Page 1 - John Hundley 2008

Sharp Thinking

No. 3 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. January 2008

Income Withholding Act Poses Employer Threat,

Possible Challenge to Punitive Damages Doctrine

By John T. Hundley, Jhundley@lotsharp.com, 618-242-0246

Shock waves started spreading through employer payroll departments last month when the Illinois
Supreme Court approved imposition of over a million dollars in civil penalties on an employer who had
failed to make timely payments under the Income Withholding for Support Act, 750 ILCS 28.

Although the decision involved unusual and, most would say, egregious facts, the condoning of a
penalty-to-actual damage ratio of over 100:1 may implicate federal doctrines on the limits which “due
process of law” places on punitive damages.

The facts in In re Marriage of Miller, __Ill.2d__, 2007 WL 4200819, Nos. 104022, 104035 (Nov. 29,
2007), were certainly not sympathetic for the employer side:

► The employer was the father of the employee who had been ordered to pay the child support;

► The employer actually made the withholdings from the payrolls – it simply failed to pay them over;

► The employer’s failures to remit continued after being advised that such failures violated the Act
and were punishable by $100 per day violations.

Whether the decision is reviewed by the U.S. Supreme Court or not (the time for petitioning has not
run), Marriage of Miller demonstrates how far payroll withholding for support has come from the days
when the employer simply was asked to go along with the employee’s assignment of part of his wages to
the ex-spouse.

Miller also confirms the Draconian way that penalties are imposed under the Act – which often is
doubted when one first reads or is told of same. As the court said:

If an employee is paid weekly, and the employer fails to remit child support withheld from the
employee's paycheck in week one, the employer is subject to a penalty at the rate of $100 per
day. If the employer also fails to remit the next support payment withheld in week two, and the
first payment is still outstanding, the employer is subject to two $100 penalties each day that both
payments remain outstanding.

See also Grams v. Autozone, Inc., 319 Ill.App.3d 567, 745 N.E.2d 687 (3d Dist. 2001). If the failures to
remit continue into a third week, penalties accrue at $300 per day, in the fourth week at $400 a day, and
so on. The results in Miller were 11,721 penalties in a 2½-year period – or $1,172,100 on a withholding
obligation of $82 per week.

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●
Sharp Thinking is an occasional newsletter of The Sharp Law Firm, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp
Thinking shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein
constitute educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal
advice on your particular situation, contact a Sharp lawyer at the phone number or one of the addresses provided on page 2 of this newsletter.