Parents who are obligated to pay child support can sometimes look for ways to reduce the amount of support they are required to pay. One way to do so is to earn less pay, thereby reducing the amount of money payable for support each month. Some parents might look to find a lower-paying job, while other may claim an inability to work at all. The courts can address this type of behavior by finding a parent to be intentionally underemployed. Upon doing so, the courts can then determine a parent’s imputed income (what their income should be) and fix the spousal or child support payments to match the imputed income. The Court of Appeal for Ontario recently heard a case where the issue of voluntary underemployment came up in the context of a wife who started her own business with her husband’s approval.
The decision to leave the workforce and start a business
The couple began living together in 1998 and were married in 2000. They had two children (born in 2001 and 2004) before separating in 2009. The parties agreed to joint custody upon their separation.
The mother had worked as a teacher from 1998 to 2004. She left her profession after the birth of their second child. The parents agreed that the mother would work out of the home in order to parent their children. In 2006 the mother started a business running a child play center. At trial, the judge imputed the income from this business to be $15,000 per year, with the business having a value of $55,000.
The father worked as an editor on a television show from 1996-2012, when he was terminated. His income in his last year of employment was $77,923, but he also received a substantial severance package. The trial judge imputed the father’s annual income to be $70,000.
At trial the father had asked for an equalization payment of $64,915.97 as well as a post-separation adjustment of $52,669.16. The judge disagreed, setting an equalization payment to the father in the amount of $5,380.27 and a post-separation adjustment payable to the mother in the amount of $1,440.
The trial judge ordered the father to pay retroactive child and spousal support starting on November 1, 2009. The trial judge did not impute the mother’s income to that of a teacher based on the fact that both parents had agreed she should not return to teaching.
The father appealed the trial judge’s decision. He had a number of grounds of appeal, one of which being the trial judge’s imputation of income to him, but not to the mother.
The authority for the courts to impute additional income comes from Section 19(1)(a) of the Federal Child Support Guidelines. The guidelines state:
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;
A 2002 Court of Appeal decision added that there is no need to find a specific intent to evade child support when determining whether a person is intentionally underemployed. Rather, the obligation is only that a parent earn what they are capable of earning. In light of this, the court of appeal determined the trial judge erred in concluding the mother was not intentionally underemployed.
The trial judge’s conclusion was based on the couple making the decision for the mother to leave the workforce together, adding it “was really for the purpose of improving their family life.” This was not enough to discharge the mother from earning what she is capable of. The court wrote,
“From the time she chose to start BOF and to earn $15,000 per year rather than the over $70,000 per year, (the mother) would have earned returning to teaching, she was intentionally underemployed. There was also no basis on the record to find that (the mother) could not resume her teaching career at the time of separation or at the time of trial. In fact, the trial judge found that her teaching career had not been compromised by her marriage or assumption of household responsibilities.”
The result of the court’s decision was that no spousal or child support would be owed by either party.
It can be difficult to navigate spousal and child support issues. The experienced and knowledgeable team at Borden Family Lawyers help our clients through all stages of separation and divorce. We help our clients draft separation agreements and work with them if changes are needed following agreements or court orders. We focus exclusively on family law and have gained an in-depth knowledge of the family law system in Ontario. Please reach us online or by phone at 905-576-6090 to see how we can help you today. Please ask about our flat fees.