One of the challenging puzzles involved in each divorce is figuring out the transitional and ongoing management of the finances of the family which initially involves covering the joint finances of the couple in one home then expands into the need to manage the additional expenses of now having two homes but not necessarily any more income to work with. Before divorce, couples make decisions that are practical to the family as a whole which may include one spouse being a primary breadwinner and the other spouse being the primary care provider for the children. This week’s blog discusses issues related to divorces involving one or both spouses not being employed or not earning at the level they may ultimately be capable of. We will consider issues related to providing reasonable transition periods, take a peek at how the Court deals with the issue and end with some consideration about how these issues are approached in mediation.
Family Work Situation at Separation. During marriage families make decisions on how income will be generated, whether both will work, or one will remain at home to tend to the children or other household responsibilities. At time of separation these arrangements can be called into question because there might be financial strain caused by increased expenses, or there might just be disagreement because while the arrangement might have been acceptable when they were working together as a team, things have now changed given the ending of the marriage. The working spouse might hear from an attorney that the child and spousal support obligations they will be responsible to pay will be a lot less if the other spouse is working, or working more hours.
If both spouses are fully employed at separation, ability to earn is not an issue. If both spouses remain on the same page about possibly continuing an arrangement for the good of the children to have one parent not work, or continue to exercise reduced hours to allow for greater availability to meet children’s needs, again the issue may not arise. The issue does typically arise when one spouse is working full time and the other spouse is choosing not to work, is not having success in finding work, or is working, but not doing so on a full time basis.
Transition One of the first considerations is that whatever decisions have been made by the family up to time of separation, those prior decisions are what have placed the family in the current situation they are in. If a family decision is made for one parent to stay at home with the children while the other provides financially for the family, that is the lay of the land moving into the separation. It is not reasonable to expect the other parent to be working overnight. There are obligations that need to be addressed. If the non-working spouse has been out of the job market for a long time or perhaps has never worked then it is unreasonable to think that they would immediately be ready for diving back in. The financial strain combined with the emotional upheaval arising from the breakup of the marriage can add to the difficulties in obtaining work. Being considerate of the changes taking place and approaching the situation with some patience may go a long way in getting to a place to constructively address the issue.
Reasonable Conversation to Have At separation it is appropriate to revisit financial decisions that were made during the marriage. The finances of the family are changing. There are likely going to be more financial demands given that one household will become two which inevitably will require more money. If the family was living on a paycheck to paycheck, shoestring budget, any increase in expenses can turn the financial picture upside down. The couple must sort out how to navigate the situation. Are there ways to reduce costs? Are there savings to turn to for help weathering the storm? Can someone work a second job? If someone is currently not working, can they go find work, or if they are working part time, can they increase their hours? Generating more income is a clear and obvious option to make the family financial picture a little brighter. Having the conversation about returning to work, including the timing, and what it will all look like is a fair topic of conversation. It might be a difficult conversation, but if approached from that patient place mentioned above, it can be a very important part of the puzzle.
Litigation and Imputation In litigated divorces if a spouse is unemployed or under-employed the issue is usually addressed through motions seeking child or spousal support filed with the Court. The fully employed spouse will seek orders from the Court that the other spouse either obtain full time employment, or that if they fail to do so, that the Court impute them with the ability to earn. When this takes place, the non-working spouse will typically be provided an opportunity to explain why they are not working, what efforts they might be making to find work, or what might be standing in their way of seeking work. When the Judge considers the issue, assuming there is not some true impediment to working the Court will typically make an order requiring the non-working, or under-employed spouse to make a certain number of job contacts each week until they have obtained employment. That party is required to maintain a log of the efforts and provide them to the other side to verify compliance. The Court will typically schedule a review hearing a few months out to check in on the progress with the hope that employment will be secured and support can be appropriately set.
I mentioned transition above. The Court considers the circumstances including the party’s long period of being out of the workplace, when it makes these orders. It does not typically immediately impute earnings on the spouse that is not working, instead giving them some time to obtain acceptable employment. If the party is making reasonable efforts to obtain employment and complying with the directive of the Court, they will be provided time to obtain work. If they don’t make the efforts expected, the Court has the ability to, and may very well decide to, impute the spouse with the ability to earn.
Imputation. Family Code 4058 states that “the court may, in its discretion, consider the earning capacity of a parent in lieu of the parent’s income…” This statute applies to child support but the same is true with spousal support. To impute income to a party the Court must find that the party has the ability to work and the opportunity to work. Opportunity means that there is an available job out there that the party has the skills to take. A simple imputation argument might be easy to show that there is a minimum wage job waiting out there. It takes more to show that the party has the ability to earn at a higher level. Here proving ability to work requires evidence that the party has the higher skill set qualifying them for the higher paying job, with again the requirement to show availability of such higher paying jobs. These cases may involve bringing in a qualified professional to conduct a vocational evaluation to help with determining the underemployed spouse’s earning ability and job availability.
How Do We Do It in Mediation? The first part of the discussion in mediation is usually gaining an understanding of how the couple feels about the current arrangement. Is the current arrangement working? Maybe it makes more sense for a stay at home parent to continue in that role, especially if that spouse returning to work will not have a dramatic impact on the family finances. If the finances are tight it will typically become an important topic to address early in the process. While it might be an uncomfortable conversation, it is an important one to have to realistically address the ongoing finances of the family. Giving some space for transition can be part of that conversation. How can the finances be managed to provide some transition time? Is there some reasonable period of time to provide before the search for work needs to commence? Is there some schooling or other training that might be more beneficial to the employment outlook that might impact timing.
As mentioned above, discussing the expectations for a spouse to work is an appropriate topic of conversation in the mediation. The fact that the Court would expect a non-working spouse to eventually return to work is something both spouses should understand as they explore the support issue through mediation. The mediator should facilitate the conversation to help the couple navigate the issue. The conversation can include how the children’s needs will be met when the other parent returns to work, will the shift make sense financially if the income is accompanied with daycare and other expenses to cover the responsibilities the spouse was previously providing, and what efforts should be made to secure the work. Sometimes it is important to have that reality check provided by understanding what it might look like at Court if an agreement can’t be reached in mediation. Mediation provides an opportunity to look at it holistically, ease into the conversation, and to provide a forum where both spouses have an opportunity to hear and consider where they are each coming from. This lends itself to fashioning an agreement that duly considers both spouses working to best meet the financial needs of the family.
The law recognizes the responsibility of both spouses to assist as they are able to meet the financial needs of the family moving beyond the divorce. The Court considers the decisions made by the family that might result in one spouse not working at time of separation, or only working part-time. Divorce changes the financial situation of families and working toward getting to a place where both spouses are making the financial contribution they are able is essential to accomplishing a practical and equitable resolution.