Separating spouses, or those who have child support obligations to one another remain invested and interested in each other’s financial situations long after their relationships are over. Most of us think that once we are no longer involved in a partnership with someone, we are no longer financially connected: after all, between friends (or more accurately, exes) how much money someone makes is neither here nor there – unless there is a support obligation owed to or by a previous partner. In this situation, you might find yourself in shock and thinking “I can’t believe this is all s/he makes!” as you review your former partner’s financial disclosure. The economy has not been stellar for the past few years (but then again, according to the news outlets, has it ever?), and perhaps they are having a difficult time landing the optimal career opportunity. Or job interviews may be simply not their forte; they’ve always been shy around strangers. They are trying their best to get by, and this is the extent of their career potential.
Or is it?
In the context of family law, the conversation doesn’t end there. There is a concept called imputation of income, which basically means that a court can decide how much income a person should be making, and use that amount as opposed to their actual income in determining child support guidelines and obligations.
This post addresses child support guidelines, the basic principles of income imputation due to intentional under- or unemployment, factors reviewed by the court in making the decision, and some common scenarios.
Basic Principles of Unemployment, Underemployment and Support Obligations
The basic principle for child support in Canadian law is that parents have a joint financial obligation to maintain their children in accordance with their relative abilities. This is a statutory principle under Section 26.1(2) of the federal Divorce Act and applies to married couples.
Even if two parents have never been married, but share a child, they have a legal obligation to provide support for their child to the extent that each of them is capable of doing so. This obligation for common-law couples can be found under Section 31(1) of the provincial Family Law Act.
This means that each parent will be expected to financially contribute to his or her child’s needs. This is very much a fact-driven exercise, as multiple factors are taken into consideration in determining the earning capabilities of a parent. For the most part, the parent’s annual income is determined by the income set out on that parent’s Income Tax Return and Notice of Assessment. However, if the other party challenges that the parent is making less money than they reasonably should be or could be, this opens the question of whether the parent is under-employed, and if so, how much income should be imputed to him or her.
The Test To Impute Income
The three-step common-law test in determining whether income is to be imputed is outlined in the Court of Appeal case of Drygala v. Pauli:
1. Is the spouse intentionally under-employed or unemployed?
2. If so, is the intentional under-employment or unemployment required by virtue of his reasonable educational needs?
3. If the answer to question #2 is negative, what income is appropriately imputed in the circumstances?
What Does it Mean to Have Income Imputed?
Imputation of income is the court’s way of saying that they do not think that the number presented by a parent is truly reflective of his or her income-earning abilities. Having an income imputed to a parent means that he or she will be deemed to earn the amount decided by the court.
When is Income Imputed Due to Intentional Under- or Unemployment?
Courts have jurisdiction under section 19(1)(a) of the Federal Child Support Guidelines to impute income on a party for the purposes of child support when a party is intentionally under-employed or unemployed.
There are other circumstances in which the court can impute income. A list of some of these circumstances can be found under section 19(1) of the Federal Child Support Guidelines (this is not a closed list, and the court is not limited in its power to impute income in other circumstances). However, for the purpose of this blog post, we will only discuss cases in which income may be imputed due to a finding of under-employment or unemployment.
Some factors that the court takes into consideration in determining a parent’s income-earning capabilities are: employment history, age, education, skills, health, past income level, and available employment opportunities in the industry or geographic area (again, this is not a closed list).
No two cases are the same, and the factual matrix for each family will dictate whether it is reasonable for a parent to make the amount of money he or she is currently making or even none at all.
For example, it is customary for those who serve in the military or police forces to retire earlier than those who work in office environments. Retiring at the age of 50 or 55 for parents in the former might not be unusual, but may raise some eyebrows if in the latter.
Health is another factor. It is expected that those who experience significant physical and/or mental health issues may earn less income due to shorter work hours or leaves, in comparison to what they might have earned had they not been subject to those challenges. Women in more traditional relationships tend to leave the workforce for a significant number of years as a result of childrearing responsibilities before trying to re-enter the industry later on. Courts recognize that this is a challenge, and the likelihood of finding employment that is lucrative as someone in an uninterrupted career path might find is quite low. They will, therefore, take this into consideration when determining how much a party ‘should be’ earning.
To impute income, the court does not necessarily have to find that a party is under- or unemployed with specific intent to evade support obligations. The fact that a parent chooses not to work when capable of earning a certain level of income is sufficient. There does not need to be a finding of bad faith or willful intention of evasion for the court to make a decision on how much support a payor should be earning. (Drygala v. Pauli).
When is Income NOT Imputed?
Even if there is a finding of under-employment or unemployment, courts will not impute income in situations where such is required by the needs of a child, or if the party in question has reasonable educational or health needs that makes them earn less money than they otherwise could have.
For example, if a parent has had a busy career, but must reduce his or her working hours in order to care for a child with significant disabilities, the court will take this fact into consideration. This information can be found under Section 19(1)(a) of the Guidelines.
What About Illness and/or a Disability?
The health issues in question must be direct and significant to a degree that they impact the earning capabilities of a party. To defend against a claim of intentional underemployment or unemployment, the crux of the case depends on how relevant and credible the evidence is to demonstrate that the illness impinges on the ability to work.
What if I was Fired From my Job? Will I Still be Imputed Income?
Being let go from a job is not a sufficient reason to impute income. There are numerous situations in life where losing a job, or having work hours reduced, is not a consequence of one’s own actions. Examples include downsizing of companies, an overall bad economy, and automation replacing human labour.
If there is evidence that the payor parent has been making genuine and reasonable efforts to find employment, the court will likely not find him or her to be intentionally unemployed. Some pieces of evidence that can be used to support that a party has been actively looking for a job include job search history, any applications and resumes forwarded to potential employers, and communications resulting from such applications.
For example, refusing a job opportunity that is comparable in the salary amount with previous employment without any good reason will be deemed as intentional under- or unemployment (Andre v. Van Gentevoort, 2015 ONSC 1753).
In contrast, if a party has been fired with cause, such as due to misconduct, negligence, or criminal conviction, the court might construe this as a fault on the payor parent’s part and refuse to let the support recipients suffer from his or her bad behaviour (Rogers v. Rogers, 2013 ONSC 1997).
I want to shift gears, go back to school, and start a new career. I might not be earning as much money as I currently am for the next few years – or ever. Will I be imputed income?
In Ffrench v. Williams, 2016 ONCJ 105, the court held that the obligation to support one’s children takes priority over the parent’s own interests and career choices. Considering that an average person in North America will experience five to seven career changes in a lifetime, taking on a new interest or a degree is not unusual. Section 19(1)(a) of the Guidelines provides for the circumstances where a parent returns to school. The operant term, however, is that the career shift should be reasonable. As it was in the case of Mr. Williams, returning to school to pursue a professional football career – or any avenue where the likelihood of success is minimal – whilst foregoing more substantial prospects of employment is unreasonable. So abandoning a well-paying and/or stable career for a degree with limited promises, solely in the name of ‘finding oneself’, might not be the best course of action.
How Much Will Be Imputed?
This is a case to be made by the party bringing the claim. The determination of quantum is on a case-by-case evidentiary basis, as it is a contextual analysis of what a person should be earning. These cases are very fact-driven, as discussed.
I Want to Appeal the Decision Made by the Court. How do I do this?
Whether you think the court erred in imputing income to you, or whether you think income should have been imputed to the other parent but it has not been, appealing a decision that is so fact-centric is a difficult matter. This is because of one of the basic tenets of our justice system, where a trial judge is deemed to be in a better position to make decisions that are based on a finding of facts. The trial judge, unlike the appeal judge(s), has the opportunity to review the evidence put forth to the court in its entirety, assess the credibility of witnesses through both verbal and non-verbal cues, and appreciate the history of the case.
Indeed, the decision for Trang v. Trang (2013 ONSC 1980) states that an imputation of income is not an estimate or a guess; it is a ‘determination of a fact… [and] not a provisional order awaiting better disclosure, or further review’. This implies that the trial court must have gone through a careful and deliberate examination of all evidence put forth, which is all the more reason for the appellate court to provide deference to the income decided by the trial judge.
The standard of appeal for this issue would be a ‘palpable and overriding error’. This is quite a high legal threshold to meet. An appellate court should not interfere with a trial judge’s conclusion that a parent acted reasonably in seeking lesser-paid employment. They can only intervene where there is a material error, a serious misapprehension of the evidence, or an error in law. The possibility of the appellate judiciary making a different decision, or balancing the factors differently, is simply not enough to overturn a support order (Schindle v. Schindle, [2001] M.J. No. 564 (Manitoba Court of Appeal)).
Understanding Unemployment, Underemployment and Support Obligations
Bringing an application for or responding to, a claim of intentional under- or unemployment is a strongly factual exercise. If you find yourself in either of these situations, you would be wise to consult with a qualified family law lawyer in determining what evidence is needed to make or respond to such claims, and how the case should be presented.
The above information is NOT legal advice of any kind, and you should be sure to speak to a qualified family law lawyer about your specific situation. For more information, on how to find justice during a pandemic, call us at 905-273-4588 or email us at contact@kainfamilylaw.com to book a free 30-minute consultation with one of our experienced family law lawyers at Kain & Ball Family Law about unemployment, underemployment and support obligations.