Penalties of $100 Per Day Due to Failure to Withhold Child Support in Light of the Miller Decision
By: Gunnar J. Gitlin
The Gitlin Law Firm, P.C., Woodstock, Illinois
© 2008
www.gitlinlawfirm.com
Illinois law gives power
to the family law 
courts to impose penalties of $100 per day for
a failure to withhold child support in a manner. In light of the Illinois
Supreme Court’s Miller
decision, knowledge of these penalties is critical for Illinois lawyers, for
litigants and for employers. The 2004 legislation provides:
(750 ILCS 28/35) Sec. 35. Duties of payor (a) It shall be the duty of any payor who has been served with an income withholding notice to deduct and pay over income as provided in this Section. The payor shall deduct the amount designated in the income withholding notice, as supplemented by any notice provided pursuant to subsection (f) of Section 45, beginning no later than the next payment of income which is payable or creditable to the obligor that occurs 14 days following the date the income withholding notice was mailed, sent by facsimile or other electronic means, or placed for personal delivery to or service on the payor. The payor may combine all amounts withheld for the benefit of an obligee or public office into a single payment and transmit the payment with a listing of obligors from whom withholding has been effected. The payor shall pay the amount withheld to the State Disbursement Unit within 7 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 withhold the amount designated in the income withholding notice or to pay any amount withheld to the State Disbursement Unit within 7 business days after the date the amount would have been paid or credited to the obligor, then the payor shall pay a penalty of $100 for each day that the withheld amount designated in the income withholding notice (whether or not withheld by the payor) is not paid to the State Disbursement Unit after the period of 7 business days has expired. The failure of a payor, on more than one occasion, to pay amounts withheld to the State Disbursement Unit within 7 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 nonperformance 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, or on the date an electronic funds transfer of the amount has been initiated by the payor, or on the date delivery of the amount has been initiated by the payor. For each deduction, the payor shall provide the State Disbursement Unit, at the time of transmittal, with the date the amount would (but for the duty to withhold income) have been paid or credited to the obligor.
Several years ago, in providing a presentation to the Illinois Institute for Continuing Legal Education on child support enforcement, I had the opportunity to review the law regarding penalties applied to an employer for their failure to withhold. In reviewing the case law, I stated that because of what was a strict construction of the statute by the Illinois appellate courts, the provision in the statute for $100 per day penalties was generally meaningless because it applied only to the failure to pay over amounts already withheld. Usually, when an employer does not honor an order for withholding, the employer fails or refuses to withhold the pay from the employees' wages in the first place. For example, this often occurs for an individual who manages his own company and wishes to avoid full compliance with the support order.
One of the first Illinois appellate court cases to address the $100 per day penalties was eye-opening to many Illinois family lawyers. In Dunahee v. Chenoa Welding & Fabrication, Inc., 273 Ill.App.3d 201, 209 Ill.Dec. 898, 652 N.E.2d 438 (4th Dist. 1995) the Illinois appellate court case held that the penalties of $100 per day (under former IMDMA §706.1(G)(1)) must be imposed against an employer who withheld child support but failed to remit the support payments. The Dunahee court emphasized that the statute was meant to impose a penalty and should be strictly construed. The employer, therefore, did not have a valid defense by urging that the $100 per day penalty would be an undue hardship. The case stated:
[T]he fact the Illinois legislature placed this penalty within the larger mandated enforcement scheme indicates an intent the penalty provision be strictly enforced, to help combat the crisis of child support delinquency.
However, the court's review of the legislative debate indicated that an inadvertent violation of the statute should not be punished. "[T]he legislative history indicates the legislature intended the penalty to be applied where an employer knowingly failed to make a timely payment of withheld child support . . ." (Emphasis added.)
In applying these principles, the Dunahee court stated:
[Employer], however, argues the penalty is unjust as applied against a small business such as itself, and would result in hardship. [Employer] overlooks noncompliance with a child support withholding order by an employer places a substantial burden on a child support obligee, who might be forced to postpone purchasing essentials such as food or medicine for a child until the overdue payment arrives. Thus an employer defendant cannot be heard to complain about hardship to itself caused by payment of a penalty to a plaintiff where that employer defendant's noncompliance with a court order caused hardship on the plaintiff.
* * *
Indeed, without the application of a penalty, employers would have an incentive to not 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, either to help support the operation of its business activities, or to allow invested money to yield a higher return.
The Dunahee court addressed the legislative reason for the provision for $100 per day penalties. It was meant to discourage employers from withholding pursuant to an order for withholding but then have the advantage of the use of those funds for some period of time. However, the legislation, as originally drafted, failed to give the employer a pecuniary or punitive reason to fully comply with a notice or order to withhold income for support.
Many Illinois family lawyers misread the Dunahee decision and believed that the statutory provision for $100 per day penalties should apply to the situation where an employer failed to withhold child support from an employee's wages. For instance, assume a lawyer attempts to enforce child support as against the husband who runs his own S Corporation. An order for withholding could be served on the husband/employer but the husband might choose to simply refuse to withhold child support. The argument the husband would make is that this is not a violation of the statute because the $100 per day penalty only relates to the refusal to pay over amounts previously withheld. This was the situation in the next significant Illinois appellate court case to address the issue.
Vrombaut V. Norcross Safety Products, 298 Ill.App.3d 560, 232 Ill.Dec. 708, 699 N.E.2d 155 (3d Dist. 1998), held that the former IMDMA §706.1(G)(1) did not impose penalties for failing to withhold income initially. According to that case, the penalties apply only to payor's failure to tender payment of withholding once they have already been withheld.
In Vrombaut, in accordance with the parties' divorce judgment, an order of income withholding was served upon the ex-husband's employer. The order required the employer to withhold $90 per week from the ex-husband's income for child support. Once in October 1996 and twice in January 1997, the employer failed to withhold support payments from the ex-husband's pay-check. The ex-wife filed a civil action seeking damages of $100 per day for each late payment. The trial court dismissed the complaint with prejudice and the ex-wife appealed. The appellate court affirmed.
Former IMDMA § 706.1(G)(1) (now 735 ILCS 28/35) stated in pertinent part:
It shall be the duty of any payor who has been served with a copy of the . . . order for withholding . . . to deduct and pay over income as provided in this subsection. . . . If the payor knowingly fails to pay any amount withheld to the obligee or public office within 10 calendar days of the date income is paid to the obligor, the payor shall pay a penalty of $100 for each day that the withheld amount is not paid to the obligee or public office after the period of 10 calendar days has expired. (Emphasis added.)
The ex-wife contended that the penalty provisions applied to an employer's duty to withhold and the employer's duty to remit payment. The Vrombaut appellate court did not agree, based on its construction of the plain language of the statute. Vrombaut held:
The plain language of section 706.1(G)(1) imposes a penalty on an employer who "fails to pay any amount withheld to the obligee." The only plausible reading of this sentence is that an employer will be penalized if it does not promptly pay over an amount withheld from an employee's paycheck. The penalty provision specifically imposes a fine for failing to remit a withholding. The provision, however, does not reference an employer's initial failure to withhold the child support. The absence of such language leads us to conclude that the intent of the legislature was to encourage the quick and efficient payment of child support to the obligee once it has been withheld. Unless or until the legislature indicates that the penalty provision is meant to apply to all duties imposed upon the employer under the Act, we decline to apply the penalty in the manner urged by [the ex-wife]. We therefore hold that section 706.1(G)(1) of the Act must be construed to mean that a penalty will be imposed only if the employer does not remit the child support withheld in a timely manner.
The appellate court commented that it was the legislature's “duty” to correct the anomaly of which the ex-wife complained.
Because of the challenge presented by the Vrombaut decision and the failure of the matter to be addressed by the legislature in the five years after the decision, I proposed to my legislator that this legislation be amended to be much more child support recipient “friendly.” Anticipating the potential opposition by small businesses to a statute which would impose a penalty that could amount to tens or even hundreds of thousands of dollars, I further picked up the language of Section 508(b) of the IMDMA. Section 508(b) of the IMDMA places the burden on the non-complying party to now show a compelling cause or justification for non-compliance in order to avoid the imposition of attorney's fees due to a failure to comply with a court's order. This language seemed to strike the correct balance in promoting greater compliance with income withholding notices and orders while allowing an employer to avoid penalties if there was an extremely good reason for the failure to withhold. One such example I considered was a self-employed individual whose business has had significant losses and the business owner has filed a petition to reduce his child support obligation.
The amended legislation which I drafted now provides that the “payor shall withhold from the obligor's wages and pay the amount withheld to the State Disbursement Unit within 7 business days after the amount ... would have been paid or credited to the obligor.” (Emphasis new language in statute.). The statute then provides that if the “payor knowingly fails to withhold the sums from the obligor's wages or pay any amount withheld” within the period of seven business days, then the payor shall pay the $100 per day penalty “for each day that the withheld amount or the amount that should have been withheld is not paid to the SDU after the period of seven business days has expired.” The final provision of the amendments places the burden of proof on the employer to show compelling cause or justification to avoid the imposition of the penalties. It states, “Payment of a penalty of $100 per day is mandatory unless the payor demonstrates the payor's compelling cause or justification for the failure to withhold or the payor's failure to pay over withheld amounts to the State Disbursement Unit.”
Part of the reason that the bill allowed the avoidance of $100 per day penalties in an appropriate case is the nature of how the $100 per day penalty provisions works. Grams, f/k/a DeRoo v. Autozone, Inc., 319 Ill. App. 3d 567, 253 Ill. Dec. 564, 745 N.E.2d 687 (3d Dist. 2001), held that the provisions apply each time a child support payment is mailed late to a recipient. In that case, an income withholding order was served on January 19th but the employer did not pay over the amounts until April 24th when it complied in full with the withholding order.
The trial court found that the employer mailed the checks late as follows: the first check was mailed 69 days late; the second check was mailed 55 days late; the third check was mailed 41 days late; the fourth check was mailed 27 days late; the fifth check was mailed 13 days late; and the sixth check was mailed 2 days late. The sum total of all days late for all pay periods was 207 days. Pursuant to 750 ILCS 28/35, the trial court fined the employer $20,700. The employer urged that the support recipient's construction of the statute would provide for a windfall to the support recipient.
The Grams court ruled that if the legislature had intended the fine calculation to be as suggested by the employer, the statute would have used plural language stating the fine was based on a failure to timely mail "all withheld amounts." Instead, the use of the following singular language, "shall pay a penalty of $100 for each day that the withheld amount" indicates the legislature intended for the fine to be assessed based on $100 per day for each missed payment. In drafting the legislation I deliberately did not include a provision that the $100 per day penalty would apply to the failure to timely mail all amounts withheld. Accordingly, an employer who fails to withhold should be warned that the penalties that are presumptively applied are against each failure to withhold or each failure to pay over amounts withheld to the State Disbursement Unit.
A post-amendment case addressing the $100 per day penalty issue is Thomas v. Diener, 351 Ill. App. 3d 645, 656, 286 Ill. Dec. 537, 814 N.E.2d 187, (4th Dist. 2004). Thomas addressed the use of the income withholding for support act against an individual who had his own business. The ex-husband was served with a notice to withhold income for support. In 2001 the ex-wife brought suit against her former husband seeking penalties in the amount of $153,500 because she alleged that several payments were timely withheld but were mailed 1,535 days late. In short, there were two checks which were ultimately at issue. The court in Thomas approved of the Grams decision and stated that Grams, "set forth guidance on how the statutory penalty in Section 35 should be addressed." There were several holdings of significance. One involves the definition of what constitutes mailing and that following the customary business practice for placing documents in the mail was sufficient to create a presumption that mailing occurred. There was a dissent at to this issue. The second holding was as to the definition of business days and the case defined business days as set forth in IWSA Section 28/15(b-5) as days when State offices are open for regular business -- and therefore the Saturdays and holidays are not included. Next, the appellate court addressed the issue of strict liability versus whether the failure was "knowing." The appellate court stated that judgment were allowed it would have been for $87,300.
Another post-amendment case to address the issue of $100 per day penalties is IRMO Chen and Ulner, 354 Ill. App. 3d 1004, 290 Ill. Dec. 69, 820 N.E.2d 1136 (2d Dist. 2004). This case illustrates the seriousness of failure to properly withhold support. The appellate court reversed the trial court's determination of $38,100 and determined that a figure of $90,600 was proper due. One of the issues was an inadvertently failure to withhold as opposed to a knowing failure. The appellate court commented that IWSA does not define "knowingly" and there are only four cases to be decided to date and of these only two were significant as applied to this case -- Dunahee and Thomas (both Fourth District cases).
The appellate court stated:
While Auto Mall claims that there was no "knowing" violation in this case, we cannot agree. The trial court expressly found that Auto Mall knowingly failed to pay over amounts withheld from Greg's final three paychecks. According to the facts, Wanshek received notice of the $100-per-day penalty provision when he was properly served with the 2000 support order. Wanshek acknowledged that, at some point, he became aware that the money that was being withheld from Greg's paychecks was not being paid over. As a result, he wrote a $933.42 check encompassing six pay periods on August 23, 2000. Despite his effort to correct the situation, the check was apparently "lost" on Wanshek's desk, mailed in late December, and not received until January 5, 2001. Further, Auto Mall failed to pay over amounts withheld from Greg's final two checks. A check for $311.42 was not received until October 2, 2001. In short, this case does not present a situation similar to Thomas, where the employer was complying with the statute save for a few innocent exceptions. Instead, the facts of this case more closely resemble Dunahee, where the employer offered no compelling excuse for consistently failing to comply with the statute.
More important, Auto Mall's actions in this case raised the presumption of a knowing violation, since it failed, on more than one occasion, to pay amounts withheld to the SDU within the seven-business-day period. While Auto Mall argues that this presumption may not apply to the checks issued prior to its receipt of the 2000 support order, this argument is of no consequence since the presumption was clearly raised by Auto Mall's failure to pay over support withheld from Greg's final three paychecks. Based on this evidence, we cannot say that the trial court's finding of a "knowing" violation was against the manifest weight of the evidence
Finally, the Illinois Supreme Court in IRMO Miller reversed the first District’s appellate court decision and upheld the trial court’s award of $1,172,100. The appellate court decision of Miller, (First Dist, December 12, 2006) had raised questions regarding the continued validity of this legislation. In Miller the Defendant, H.E. Miller, Sr., appealed from the trial court’s judgment ordering him to pay a $1,172,100 penalty to the plaintiff, Lenora Miller, for knowingly failing to timely remit child support payments withheld from his employee’s wages. The appellate court reversed and remanded the matter. The Illinois Supreme Court reversed the appellate court’s decision and affirmed the trial court’s judgment.
The $1.172 million liability stemmed from a May 2001 divorce judgment requiring the ex-husband to pay $82 weekly in child support. Shortly, thereafter, an order for withholding was served on the Defendant. The issue was the $100 per day penalty of 750 ILCS 28/35(a). In a stipulation as to the facts, the parties agreed that between April 2002, and October 2004, the defendant withheld 128 child support payments from the husband’s wages, but failed to timely remit the payments to the State Disbursement Unit. The parties also agreed that the penalties for the defendant's delay equaled $1,172,100. The circuit court entered a judgment against the defendant for $1,172,100 in statutory penalties pursuant to §35 of the Act.
The question before the appellate court was whether the defendant's affirmative defense of laches alleged facts sufficient to constitute a legally cognizable defense. The trial court had granted a motion to strike the affirmative defense of laches. The appellate court had addressed whether the $100-per-day penalty provision, as applied to the facts of this case, violated due process.
The appellate court then stated:
In enacting section 35 of the Act, the legislature sought to provide a simple and speedy method of obtaining payments from the wages of employees owing child support. [Citing Dunahee.] On its face, the $100-per-day penalty provision rationally advances the State's legitimate interest in encouraging the prompt payment of child support. However, when compared to the other penalties provided by the legislature for similar misconduct, we cannot conclude that the $1,172,100 penalty imposed in this case is constitutional.
Under the Non-Support Punishment Act, the legislature has authorized a maximum fine of $25,000 for the criminal offense of a spouse's willful failure to pay child support. Thus, the $1,172,100 penalty imposed against the defendant in this case is approximately 47 times greater than the maximum criminal fine the legislature has found necessary to ensure a spouse's compliance with a child support obligation. The gross disparity between the penalty applied in this case and the maximum criminal fine demonstrates that the $1,172,100 penalty is wholly disproportionate to the defendant's offense and obviously unreasonable. [Citation omitted]. Consequently, we conclude that section 35 of the Act is unconstitutional as applied to this case.
Then the appellate court stated, “Accordingly, we remand this cause with directions to the circuit court that it hold a hearing to determine an appropriate penalty.”
In my original presentation on this case, I wrote:
Justice Wolfson’s dissent in this case is noteworthy. The dissent urged in part, “It is a mistake to give short shrift to the societal interests at stake in this case. Illinois has a strong interest in preserving and promoting the welfare of children. "Indeed, it is difficult to imagine a more compelling State interest than the support of children." The impact of Miller on Section 35 of the IWSA is yet to be determined. In spite of the questions presented by the Miller decision, the enactment of the amendments to Section 35 of the IWSA, a family lawyer in Illinois has one more weapon in his or her arsenal when representing a child support recipient — especially in a case involving a business owned and controlled by the client's spouse or former spouse.
This author had drafted the original legislation which was ultimately enacted regarding the failure to withhold and pay over the amounts withheld. The Supreme Court’s language shows the nature of this extraordinary remedy. The Illinois Supreme Court stated:
We note, too, that the harm suffered by custodial parents and their children where payments are not received on a regular and timely basis is not necessarily susceptible of precise measurement, and that the eventual receipt of a child support payment may not adequately compensate the family for the delay. See Dunahee, 273 Ill. App. 3d at 208 (recognizing that an employer’s noncompliance with its support obligation may force the custodial parent to postpone purchasing essentials such as food or medicine). Thus, the need for uniform adherence to the Withholding Act is paramount.
I liked the paragraph which reads:
Although inferentially conceding that the statute is constitutional on its face, Miller maintains that the statutory penalty, as applied to him, is grossly exaggerated and out of proportion to the severity of his conduct and the amount of child support involved. Miller likens the penalty here to the imposition of a life sentence for a series of speeding tickets. In short, “the punishment does not fit the crime.”
Miller then points out that:
During the 2½-year period relevant to this litigation, Miller, by his own admission, violated the Withholding Act on 11,721 separate occasions. This figure does not include the thousands of violations Miller allegedly committed prior to Lenora filing suit. Although Miller continuously withheld the required support from Harold’s weekly wages, Miller waited five weeks after suit was filed before mailing another child support payment to the SDU, and failed to mail any further payments for another 20 weeks. A 10-month delay preceded the next payment. In all, during the 128 weeks at issue, Miller mailed the weekly support on only 11 occasions. His sporadic payment practice resulted in the payment of child support which was, on average, 90 days late, and as much as 10 months late.
Significantly, Miller was aware of his statutory obligations, and equally aware of the $100-per-day penalty, as set forth in the withholding notice delivered to him in May 2001. Miller was reminded of his obligations and the statutory penalty by Lenora’s counsel in his October 2001 letter. Nonetheless, Miller repeatedly and knowingly violated the statute and his noncompliance continued, as indicated above, even after suit was filed. Miller’s disregard of the Withholding Act persisted even after the circuit court twice ordered him to stay current, and even after Lenora filed two petitions for rule to show cause.
We recognize that the individual daily penalties amassed by Miller produce a weighty sum when aggregated. Miller, however, could have avoided the imposition of any penalties simply by complying with his statutory obligation upon service of the withholding notice or at least after suit was filed. Miller chose to do otherwise. Because Miller controlled the extent of the penalty, he cannot now complain that the penalty is harsh when compared to the amount of child support at issue.
Regarding the more than $1 million penalty the Supreme Court’s decision contained the following language:
This aside, we decline to judge the constitutionality of the penalty here with reference to Miller’s assets. Our lawmakers are under no obligation to make unlawful conduct affordable, particularly where multiple statutory violations are at issue. Based on the important societal interests at stake and the concomitant need for adherence to the Withholding Act, coupled with the egregiousness of Miller’s conduct, we cannot say that the statute is unconstitutional as applied to Miller. Were we to hold otherwise, then “[a]ll an employer would have to do to evade any penalty is nothing, as Miller did here. It could pile up the nonpayments and, when called to account under the penalty provisions, contend it cannot be required to pay because the mandatory penalty is unconstitutionally excessive.” 369 Ill. App. 3d at 54 (Wolfson, P.J., dissenting).
The Supreme Court then rejected the comparison between the $25,000 maximum criminal penalty under the IWSA and the comment that the result in this case was 47 times that amount. The Supreme Court in effect stated that it was an apples to oranges comparison because the criminal provisions allow may provide for a jail term in addition to a penalty.
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