It’s a story as old as time in the New Jersey courts. Alimony is set based upon the income of parties to a divorce, but then years later, a spouse loses his or her job and is unable to continue to make the agreed upon or ordered payments. What is a Court to do?
In the old days, prior to the enactment of the new alimony statute, judges had certain checklists, gathered from all the law that they typically used to assess whether to obligor would gain relief. You can find that checklist I compiled in 2013 here.
However, now that the new statute is in effect, the question becomes, how should judges treat on obligor’s loss of employment?
Mills v. Mills, an opinion by Judge Jones of Ocean County, approved for publication, provides some guidance on the issue.
In the Mills case, the parties divorced in 2013 after a 13-year marriage. At the time of the divorce, the parties agreed that the Husband would pay the Wife alimony in the amount of $330 per week for 8 years, as well as child support in the amount of $200 per week. This award was based upon the Husband’s income as a district sales manager for a company selling residential and commercial flooring services, earning $108,000 per year and the wife’s income as a teacher, earning $59,000 per year.
In January 2015, after 12 years of employment at the flooring company, the Husband lost his job. The job loss was involuntary; it stemmed from his employer’s decision to restructure its business plan and eliminate the Husband’s position.
The Husband began searching for a new job immediately. In April, 2015, he received an offer of employment form another flooring company, but at a significantly lower salary of $70,000, with a $6,000 car allowance.
At this point, the Husband was faced with a difficult decision – does he accept the job at a lower rate, or decline the opportunity and look for another job closer to his prior income? Ultimately, he decided to accept the new job.
Initially after accepting the new job, the Husband continued to pay alimony at the rate of $330 per week. He had received severance pay of $35,000 and was able to temporarily supplement his income from there. However, as the year neared its end, the Husband had depleted all reserves.
The Husband filed a motion on November 24, 2015 for a prospective modification and reduction of his support obligations based upon a substantial change in circumstances. In the meantime, he earned a performance bonus of $6,000, bringing his total compensation t $82,000, which still constituted a $26,000 from his prior income.
The Wife opposed the motion, and questioned the circumstances under which the Husband lost his prior employment, and that even if the loss was involuntary, he had not demonstrated that he could no longer earn at least $108,000. She also stated that the loss of support would create economic difficulties for her.
The parties were unable to resolve their differences and the matter proceeded to a contested hearing. The Husband testified that when he began at the flooring company, he was earning $50,000 and gradually worked his way up to a salary of $108,000. The Court found that he testified credibly that he could not simply walk into a new position at a new company and immediately command the same salary.
Interesting, the Court began its legal analysis by expounding upon a “Catch 22” in which many obligors found themselves under the old statute.
…no matter what decision he or she made in accepting or declining a new position at a lower pay, that decision might subsequently be critiqued, criticized and even legally challenged by an ex-spouse who, in resisting a reduction in alimony, might contend that the supporting spouse made an inappropriate choice and therefore should not receive a reduction in his or her support obligation … when a supporting spouse lost his or her job and then declined an offer to take a lower paying position…and instead kept searching for a higher paying position while seeking a reduction in support, the supported spouse would often argue that the obligor unreasonably bypassed an opportunity to earn at least some income that could have been used to pay some of the ongoing support obligation…
Reciprocally, if a supporting spouse accepted the offer for new employment at a substantially lower salary and then sought a reduction in support, a supported spouse would often argue that the obligor was underemployed because he or she accepted a position at a significantly decreased level of pay or proven “income potential”…
Judge Jones rejected the suggestion that there is a “one-size-fits-all” legal analysis for approaching and analyzing these types of issues. In that regard, he stated “imputation of income was a discretionary matter not always capable of precise or exact determination”.
After citing the amended alimony statute – N.J.S.A. 2:a:34-23(k) – for guidance as to how to analyze this issue. In doing so, he specifically referenced subsection (2), which expressly references that when an obligor loses his or her employment, a judge may consider the obligor’s documented efforts to obtain replacement employment or pursue an alternative occupation, as well as subsection (3) which provides that a court may consider the obligor’s good faith effort to find remunerative employment at any level in any field.
However, the Judge noted that the amended statute does not expressly establish or provide a specific standard for statutory analysis in situations when an obligor actually obtains new employment at a significantly lower pay, then seeks to reduce his or her support obligation over the supported spouse’s objections.
The Court concluded that as a matter of equity, fairness, as well as the most reasonable, consistent and straightforward analysis would be addressed by the following two-step inquiry:
(1) Was the supporting spouse’s choice in accepting a particular replacement employment opportunity objectively reasonable under the totality of the circumstances?
(2) If so, what if any resulting support adjustment should occur that is fair and reasonable to both parties, given their respective situations?
In applying this two-step inquiry, as well as the statutory mandates, the Court concluded that the loss of income was involuntary and that the Husband made legitimate efforts to obtain new employment in the same industry in good faith.
While the salary in the new position was lower, the Court found that the Husband nonetheless made an objectively reasonable decision in responsibly trying to begin at a new place of employment. In fact, the Court found that the Husband was very fortunate in this economy to find replacement work.
Nor did the Court find any objective evidence that the Husband was deliberately underemployed or unreasonably turned down or avoided other job opportunities at higher income levels.
After considering all the evidence, the Court reduced the Husband’s alimony obligation to $250 per week and his child support obligation to $194 per week.
With this decision, Judge Jones clearly articulated what I have personally heard many obligors say to me when deciding whether to move forward with a first, second or even third motion for a reduction in alimony based upon reduced income. Whatever step an obligor took, the supported spouse had a response; and one that was well supported by case law.
Either way, the supported spouse would argue that the reduction in income constituted underemployment and that the Court should impute income consistent with the obligor’s prior income.
Judge Jones’ decision provides a clearer analysis that Court should undertake in this all-too-familiar situation.
Eliana T. Baer is a contributor to the New Jersey Family Legal Blog and a member of the Family Law Practice Group of Fox Rothschild LLP. Eliana practices in Fox Rothschild’s Princeton, New Jersey office and focuses her state-wide practice on representing clients on issues relating to divorce, equitable distribution, support, custody, adoption, domestic violence, premarital agreements and Appellate Practice. You can reach Eliana at (609) 895-3344, or firstname.lastname@example.org.