Failure to Forward Employees’ Pay Deductions Leads to Contempt of Court and Civil Penalty for Bicallis LLC and Hill

When employers fail to fulfill their responsibilities regarding employee benefit plans, it not only jeopardizes the financial security of workers but also runs afoul of the law. In a recent case, the U.S. Department of Labor’s investigation revealed that Bicallis LLC and its owner, Ms. Jane Hill, had failed to forward employees’ payroll deductions for 401(k) plan contributions. This breach resulted in severe consequences for the company and its owner.

Investigation and lawsuit

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) meticulously looked into the matter, aiming to ensure compliance with the Employee Retirement Income Security Act of 1974 (ERISA). During the investigation, it was uncovered that Bicallis LLC and Hill had violated ERISA by not forwarding employees’ pay deductions to the retirement plan. In response to these findings, the DOL filed a lawsuit against Bicallis and Hill, seeking redress for the affected employees and holding the responsible parties accountable.

Consent decree and repayment plan

After thorough negotiations, the parties reached a consent decree in May 2022. The consent decree outlined a repayment plan that aimed to restore the funds that had been withheld from employees’ 401(k) plan contributions. As part of the agreement, Bicallis and Hill were also permanently barred from serving in a fiduciary capacity for any plan covered by ERISA in the future. This provision was essential to prevent any repeat of such misconduct in the management of employee benefit plans.

Contempt of court

Unfortunately, the story did not end with the consent decree. Despite having agreed upon a repayment plan, Bicallis and Hill failed to comply with the court’s orders, which led to serious consequences. The federal court in Maryland, where the lawsuit was filed, granted the DOL’s motion to hold Bicallis and Hill in contempt of court. The court ascertained that the defendants had violated the agreement by not adhering to the repayment plan, thus warranting further penalties.

Civil penalty imposed

In addition to being held in contempt of court, Bicallis and Hill faced a civil penalty for their non-compliance. The court imposed a fine of $100 per day until the outstanding amounts owed were paid in full. This penalty underscored the seriousness of the defendants’ failure to meet their obligations and served as a deterrent against future violations. The hope was that the financial burden of the civil penalty would motivate Bicallis and Hill to rectify the situation promptly.

Appointment of an independent fiduciary

Recognizing the urgency and importance of resolving the matter satisfactorily, the court appointed an independent fiduciary to administer the plan and distribute benefits to its participants and beneficiaries. This step was crucial to ensure that the affected employees received the rightful benefits they were entitled to. By removing Bicallis LLC and Hill from their fiduciary roles, the court sought to safeguard the interests of the workers and mitigate any potential harm caused by their actions.

DOL is seeking the court’s assistance

The intervention of the court became necessary when Bicallis and Hill failed to fulfil the terms of the agreement outlined in the consent decree. The DOL, tasked with protecting the integrity of employee benefit plans, turned to the court for assistance in enforcing compliance. The court’s intervention, in the form of contempt of court findings and civil penalties, underscored the seriousness of the defendants’ non-compliance and sent a message to others who may consider neglecting their fiduciary responsibilities.

The case of Bicallis LLC and Hill serves as a stark reminder that employers must fulfill their legal obligations to protect the financial interests of their employees. The U.S. Department of Labor’s investigation, resulting in a lawsuit, consent decree, and subsequent court intervention, showcases the commitment of the DOL to ensuring that employee benefit plans are managed with the utmost diligence. This case serves as a cautionary tale for employers who may be tempted to neglect their fiduciary responsibilities. It also emphasizes the importance of regulatory oversight and the role it plays in safeguarding the financial well-being of workers. Moving forward, it is crucial for employers to adhere strictly to the legal requirements governing employee benefit plans to avoid detrimental consequences for their employees and themselves.

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