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income withholding order penalties

Ignoring Income Withholding Order Results in $53,400 in Penalties

Categorized as Child Support, Spousal Support

Failure to follow an income withholding order brings a steep price for an Illinois employer following the divorce of one of its employees. A recent appeal came down from the Circuit Court of Sangamon County called In Re the Marriage of Sally Kay Hundley filed by the former wife and against her ex-husband John and his employer, Buckhart Sand & Gravel. The wife filed a third party claim against her husband’s employer for not paying monthly maintenance according to the income withholding notice.

Case Background

John was ordered to pay $370.00 a month in maintenance after the parties’ trial. Sally served an income withholding notice to John’s employer. The employer, Buckhart Sand & Gravel began withholding income from John’s paychecks but did not pay those withholdings to the Illinois State Disbursement Unit (SDU). Sally complained and filed a third-party complaint against Buckhart. Buckhart complained that the notice wasn’t properly filled out and the court agreed. That appeal was earlier reversed by the Appellate court.
The case went back to the trial court for further proceedings. Buckhart continued to argue that the withholding notice was invalid, but the trial court said that they were not the proper person to contest the validity of the order. Instead of just paying the money, the company continued to fight.

The court issued a written order finding that the initial failure to pay over withheld amounts pursuant to the withholding notice was an innocent mistake, but the violation became “knowing” when Buckhart failed to correct the mistake until May 2016. The company was assessed a statutory penalty in the amount of $112,000. In May 2018, the trial court modified its judgment and reduced the penalty to $53,400.

Illinois Law Provides Daily Penalty When an Income Withholding Order is Ignored

When a company is served with a notice of an income withholding order and they fail to take the money from the obligor’s check, there is an Illinois statute that allows a person to get a statutory penalty of $100 per day for each payment they miss. What is interesting about this case, is that the company took the money from John’s check, but then they wouldn’t pay it out. They paid a lot in attorney’s fees I assume and then to top it off, they are assessed the $100 a day penalty. It wasn’t even their money, so why did they mess around? 

Buckhart argued at one point that it had a “computing error” and that caused them not to pay the money over to the SDU. They argued that they shouldn’t have to pay the penalty because it was an honest mistake. But once they realize the mistake, they still didn’t pay. Instead, after the first appeal, the case goes to trial.
In January 2018, the trial court conducted a bench trial. The parties stipulated that:

  1. Buckhart received an income withholding notice requiring it to withhold $370 per month from John’s pay beginning January 1, 2016,
  2. John was employed by Buckhart and paid weekly at all relevant times, and
  3. Buckhart withheld the amounts required from each paycheck but failed to pay the amounts to the SDU until May 2016.

As a result, Buckhart agreed Sally was entitled to the statutory presumption that the violation was knowing.

Company Admits to Not Taking Action on the Notice to Withhold Income

A representative of the company, Mr. Flatt admitted he received the notice on February 19, 2016, but took no action, and Buckhart did not offer any explanation for why it did not correct the error. Accordingly, the court concluded that although the initial violation was not committed knowingly, the violation became knowing “when the error went unresolved until May of 2016.” The court also found Buckhart violated section 45(j) of the Support Act by failing to respond to the nonreceipt notice or remit the required payments. Based on these violations, the trial court then calculated the $100 per day penalty as set forth in section 35(a).

Employers Beware: Notice to Withhold Income Requires Strict Compliance

When filling out the Notice to Withhold income form, the mandatory language employed by section 20(c) means there must be strict compliance and the failure to include any of the required information (except the obligee’s signature) affects the validity of the notice of withholding. Once you have your Uniform order of support, and you want the money to come from the obligor’s check directly, you would also serve the employer with the Notice to Withhold.

The employer in this case just doesn’t use sound judgment. A payor has no interest in the funds and should not be making a legal determination as to the validity of the conditions giving rise to the withholding. It is for this reason that the Act gives immunity to any payor who complies with a withholding notice. The Act specifically contemplates that withholding notices may contain mistakes about the current amount due or even arrearages, but it is not the employer’s job to second guess the notice or to do anything besides comply. If they believe an error was made, they could always petition the court, but what they cannot do is keep the money after they’ve withheld it.

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