One of the more difficult scenarios to deal with during a divorce is when the higher earner who will likely have to pay alimony and child support, loses her/his job through no fault of their own. The problem is exacerbated if that person was earning more than one would expect based upon their education/experience and it will be unlikely to ever replicate that level of income in the future. I once had a client who was with a Fortune 100 company for virtually his whole career and had worked his way up to a position of middle management, to a job that would otherwise require an MBA or CPA that he didn’t have, making a substantial income. As sometimes happens, he got a new boss who wanted his own people or didn’t like him, and suddenly, after more than 20 years he was laid off. Despite his experience, both his age and lack of educational credentials were serious impediments in obtaining a new job and certainly in obtaining one that paid even remotely as much as his prior job. It ultimately took creativity and flexibility on both sides to come to a settlement when a trial appeared imminent. Sometimes people are forced to litigate these issues and the judge is in a hard spot. Do you impute income based upon prior earnings history, or do you acknowledge current realities. I have seen judges do it both ways, and also, split the baby, which is usually a recipe for never ending appeals and post-judgment litigation.
Often, judges get it right and yet, it is still not enough for the higher earner who maybe should leave well enough alone. That is what appears to have happened in the case of Giunta v. Fahey, an unreported (non-precedential) Appellate Division decision released on December 6, 2021. In this case, the parties divorced after a 16 year marriage, when both parties were in their early 50s. The Husband appealed after he was ordered to pay $30,000 per year in limited duration alimony. The husband had worked for many years in the financial industry, eventually reaching the position of Global Group Controller for Bain Capital. He previously worked since 2011 for a company that was acquired by Bain in 2019. In 2019 and prior years, he earned approximately $200,000. He took the position that he was “vastly overpaid” for New Jersey because his company matched his prior salary from when he worked at BlackRock in New York City. In February 2020, less than a month before the divorce trial, he was advised that he was being laid off along with 100 other employees in a company wide reorganization – receiving only 9 weeks of severance.
The husband testified that he “immediately took steps” to look for a new job, including updating his resume and LinkedIn account, and contacting acquaintances at a recruiting firm and former employers. He started having conversations with contacts, including several recruiting firms. He also stated that, by June 15, 2020, he had sent out over eighty job applications through LinkedIn. At the time he testified in June 2020, his efforts had not even resulted in any interviews. He testified that virtually all the job openings for which he would otherwise be qualified include “MBA or CPA preferred” and that he had neither credential. He further testified that the annual salaries for the jobs he is qualified for, and to which he had been actively applying, ranged between $125,000 and $140,000 per year. Based on his unsuccessful job search thus far, the husband testified that he anticipated “his pay … is going to go down probably
around $50,000” i.e. to approximately $150,000. At trial, the husband had his employability expert testify, not as to his employability but as to his wife’s.
The wife’s story is also one that is heard frequently. She had a business administration degree, initially worked in the pharmaceutical industry, but left the workforce to raise the parties’ children. At her last job, she was earning $65,000 as a financial analyst. In 2019, after the divorce complaint was filed, she went back to work as a receptionist earning $50,000. The employability expert testified that after obtaining additional certifications and upgrading her skills (over 18 months), the wife could enter the role of compensation and benefits analyst or representative at an entry salary in the lower to upper $60,000 range. The expert didn’t opine that the wife was underemployed, asserting instead that “[t]he question for [her] evaluation is what is [the wife’s] employability and … career options, and that was the question [she] was responding in [her expert] report.” She also testified that $50,000 per year was a great salary for a receptionist, but the wife “could be doing better when looking at her educational background.”
In it’s decision, the trial judge found the husband credible and “…specifically regarded as “believable” the husband’s doubts as to whether he would be able to earn $200,000 per year in a new role.” Accordingly, the judge imputed what he termed a “fair and reasonable” lower sum of $120,000 in light of “his work history.” Further, the trial court held that if the husband’s unemployment or underemployment persists despite his best efforts, he can move to modify the alimony due to an alleged change in circumstances. Considering that this was below the lower limits of the jobs he was seeking and $30,000 less than what the husband believed he could earn, and considering that the court built in an ability to seek a review, one would think that the husband would see this as a win for him. Clearly, he did not because he appealed. This seems largely because the court used $50,000 for the wife’s income instead of adopting the expert’s slightly higher amount (the rationale for which was that she would noted additional training for a cost to get to that higher number.)
The Appellate Division affirmed the trial court’s decision. Given that the Appellate Division accords considerable deference to family court’s decisions, especially when they involve credibility, they say no reason to disrupt the trial court’s rulings on either party’s earning capacity or the alimony award. As to the husband’s earning capacity, they noted:
With respect to the husband, the trial court appropriately recognized that he had been employed for many years in the financial industry, attaining an annual salary of nearly $200,000. The husband’s steady earnings history did not change until a month before the trial when he was unexpectedly included in a company downsizing. As of the time of his trial testimony, the husband had been without work for only a few months and was in the midst of a job search. Too little time had passed for the court to deem him incapable of obtaining a substantial salary, and to consider his income capacity to be zero.
We realize that the husband did not have a job as of the time of his trial testimony. However, current earnings have never been viewed as “the sole criterion [upon which] to establish a party’s obligation for support.” Weitzman v. Weitzman, 228 N.J.Super. 346, 354 (App. Div. 1988) (citations omitted). Instead, “a court ‘has every right to appraise realistically [a spouse’s] potential earning power.'” Ibid. (citations omitted). To be sure, the husband was involuntarily terminated by his employer and had, in a short time, pursued new job opportunities. Even so, insufficient time passed to enable a declaration that he is incapable of restoring much or all of his previous salary.
The $120,000 annual income the trial court imputed to the husband was a fair compromise. The court did not impute to him the $200,000 in compensation he had been earning. Nor did it find he lacked an earning capacity despite his present joblessness. The $120,000 figure the court selected roughly corresponds to slightly below the range of salaries the husband testified he was then pursuing in his job search, i.e., $125,000 to $140,000.
The court also acknowledged that the trial court left the door open to modify alimony if he didn’t get to the $120,000 figure that was imputed.
As to the wife, the rationale for affirming the imputation to her was as follows:
We likewise uphold the trial court’s adoption of the wife’s current $50,000 annual income. She only recently reentered the work force after over a decade as a stay-at-home parent. Even the husband’s expert witness recognized that the wife’s skill set needed to be updated with training in order for her to earn more. Her present salary is quite generous for a receptionist, and it would be speculative that she could readily obtain a higher-paying job without training. Again, if circumstances materially change, the husband can move for a future modification.
As to the amount, the Appellate Division noted that the $30,000 per year “… roughly equalizes the parties’ presumed incomes ($80,000 for the wife versus $90,000 for the husband). The sums are within the zone of fair and equitable judicial discretion.”
There are a few takeaways to this case that come to mind. It seems to me that if a court imputes to you an amount lower than the jobs you are seeking and lower than you said you thought you can earn, and also leaves the door open for review if you don’t hit that mark, maybe you should quit while you are ahead. I would say too, that maybe he should had his expert opine about his income too, but he ultimately did better than what he thought he could hear (and maybe, the expert couldn’t legitimately opine as to a lower number.) Also, the difference between $50,000 and low to upper $60,000s seems like a number that could have probably been compromised by the parties to avoid the uncertainty. Either way, the difference probably didn’t move the needed on alimony much either way.
Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973) 994-7501, or firstname.lastname@example.org.