Posted on October 26, 2009 by Sandra C. Fava

CALCULATING CHILD SUPPORT OBLIGATIONS

I have heard on more than one occasion from a client that their spouse or ex-spouse isn't earning nearly as much income as he/she may be capable of earning.  This statement is often made in the face of an alimony or child support calculation.  What happens if this is in fact true?

During the divorce process one of the more common ways to determine how much income a spouse can earn is to have them evaluated by an employability expert.  Now if you look up "employability expert" as a qualified profession or a course of study available in a college course book, I doubt that you would find it in there.  Like many other things, employability experts arose out of a need in the legal profession to have an individual with the proper experience, knowledge and background meet with an individual and assess their skill set to determine what kind of employment they may be eligible to obtain. Viola- a new niche profession is born!

So what about after a divorce is finalized and an ex-spouse is either unemployed (because of the economy, the job market or they simply refuse to work) or is underemployed (earning less than they had previously earned either by choice or no fault of their own) and a support obligation exists?  What does the court then rely upon when addressing the recalculation of a support award?

The Appellate Division, in the recent unpublished decision of Bakalian v. Bakalian, A-4773-07T1, decided October 21, 2009, revisited this issue.  In this case, the ex-husband appealed, in part, from the trial court's Order that imputed income to him as well as objecting to the way in which the trial judge reached the imputed income number.

Imputed income- what's this?  In simplest terms- imputed income is income that is ascribed to an individual as the amount of money they could be earning, if they either chose to work or chose to find employment similar to their past employment and/or earnings. 

In Bakalian, where the parties were both employed in the medical field but where child support had to be recalculated because the parties' son decided to live with husband, however hehad given up his chiropractic practice after the death of the parties' 16 year old daughter because he "could not get out of bed in the morning", had to deal with the legal issues stemming from his divorce, and he had raise the parties' other child, a 17 year old son.

The trial judge used the New Jersey Department of Labor statistics (NJDOL) in coming up with a comparable salary for husband if he had in fact been working and imputed that number to him when recalculating the child support obligation.

The Appellate Court affirmed the trial judge's imputation of income and methodology used to determine the amount imputed. First, the Court noted that a trial judge's decision to impute income won't be changed unless the underlying facts to do so are either contrary or unsupported by the available evidence. 

That said, the Court went on to hold that whenever a parent remains unemployed or underemployed without a good reason, imputing income allows for a fair and just determination of child support.  In doing so, the potential earning capacity should be taken into consideration in the support calculation.  The first part of this analysis requires a determination by the trial judge that the parent has good reason to be voluntarily unemployed.  To make that decision, the judge needs to consider the employment status and earning capacity of that parent if the family had stayed together, as well as the reasons for the voluntary unemployment or underemployment.

As for the methodology used to determine the imputed income, the New Jersey Rules of Court provide guidance for this process, once a court decides that a party does not have good cause for being unemployed.  These three options are listed in descending order of priority:

1).  Impute income based on potential employment and earning capacity using the parent's work history, occupational qualifications, educational background, and prevailing job opportunities in the region.  The court may impute income based on the parent's former income at that person's usual or former occupation or the average earnings for that occupation as reported by the NJDOL;

2).  If potential earnings can't be determined, impute based on the parent's most recent wage or benefit record; or

3).  If a NJDOL wage or benefit record is not available, impute income based on the full-time employment (40 hours) at the NJ minimum wage ($7.15 per hour).

As you can see, courts don't simply guess a number when making these determinations.  If you are going through a divorce or have an ex-spouse who you believe is voluntary unemployed or underemployed and support (either spousal or child) is an issue in your case, take the above considerations to heart.

 
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Posted on August 4, 2009 by Eric S. Solotoff

15 YEAR MARRIAGE NETS PERMANENT & REHABILITATION ALIMONY - BUT REMAND ON IMPUTATION OF INCOME TO WIFE

In an interesting unreported decision released on August 3, 2009 entitled Mathias v. Mathias, a wife was granted both permanent and rehabilitation alimony after a 15 year marriage. 

In this case, the husband was a state trooper.  The wife had cared for the children, by agreement, though she had worked on and off as a cosmetologist.  She was attending college seeking to be a registered nurse at the time of trial.

The trial judge imputed two income figures to the wife.  One as to what she was earning at the time and what she could earn in the future as a nurse.  The matter was reversed and remanded for further consideration as to both.  For the current income, there was a finding that the wife was underemployed yet the Court used her current income.  For the future, the statistics from the department of labor as to what a registered nurse could earn were used. 

The Appellate Division stated:

However, Danielle has not held a full time job since the children were born. She has never worked as an RN, has no experience in the health care field, and has no specific prospective employers. There was no evidence that the yearly income imputed by the trial judge was an appropriate rate for an inexperienced, recently licensed RN in New Jersey. In short, although the judge used the appropriate source for imputing income, he did not take other significant, relevant
factors into consideration.

The wife unsuccessfully appealed her request to impute more income to the husband than he was currently earning but which was consistent with prior history. Interestingly, a consideration in not imputing more income for overtime to the husband was his desire to spend more time with the children, which the Appellate Division deemed relevant and appropriate.
 

Of more significance to me, but a fact that was not appealed is that the wife was awarded permanent alimony after a 15 year marriage.  15 years has, of late, been deemed a mid term marriage and there has been some debate as to whether permanent alimony was merited in a 1 year marriage.  This case may be one that can be used to convince a judge who is on the fence.

 
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Posted on January 9, 2009 by Robert A. Epstein

Roundup Continues in New Jersey for Child Support Delinquencies

As previously reported in this Blog here and here, New Jersey has taken the initiative on penalizing individuals who fail to pay their court-ordered child support or who have failed to show up for court hearings.  In just one week in December 2008, nearly 1,000 delinquent individuals were rounded up as part of the state Sheriff's Association biannual child support warrant sweep.  Nearly $300,000 was collected statewide, with the most warrants served in Monmouth County and by far the most monies collected in Bergen County.

EDITOR'S NOTE:  As noted in prior posts, on wonders whether there will more more support arrears caused by the current economy, whether there will be more motions for modification and/or more motions for enforcement.  The longer the economy suffers, it will be interesting to see whether the law of imputation of income, changes of circumstances and enforcement changes.      Eric S. Solotoff

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Posted on November 17, 2008 by Robert A. Epstein

Applying Res Judicata and Collateral Estoppel to Child Support Modifications

Can a prior judicial determination regarding an ex-spouse’s employment situation preclude the other party from subsequently making an issue out of it when faced with a motion to modify child support? That was the unique issue taken on by the Appellate Division in Simon v. Simon, where the Appellate Division gave preclusive effect to a prior judicial holding regarding the reason why the ex-spouse husband left his job and his resulting subsequent income in deciding a motion to reduce child support.

The parties entered into a Property Settlement Agreement in 2001, wherein the husband agreed to pay child support for their three children at a set amount through the end of 2005, at which point his support obligation would be reevaluated pursuant to the Child Support Guidelines. In 2006, the husband left his employer and obtained a job in Florida because he was allegedly unable to find suitable work in the Princeton, New Jersey area where he lived. As his new job was in Florida, the husband initially lived there with his father, thereby substantially reducing his parenting time with his biological children. 

 

In spring 2006, the wife moved for a child support increase, alleging that the husband provided no justification for his relocation to Florida, that her parenting time and related expenses increased due to the husband’s reduced parenting time attributable to the move, and because such expenses would only increase as her alimony was ending. The husband cross-moved to modify his support obligation, arguing that he involuntarily left his employer and was forced to take a substantial salary reduction in Florida because he was unable to obtain a position in New Jersey at a salary higher than that he received from his Florida employer. Responding to the husband’s claims, the wife asserted that he left his employment voluntarily so that he could commence his retirement in Florida and, as a result, the Court should use his 2004 and 2005 income to determine support. She submitted no evidence, however, of the husband’s ability to earn a higher salary in the metropolitan area. Ultimately, the Court found that the husband’s 2006 income should apply.

 

The husband subsequently moved again in 2007 before a different judge to reduce his child support obligation based on his current income, which had allegedly dropped by approximately $70,000 from the income figure used by the Court in deciding on the wife’s prior motion. The wife cross-moved for a support increase, again arguing that the husband’s 2004 and 2005 income should apply while the husband relied on the same successful arguments he previously made regarding his 2006 income. Notably, the husband also argued that the prior judicial finding was binding as to his reasons for leaving his former employer – involuntary termination – and also as to his 2006 salary. As such, he argued that because his 2007 salary was substantially lower than the 2006 income previously applied by the Court, he was entitled to a reduction. The motion judge decided without conducting a plenary hearing that the prior judicial determination regarding the husband’s relocation and income was binding on the parties in deciding motion before it.

 

Pursuant to the Court’s instructions, the husband then filed his motion to reduce support based on his judicially determined 2006 salary and his predicted 2007 salary. The wife, however, again reiterated her prior arguments regarding the husband’s relocation and income and, on this occasion, finally included a certification and report from an employability expert as to the husband’s earning capacity. A third judge reviewed the husband’s application and, despite the second judge’s finding, rejected the husband's argument that the first judge’s determination was binding. In so doing, the third judge concluded that the husband’s income decreased because he voluntarily left his employer, relocated to Florida and accepted a lower-paying position.

 

In reversing the third judge’s factual findings and conclusions of law regarding the husband’s relocation and income due to the binding nature of the first judge’s decision, the Appellate Division first held that the legal principle of res judicata was inapplicable because that principle prevents the re-litigation of the same controversy between the same parties, rather than a specific finding derived from a different controversy. The Appellate Division then held that the concept of collateral estoppel, which bars reconsideration of an issue of law or fact previously determined in a different action, did apply because the first judge’s decision “implicitly adopted” the husband’s arguments as to why he left his job, relocated to Florida and accepted a lower paying position. As such, the wife could not subsequently challenge these findings.

 

This case, while not approved for publication, presents interesting issues that will likely arise on a more frequent level as parties live in this difficult economic environment. In fact, in the current economic climate, the issue of whether a support payor who lost his or her job is underemployed may come up more and more. This hot topic was previously raised in another entry in this blog that can be found here.
 
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Posted on October 23, 2008 by Eric S. Solotoff

IT'S THE ECONOMY - WHERE THE LAW AND REALITY MAY COLLIDE IN FUTURE POST-JUDGMENT MOTIONS CAUSED BY JOB LOSS

One need only pick up any newspaper, turn on any radio or television or even have water cooler conversation, even with those who never used to speak about the economy, to know of the serious economic crisis that this country and the world appear to be facing.  Even today, we read that the stock markets took yet another tumble based upon the news of increased jobless rates.

These realities will no doubt start hitting the family court system if they have not already begun to hit. Specifically, there will be motions by people paying alimony and child support to reduce their support because they have lost their job or have suffered a significant decrease in income.

In the seminal NJ Supreme Court case of Lepis v. Lepis, the historical standard for a modification of support is the showing of a substantial and continuing change of circumstances.  We also know that temporary changes do not form the basis for a modification. 

In fact, in order to get relief, a litigant usually had to show that they have made a significant, diligent job search and despite their best efforts, they could not obtain comparable employment.  How long this had to be depended on the circumstances, but it was probably more than 90 days, or even more than 6 months. 

The question during these times is have we entered a brave new world.  Will someone who worked on Wall Street earning $500,000 per year who has lost their job be expected to get comparable employment?  Should they?  What about the financial professional whose income is based in large part on either commissions or a large yearly bonus that they always used to carry them for the entire year who wont be getting a bonus this year or their commissions are 50% less than last year? 

In the past, when someones income was sporadic, the case law and Child Support Guidelines require that you take an average of 3 or maybe 5 years.  Is that fair now when doom and gloom about the economy is being predicted?  Put another way, is the 3 or 5 year average indicative of what the payor can really earn in this economy? Will the earn at historical levels during the foreseeable future? 

If we use an average now, or impute the last income earned, is that fair?  Is only the payor being forced to sacrifice in that case (assuming for the moment that they even have the ability to pay the prior support which may be unlikely)? If they are forced to pay support based upon passed income, will they ever get the money back when then show in a year or two or three that their income has not and may never be the same> The answer is that this is doubtful. Is this fair?

While representing the recipient, what choice will attorneys have to argue that the laws of imputation and averaging, as the case may be, must be followed by the Courts?  I do not think that we can argue a deviation from the law, to the detriment of our clients.

On the other hand, attorneys for the payor's have to be bold in their arguments that the existing law is distinguishable based upon the current circumstances.  I also think that Judge's must be courageous in their decisions so that the reflect the economic realities.

If the current economic circumstances are ignored, then I foresee a lot more enforcement proceedings, if not a lot more arrest warrants issue for failure to pay support.  In the end, if things continue as they are economically, attorneys and judges should try to work together, creatively, to strive for fairness for all of the parties based upon the economic realities of today.

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Posted on October 3, 2008 by Eric S. Solotoff

USE OF EMPLOYABILITY EXPERTS IN DIVORCE CASES

In order to determine alimony and child support, the court must know what both parties earn.  In fact, the child support and alimony statute requires the court to look at the parents "earning ability" (in the child support statute) and "earning capacities" (in the alimony statute).  Don't ask me why the terminology is different but the concept is the same.  That is, if someone is not earning up to their capacity, the Court needs to know what they can/should be earning.

This often comes up when one parent, by agreement or otherwise, was a stay at home parent or worked part-time in order to care for the children.  The other instance where this comes up is one someone is a malingerer or otherwise unmotivated to work.  In fact, in a trial court opinion, when discussing imputation of income in one of these situations, there is an amusing reference to a dictionary definition of a parasite.

Notwithstanding, if someone is not working or is only working part-time, the court can and usually should impute income to that party.  Of course, if child care will be needed to replace the care that that parent gave, the court must also assess and offset what appropriate child care would be. 

The New Jersey Department of Labor publishes statistics on wages for numerous occupations, providing statewide statistics and statistics broken down by groups of counties.  In addition, the charts provide the mean, median 25th percentile and 75 percentile of income for the particular job.  To go the the Department of Labor website regarding this information, click here. 

Courts have the ability to take judicial notice of these statistics.  Some judges will - some wont.  In addition, these are merely cold statistics and may are may not provide definitive income regarding what someone can earn. 

Another method of providing evidence of what someone can earn is to employ an employability expert to assess the underemployed party.  Note however, there are some judges who do not allow employability experts, at all.  Of course, in a case where that same judge said that a wife's part time income should be doubled to get to a full time wage for support purposes, the Appellate Division reversed that finding because it lacked evidence in the record to support it.

I have heard other judges say that they do not put much weight to the reports/testimony of any of these experts, though they will permit them.  Just recently, an adversary during a trial objected to the scientific basis of employability experts, seemingly in general (though the expert was permitted to testify and the report was received in evidence).

While I suppose there can be a debate about the science, I for one am a proponent of employability experts, where appropriate.  A good expert will meet with the party, get a detailed history, perhaps do some testing, if appropriate, then do research.  Part of this research typically includes resources looking at job availability in the industry.  They also look at wage statistics such as those set forth above and other sources.  More and more, the experts will do a labor market survey in where they contact employers in the target field to determine whether the candidate would be considered for the job and what the range of pay is.  The good thing about the labor market survey is that it can buttress the statistics.  The bad thing, at least at trial, is that it is a ripe area for damaging cross examination.

That said, employability experts are an effective tool to help the court determine what an unemployed or underemployed person can earn.

 

 

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Posted on August 22, 2008 by Sandra C. Fava

INTERESTING CONSIDERATION IN IMPUTING INCOME

The Appellate Division recently issued an opinion addressing the imputation of income to a parent who is not a resident of the United States.  In Ibrahim v. Aziz the parties first came to the US on visitor visas and shortly thereafter returned to Egypt.  A year later, they returned with their child, at which time Ms. Ibrahim got a job as a waitress and the family moved into an apartment.  She alleges that Mr. Aziz opened a retail store at that time, however he denied doing so.  While the parties lived in Egypt, where the cost of living is significantly lower than that of the US, Mr. Aziz worked with his family in their jewelry store and the family maintained a middle class lifestyle.

During their stay in the US, an act of domestic violence occurred and Ms. Ibrahim obtained a Final Restraining Order.  At the hearing, child support was determined.  Shortly after that hearing, Mr. Aziz returned to Egypt and Ms. Ibrahim eventually obtained a divorce, including child support.  Mr. Aziz made an application to the court to reconsider the judgment of divorce for the purpose of reviewing his child support obligation.  He claimed that the court erred in imputing income to him based upon New Jersey wages because he was now living in Egypt, where wages were significantly lower.  The trial court found that Mr. Aziz's income should be that of what a retail store manager in NJ could earn.  He appealed from that decision.

The basis for his appeal was that not only could he not earn similar or even comparable salary in Egypt as compared to NJ, but also that he was unable to return to NJ to work as he had been denied a visa on several occasions.  Ms. Ibrahim claimed that the parties lived a middle class lifestyle while in Egypt but failed to provide any proof of their lifestyle or provide any proof that Mr. Aziz could return to NJ to work.  Ultimately, the Appellate Division found that the trial court had erred in imputing a NJ salary to Mr. Aziz as he was unable to work in NJ and the income he earned in Egypt was significantly less than that which had been imputed.

When calculating child support payments, the court may impute income to a parent whose income cannot be determined.  The court may also impute income to a parent who has voluntarily become underemployed or unemployed without good cause.  There are four considerations for a court when determining whether to impute income: 1) the employment status and earning capacity of the parent  if the family had remained intact, 2) the reason and intent for the voluntary underemployment or employment, 3) the availability of other assets that may be used to pay support, 4) the ages of any children in the parent's household and child-care alternatives.

This issue arises quite frequently during divorce when one parent engages in divorce planning and intentionally reduces his/her income so as to avoid a higher support obligation.  Imputation of income for support purposes is also applicable to unmarried individuals who have a child or children in common and support must be determined.

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