In Re Marriage of Gulla

Appellate Court of Illinois
382 Ill. App. 3d 498, 888 N.E.2d 585 (2008)

ELI5:

Rule of Law:

An employer is subject to a statutory penalty for knowingly failing to comply with an income withholding notice, even if the ordered amount exceeds the employee's income. The failure is considered knowing if the notice provides instructions for such a contingency and the employer fails to withhold any amount or contact the designated attorney for clarification.

Facts:

Stephen Kanaval was ordered to pay his ex-wife, Suzanne Gulla, child support, and by April 2004, he had an arrearage of $123,140.63.
A court ordered Stephen to pay $3,000 per month toward this arrearage once he became reemployed.
Stephen was subsequently hired by Knobias, Inc., a corporation based in Mississippi.
On March 28, 2006, Knobias received an income withholding notice from an Illinois court, directing it to withhold $3,000 per month from Stephen's pay.
The notice specified that if the amount to be withheld exceeded the limits under the employee's state law, Knobias should withhold only the maximum amount allowed by that state's law.
The notice provided the contact information for Suzanne Gulla's attorney.
Stephen Kanaval's attorney informed Knobias that he would have the order vacated and that the matter had been settled between the parties.
Relying on these representations, Knobias failed to withhold any money from Stephen's wages from March until November 2006.

Procedural Posture:

Suzanne Gulla filed a petition for a rule to show cause against Knobias, Inc., in the Circuit Court of Lake County, Illinois (trial court), for its failure to withhold income.
Knobias filed a limited response challenging the trial court's personal jurisdiction.
The trial court found that it had jurisdiction over Knobias.
After a hearing, the trial court entered a judgment against Knobias, finding it had knowingly failed to withhold income as ordered.
The trial court initially assessed a penalty of $168,000, which was later modified to $369,000.
Knobias filed a motion to reconsider, which the trial court denied.
Knobias, as appellant, appealed the trial court's judgment to the Illinois Appellate Court, Second District.

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Issue:

Does an employer 'knowingly fail' to comply with an income withholding notice, thereby incurring statutory penalties, when it withholds no funds for several months after receiving a notice that ordered an amount greater than the employee's total wages, even if the employer allegedly relied on the employee's attorney's assurances that the matter was settled?

Opinions:

Majority - Justice Gilleran Johnson

Yes. An employer 'knowingly fails' to comply with an income withholding notice under these circumstances. The court reasoned that the notice itself explicitly instructed Knobias on the correct procedure if the withholding amount was excessive: withhold the maximum amount permitted by the law of the employee's state of employment. Knobias's failure to withhold any amount, despite being aware of this provision, created a statutory presumption that its failure was knowing. Furthermore, Knobias acted unreasonably by relying on the representations of its employee's attorney instead of contacting the obligee's attorney, whose information was provided on the notice. The court also held that jurisdiction over the out-of-state employer was proper under federal and Mississippi statutes requiring states to give full faith and credit to each other's child support withholding orders.

Analysis:

This decision reinforces the strict obligations placed on employers by the Illinois Income Withholding for Support Act. It clarifies that an employer cannot use impossibility or reliance on an employee's counsel as a defense for non-compliance, especially when the legal notice provides clear alternative instructions. The ruling broadly interprets the 'knowing' failure standard, placing the burden on the employer to proactively comply to the maximum extent possible or seek clarification from the proper authorities. This case serves as a significant deterrent to employers who might otherwise ignore or improperly handle out-of-state child support withholding orders, strengthening the enforcement mechanism for such obligations across state lines.

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