (4th Dist., Aug 4).

According to section 35 of the Income Withholding for Support Act, employers like Diener "shall pay the amount withheld to the State Disbursement Unit within seven business days after the date the amount would (but for the duty to withhold income) have been paid or credited to the obligor. If the payor knowingly fails to pay any amount withheld to the State Disbursement Unit within seven business days after the date the amount would have been paid or credited to the obligor, the payor shall pay a penalty of $100 for each day that the withheld amount is not paid to the State Disbursement Unit after the period of seven business days has expired.

"The failure of a payor, on more than one occasion, to pay amounts withheld to the State Disbursement Unit within section business days after the date the amount would have been paid or credited to the obligor creates a presumption that the payor knowingly failed to pay over the amounts.

"This penalty may be collected in a civil action which may be brought against the payor in favor of the obligee or public office. A finding of a payor's non-performance within the time required under this act must be documented by a certified mail return receipt showing the date the income withholding notice was served on the payor. For purposes of this act, a withheld amount shall be considered paid by a payor on the date it is mailed by the payor." 750 ILCS 28/35.

Here are some highlights of Justice John T. McCullough's majority opinion in favor of the payor (with various omissions not noted in the quoted text):

"There are three Illinois cases that interpret and apply section 35 of the Support Act or its predecessor, yet none address the precise issues presented here.

"In Vrombaut v. Norcross Safety Products LLC, 298 Ill.App.3d 560 (3d Dist. 1998), the court found that the predecessor statutory section (750 ILCS 5/706.1(G)(1)), upon which the plaintiff's complaint was based, imposed a fine upon an employer who failed to remit the amount withheld, not on one who failed to withhold all together. The parties had stipulated that the employer had failed to withhold; therefore, the plaintiff was not entitled to relief under subsection 706.1(G)(1), but under subsection 706.1(J). The dismissal of her complaint was affirmed.

"In Grams v. Autozone Inc., 319 Ill.App.3d 567 (3d Dist. 2001), the court set forth guidance on how the statutory penalty in section 35 should be assessed. The defendant employer had stipulated to liability.

"This court's decision in Dunahee v. Chenoa Welding & Fabrication Inc., 273 Ill.App.3d 201 (1995), is more closely analogous to the case sub judice, with some important distinctions, than the 3d District's opinions. We will address those distinctions in detail in the relevant sections below.

"Briefly, in Dunahee, this court imposed the $100 per day fine on an employer for failing to timely comply with a withholding order. The then-applicable statutory section (750 ILCS 5/706.1(G)(1)) required the employer to forward the support check within 10 calendar days of paying the employee.

"There, the employer wrote out a check each week but only mailed them once a month to the obligee.

"We considered the statute's legislative history and the federal mandate of Title 42 of the United States Code (42 U.S.C. [sec]666 (1988 and Sup. V 1993)), regarding employer withholding of wages of an obligor, before concluding the imposition of the penalty was appropriate.

"We held the penalty would serve to compensate the plaintiff for any hardship and would deter future non-compliance by the employer. We also noted without the application of a penalty, employers would have an incentive not to send in a withheld child support payment in a timely manner.

" 'The longer a withheld child support check is not mailed to the obligee, the longer those funds are available for the employer to use to its own advantage.' We leave undisturbed our decision in Dunahee and distinguish the facts here."

The majority in the new case concluded that the Circuit Court erred in ruling that the Diner failed to prove he mailed various payments and erred in calculating the deadline for mailing the payments. Finally, although Diener still missed some deadlines, the majority distinguished Dunahee and reversed the remaining $100-a-day penalties.

"In Dunahee," McCullough explained, "we imposed a penalty upon the employer for failing to timely remit child support withheld from the obligor's pay. There, the person in charge of withholding and mailing the child support checks testified she withheld the proper amount from the obligor's pay every week and only mailed the checks once a month.

"Section 706.1 of the Illinois Marriage and Dissolution of Marriage Act required the employer to mail the checks within 10 calendar days of the date the obligor was paid. The employer admitted consistent non-compliance with the withholding order by intentionally forwarding the payments only once a month for several months despite notification from the obligee.

"We held the mandatory nature of the statute, coupled with the legislative intent, made application of the statute reasonable since that was the type of behavior the statute was meant to redress. Such is not the case here.

"Danny and Darrell [Diener] testified they complied with the statute by mailing each check within the required seven business days of paying Jean. The evidence demonstrated that if the check was not written or mailed within the seven business days ... it was an oversight and not a knowing violation of the Support Act. Darrell testified that he knew the child support needed to be paid and took care of it whether Jean earned it or not.

"Thus, we find the trial court erred in imposing a 622-day penalty on the January 2000 check and an 11-day penalty on the November 2000 check. Neither constitutes a 'knowing' violation under the Support Act. We find Darrell's testimony regarding the importance of paying child support regardless of whether Jean earned it indicated he did not intentionally disregard his obligation on either occasion.

"In Dunahee, we analyzed the House debates on the then-applicable statute. Rep. Dunn was concerned that a penalty imposed upon an employer at the rate of $100 a day was unduly harsh and could be unfair to smaller employers, especially those who had more than one employee subject to an order to withhold.

"Rep. Frederick attempted to ease Dunn's concerns by indicating that the penalty would not apply to an innocent or negligent employer, but to one who intentionally withheld a child support payment from the custodial parent.

"Because the employer in Dunahee knew it was not forwarding the checks within 10 calendar days of payday, the penalty was properly imposed.

"Here, the employer was, at worst, negligent. He was cognizant of forwarding the child support within the required seven business days, and except for a few innocent exceptions, the evidence did not demonstrate that he failed to do so.

"In analyzing the intent behind section 35, we are mindful of the duty placed on the employer. In effect, the state has recruited employers as private child support enforcement agencies. The enforcement obligation is not voluntary. The employer is subject to a civil penalty and liability for failure to comply.

"To permit plaintiff to recover a windfall of $87,300 from Jean's employer is an onerous burden and should be found only if it is clear that the legislature intended that burden. Neither the express legislative intent, the language of the statute, nor the evidence presented supports application of the penalty here.

"We find it was improper to impose a penalty against Danny, and we reverse the trial court's judgment therefore."

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