Accounting for Law

Don't panic if your ex threatens to quit working

By Jennifer Krob

Faced with the financial stresses of divorce, it's quite common for spouses to lash out about money, and when the issue in question is support, payors (the spouses who pay support) have been known to threaten, "If you don't accept what I'm offering for support, I'll quit my job and then you and the kids will get nothing!"

The response to this kind of threat varies, but some combination of anger, panic, and anxiety is not uncommon. The good news for the payees (the spouses who receive support) is that they probably don't need to worry. Family court judges are attuned to the various strategies payors use when trying to evade support, and the relevant legislation provides remedies for payees who find themselves in such situations.

The Federal Child Support Guidelines allow a court to impute income to a spouse; in this context, "impute" means to attribute income to, whether income is actually being earned or not. The relevant section reads as follows;

Imputing income
19. (1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:

(a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;
(b) the spouse is exempt from paying federal or provincial income tax;
(c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
(d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
(e) the spouse's property is not reasonably utilized to generate income;
(f) the spouse has failed to provide income information when under a legal obligation to do so;
(g) the spouse unreasonably deducts expenses from income;
(h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and
(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

The list of circumstances in s. 19 is not exhaustive, meaning that there could be many other situations in which a court will impute income to a payor. The courts take a very dim view of parents who try to evade their child support obligations, and will not hesitate to impute income to a parent when there is evidence that the parent is trying to decrease their income (such as working fewer hours, or quitting), hiding their income (like by getting paid "under the table" and not declaring it), or disguising their income (for example when they opt to get paid through methods that have different income tax treatments, and attract a lower tax rate).

In some cases, courts have even imputed income to an unemployed payor where the payor insisted that their employment was completely out of their control.

One such example is the recent Ontario Court of Justice decision by the Honourable Justice Stanley B. Sherr in Jean-Francois v. Barnes, 2012 ONCJ 124, released March 12, 2012. In Jean-Francois v. Barnes one of the issues was whether the court should retroactively vary a child support order. The facts were these: In 2010, the court imputed income to the payor, in this case the father, in the amount of $53,000 per year, based on uncontested evidence from the payee, the mother, about the father's employment. The father chose not to participate in the court proceedings at all, and only sporadically paid child support.

From November 2010 to March 2011, the father was in jail for a forgery-related crime. In 2011, the father asked the court to vary his support obligations and he provided evidence about his income. Justice Sherr heard the case and found that the father had never made $53,000 per year, and instead, his income was closer to $32,203. Justice Sherr decided to decrease the child support arrears owing by calculating the difference between the amount that would have been owing had the father made $53,000 per year, and the amount that would have been owing if the father had been making $32,203 per year. The father also argued that no child support should have been payable while he was in jail for four months, to which Justice Sherr responded in para. 65 of the judgment

I gave less consideration to his argument that he couldn't afford to pay child support when he was incarcerated for four months. Where the under-employment or unemployment is the result of one's own actions (an event over which the payor had some control) or misconduct, the support obligations will not be reduced or cancelled.

It is clear from this case that courts have little sympathy for parents who, by their own actions, become unable to earn an income and pay child support, even when the parents are in jail.

Similarly, the case law demonstrates that a court will impute income to a parent who is unable to earn income and pay child support because of a substance abuse problem. In the Ontario Superior Court of Justice case Hutchison v. Gretzinger, 2007 CanLII 57089, the Honourable Justice Joseph Quinn found that the payor, in that case the father, had not satisfactorily proven that he was a cocaine and oxycontin-addicted drug user. However, Justice Quinn held at paras. 22-23

...However, even if one were to accept that the respondent is a drug addict, his addiction is not a defence to a support claim. When one first consumes illicit drugs, one must be taken to know that addiction can result: addiction is a reasonably foreseeable consequence, as is the resultant loss of income or employment. To the extent that drug addiction is properly viewed as an involuntary illness, the initial drug use is voluntary and, therefore, it is intentional. It is wrong in law (and contrary to public policy) that a parent be exempted from his or her child support obligation because of drug addiction. As was said by Eberhard J. in another context, "He may someday have better ability to pay and there is no reason why the arrears should not be there waiting for him": see Courchesne v. Courchesne, [2004] O.J. No. 442 (S.C.J.) at para. 13.

The respondent acted "intentionally," within the meaning of clause 19(1)(a) of the Child Support Guidelines, when he first began using drugs. He was engaged in voluntary (and criminal) conduct. Such conduct may be equated with self-induced under-employment or unemployment. It is my respectful view that it was a reversible error not to impute minimum-wage income to the respondent.

While the legislation and courts appear quite eager to impute income to payors who are trying to evade child support payments, or who claim to be unable to earn an income, payees should also be aware of some of the situations where a court will not impute income to a payor, even when the payor is intentionally unemployed.

One such case was Mlambo v. Mlambo, 2007 ONCJ 240. In Mlambo v. Mlambo, a payee, in that case the mother, asked the court to impute an income to the father of $63,900 based on the fact that he quit his job as a financial analyst to go back to school, despite knowing that he had an obligation to support his three children. The Honourable Justice James D. Karswick acknowledged that parents have a duty to seek employment, and said at para. 26 of the judgment that those circumstances where the parent was not forced to give up his employment by unfavourable economic conditions or other external circumstances beyond his control but has voluntarily and independently decided to pursue a career change and to enjoy full-time attendance at an educational programme, the first step requires the court to examine that parent's reasons and need to embark on that particular programme of education at that particular point of time at which he chooses to do so.

After reviewing the father's situation, Justice Karswick held that the father's choice to quit his job and pursue his education was reasonable under the circumstances. The father had been employed on a probationary basis that required him to possess a certain level of skill and to obtain professional accreditation. The father's long working hours prevented him from obtaining accreditation. He had two performance reviews where his manager advised him that his skills were not at an acceptable level and that his lack of progress in attaining professional accreditation was concerning.

When a mentor informed the father of the costly consequences of termination, the father resigned and negotiated an agreement that he would be re-hired when he completed his accreditation. The Honourable Justice Karswick found as fact that if the father had not quit his job, he would have been fired and, if he had been fired, any chance of ever returning to work in the profession as a financial analyst would have been "seriously, if not completely compromised."

The cases where income will and will not be imputed are vast and varied, but the thread that runs through them all is that a parent has a duty to seek employment, and a court will generally not permit a parent to avoid their child support obligations voluntarily, or sometimes even involuntarily. While this is clearly good news for payees, it is also good news for honourable, and reasonable payors.

The courts are not unfriendly places for parents who put their children first, even if in particular cases that means being unemployed for a time. The only ones who need fear are those who try to weasel out of their child support obligations, because they will be in for a big surprise when they get to court.

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