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Child Support - Intentionally Underemployed?

October 29, 2021

Nova Scotia

,

Canada

Issue

If a payor is suspended from their employment for conduct-related reasons, does that affect the calculation of their income for the purposes of support?

Conclusion

A payor of support is "intentionally underemployed" within the meaning of s. 19(1) of the Federal Child Support Guidelines, if, through a voluntary act, they earn less than they are capable of earning. Conversely, there is no intentional underemployment if, through no fault or act of their own, spouses are laid off, terminated, or given reduced hours of work. (Drygala v. Pauli)

Where a spouse has deliberately engaged in reckless behaviour which has caused him to become unemployed, he cannot then expect his dependent children to pay the price for his misconduct. (Rogers v. Rogers)

The court is also not bound to impute income at the payor’s previous income level if it decides to impute income due to the payor’s reckless behaviour or misconduct. It can impute income in an amount different than what the payor had been earning, or it can impute different amounts of income for different time periods. Courts have a significant degree of discretion when imputing income. (Gordon v. Wilkins)

In C.A.V. v. L.C.M., the parties were the parents of triplets, and they divorced when the children were 5. The children lived primarily with the father, with the mother paying child support on an income of $30,000. The mother filed a Support Variation Application, which included a request for a retroactive variation of child support. The mother claimed that she was unable to pay child support between June 2003 and January 2011. Cormier J., relying on the cases of Costello v. Costello, Rogers v. Rogers, and Luckey v Luckey, held that the mother created and controlled the circumstances under which her job was terminated, in that the mother resigned from her job. Following her resignation, the mother made a conscious decision to do illegal things which would make her unacceptable for the employment for which she was trained, a teacher. The mother's poor choices did not create a legitimate inability for her to pay child support. Cormier J. only declined to impute income for the periods that the mother was incarcerated and directly after the birth of her fourth child.

In Rogers v. Rogers, the payor was a sales associate earning around $75,000. The payor had a long history of failing to pay parking tickets, having his license suspended for unpaid fines, then continuing to drive. The payor was eventually sent to jail for 8 months in relation to the convictions, fines, and suspensions. As a result of the incarceration, his employer refused to take him back. Pazarantz J. held that the payor was solely responsible for the financial difficulties that he found himself in. The payor could not rely on a material change in circumstances where he created the circumstances he complained of.

In Luckey v Luckey, the court did not reduce a support order when the payor lost a job for assaulting a co-worker.

In Costello v. Costello, a father sought to reduce support for two children (pursuant to a separation agreement) and rescind arrears, on the basis that he was no longer earning $70,941.00. He had lost his employment as a probation officer because of two criminal convictions for impaired driving. Justice Zisman concluded that the court should not exercise its discretion to vary the father's current support obligations, where he loses a well-paying job because of his own reckless behaviour.

In Gordon v. Wilkins, the payor was a lawyer who had been earning in excess of $200,000, but lost his license to practice law because of misappropriation of trust funds. The payor argued that because he was no longer earning any income, he could not afford to pay child or spousal support. Although Sherr J. did recognize that the father's income had been reduced, he also found that this income reduction was directly attributable to the father's own misconduct and reckless behaviour. Sherr J., therefore, found that the father was deliberately unemployed by his own actions, without reasonable excuse, and imputed income of $150,000 to him for a six-month period, following which the income imputation would be reduced to $100,000.

In Malcolm v. McGee, the payor was fired from his job due to misconduct. The court observed that it must determine how to allocate the consequences of the father’s poor decisions. The mother argued that the father should bear the entire cost of these decisions – the child should not receive any less support. The court agreed with the mother to some extent. However, at a certain point, an existing order can become unrealistic and unjust due to a payor’s changed circumstances – no matter if those changed circumstances were caused by the payor’s misconduct. The court should conduct a contextual examination of all the circumstances in determining the support amounts it should order. The court balanced these factors by maintaining support at the father’s prior income level for seven months before reducing it to reflect his actual income.

Law

Section 19(1) of the Federal Child Support Guidelines, SOR/97-175 sets out circumstances where a court may impute income to a spouse 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 Ontario Court of Appeal, in Drygala v. Pauli, 2002 CanLII 41868 (ON CA), held that a payor of support is "intentionally underemployed" within the meaning of s. 19(1) of the Federal Child Support Guidelines, if, through a voluntary act, they earn less than they are capable of earning. Conversely, there is no intentional underemployment if "through no through no fault or act of their own, spouses are laid off, terminated or given reduced hours of work":

[27] I begin by considering the words of s. 19(1)(a). The modern approach to statutory interpretation has been repeatedly stressed by the Supreme Court of Canada as one that is contextual and purposeful. Words in legislation are to be read in their entire context, giving them their grammatical and ordinary meaning in a way that is in harmony with the scheme, objects and intention of the legislation. (See, for example, Francis v. Baker, 1999 CanLII 659 (SCC), [1999] 3 S.C.R. 250, 177 D.L.R. (4th) 1.)

[28] Read in context and given its ordinary meaning, "intentionally" means a voluntary act. The parent required to pay is intentionally under-employed if that parent chooses to earn less [page719] than he or she is capable of earning. That parent is intentionally unemployed when he or she chooses not to work when capable of earning an income. The word "intentionally" makes it clear that the section does not apply to situations in which, through no fault or act of their own, spouses are laid off, terminated or given reduced hours of work.

[29] I note that there is no requirement of bad faith in the provision itself, nor is there language suggestive of such a requirement.

In C.A.V. v. L.C.M., 2020 NSSC 168 (CanLII), the parties were the parents of triplets, and they divorced when the children were 5. The children lived primarily with the father, with the mother paying child support on an income of $30,000. The mother filed a Support Variation Application, which included a request for a retroactive variation of child support. The mother claimed that she was unable to pay child support between June 2003 and January 2011. Cormier J., relying on the cases of Rogers v. Rogers and Luckey v Luckey, held that the mother created and controlled the circumstances under which her job was terminated, in that the mother resigned from her job. Following her resignation, the mother made a conscious decision to do illegal things which would make her unacceptable for the employment for which she was trained, a teacher. The mother's poor choices did not create a legitimate inability for her to pay child support:

[132] As noted above, in this case “the onus should not fall on the support recipient to establish why income should still be imputed on a motion to change”. That determination has already been made. The onus is on the support payor to establish that there should be a change in the way their income is to be calculated.” C.A.V. sought to have this court rely on her line 150 as reflected in her Income Tax Returns between 1995 and 2016. For all the reasons listed above, I am not prepared to do so.

[133] C.A.V. has submitted that her “livelihood and overall health and welfare has diminished significantly following the Order of February 28, 2003 to include the loss of her fourth child, Complicated Grieving, a diagnosis of Post Traumatic Stress Disorder, a criminal record and current disability payments of $923.00 a month. Further she has submitted that she has not earned an income since 2000 currently living in absolute poverty collecting $923.00 a month in disability benefits.”

[134] I have found certain of C.A.V.’s circumstances were of her own making, and other circumstances were not proven including any diagnosis during the periods in question, June 2003 through January 31, 2011.

[135] C.A.V. has not provided any expert evidence regarding how her grieving process or any diagnosis of Post Traumatic Stress Disorder, has impacted on her ability to obtain employment during the relevant periods between June 2003 and, January 2011. Despite this, and given L.C.M.’s position, I have forgiven arrears owed by C.A.V. between December 2003 and May 2004 (6 months, after the birth of her fourth child), as well as between June 2005 and July 2007 (19 months, while C.A.S was incarcerated).

[136] I do not have sufficient evidence to support the conclusion that between June 2003 – November 2003, June 2004 – May 2005, August 2007 - January 2011 C.A.V. was unable to work at any job earning $35,000.00 - $49,000. I decline to rely solely on C.A.V.’s reported income. I have considered other factors including but not limited to her skills, abilities, and her availability.

[137] Specifically, Aston J, 2003 CanLII 1965 (ON SC), found in part at paragraph 62 that C.A.V. was “an intelligent professionally trained person with very good communication skills. She has apparently been unemployed or underemployed since the summer of 2000. She has not adduced any evidence that would unable the court to find that she is no longer capable of earning $30,000.00 or more per annum”…

[138] As in the case of Costello v. Costello, 2012 ONCJ 399 paras 49-76, there is no evidence C.A.V. took any “steps to find reasonable employment” during the relevant periods. In addition, there is no evidence C.A.V. “made any attempts to obtain assistance in attempting to use her experience, skills and knowledge to apply them to a new career”.

[139] In the case of Rogers v. Rogers, 2013, ONSC 1997, at paragraphs 51, through 62, the Honourable Mr. Justice Pazaratz, found the husband, and I find that in this case that C.A.V. “created and controlled” the circumstances under which her job was “terminated”, in that C.A.V. resigned from her job. Following her resignation I find C.A.V. made “conscious decisions to do things – illegal things – with the full knowledge” that her “reckless and anti-social behavior would make her unavailable (let alone, unacceptable) for employment”, and specifically in C.A.V.’s circumstances, unacceptable for employment as a teacher.

[140] In the case of Luckey v. Luckey, 1996, CanLII 11217 (ON SC), the court found “the support payor had lost his employment because he was convicted of assaulting a co-worker.” The court did not vary his support obligation as this was an event over which he had control. The court found that it could “not condone the parent’s actions of assaulting a co-worker to create legitimate inability to pay support that justified a variation.” I do not condone C.A.V.’s poor choices, or her illegal actions, as creating a legitimate inability for her to pay child support.

[141] As in the case of Luckey supra, I find C.A.V.’s unemployment or underemployment throughout most of June 2003 through January 31, 2011 did not arise “through mix up, honest mistake, bad luck, or even isolated error in judgment.” C.A.V. “knowingly and intentionally made very bad decisions”. She “broke the law – over and over again.” C.A.V’s choices have “resulted in unquestionably painful consequences.”

Cormier J. only declined to impute income for the periods that the mother was incarcerated and directly after the birth of her fourth child:

[144] C.A.V. has not provided full and complete disclosure, or in many respects sufficient relevant evidence to support many of her claims. I accept C.A.V. had a reduced ability to pay child support between December 2003 and May 2004, after her child was born, but find this circumstance was not long lasting. I also accept C.A.V. was incarcerated for periods between the end of June 2005 and July 2007, and had a reduced ability to pay child support between June 2005 and July 2007, and also find this circumstance was not long lasting.

[145] With a great deal of hesitation I have decided not to impute income to C.A.V. between December 2003 and May 2004 (directly following the birth of C.A.V.’s child), and between June 2005 and July 2007 (while C.A.V. was incarcerated for periods). I made the decision not to impute income to C.A.V. for those periods not primarily because C.A.V. was not available for work, but because L.C.M. was not asking the court to increase the amount of arrears owed by C.A.V., and L.C.M. planned to give the money to the adult children. Once the arrears are adjusted for an increase in imputed income to C.A.V after July 2007, the amount of arrears owing remains almost the same as the amount originally identified by L.C.M. as owing.

[146] I find C.A.V. owes child support for 60 months (for the periods June 2003 through November 2003, June 2004 through May 2005, August 2007 through January 2011). I find C.A.V. was imputed an income of $30,000 by Aston J. in 2003. I also find C.A.V. expects to receive an Ontario Teacher’s pension of approximately $49,000.00 per year “available 2027”.

In Rogers v. Rogers, 2013 ONSC 1997 (CanLII), Pazarantz J. held that where a spouse has deliberately engaged in reckless behaviour which has caused him to become unemployed, he cannot then expect his dependent children to pay the price for his misconduct:

51. But in the Applicant’s case, there is no uncertainty as to cause and effect. He may not have quit his job. But he created and controlled the circumstances under which his job was terminated. He made conscious decisions to do things – illegal things – with the full knowledge that his reckless and anti-social behavior would make him unavailable (let alone, unacceptable) for employment. The net result is the same as if he’d handed in his resignation.

The payor was a sales associate earning around $75,000. The payor had a long history of failing to pay parking tickets, having his license suspended for unpaid fines, then continuing to drive. The payor was eventually sent to jail for 8 months in relation to the convictions, fines, and suspensions. As a result of the incarceration, his employer refused to take him back. Pazarantz J. held that the payor was solely responsible for the financial difficulties that he found himself in. The payor could not rely on a material change in circumstances where he created the circumstances he complained of:

59. I find the Applicant is solely responsible for the financial difficulties he now submits as the basis for significantly reducing his support obligations. His unemployment (and eventual underemployment) did not arise through mix-up, honest mistake, bad luck, or even isolated error in judgment. The Applicant knowingly and intentionally made very bad decisions. He broke the law -- over and over again. His choices have resulted in unquestionably painful consequences. But why should the Respondent and her children share any portion of that pain? Why should a support recipient suffer from a payor’s misconduct?

60. The expectations placed on the Applicant were not terribly onerous: Obey the law. Support your children. It would be counter to public policy to allow the Applicant to deliberately breach the first obligation, and then use his own misconduct to avoid the second.

61. On this motion to change child support, the Applicant cannot rely on a material change in circumstances, where he created the circumstances he complains of.

62. Applying the three-part Drygala test, I find that:

a. The Applicant is intentionally under-employed. His intentional behavior caused him to lose employment, and limit his opportunities to find replacement employment.

b. His under-employment is not required by virtue of his reasonable educational needs, the needs of a child, or reasonable health needs.

c. I believe it is reasonable to impute to the Applicant his 2008 income of $74,500.00 – the base amount he would still be earning had he not lost his employment. (Oxley v. Oxley 2010 ONSC 1609 (S.C.J.)).

63. I am mindful of the fact that in 2009 and 2010 the Applicant’s income was higher than $74,500.00. But I believe it is reasonable to take into account the fact that the Applicant was in commission sales, with inevitable income fluctuations from year to year. I dismiss the Applicant’s motion for a reduction of support. There was no cross-motion for an increase. To the extent that the Applicant’s failure to disclose his 2009 and 2010 increases resulted in an underpayment to the Respondent, I will factor that into the remaining analysis.

In Luckey v Luckey, 1996 CanLII 11217 (ON SC), the court did not reduce a support order when the payor lost a job for assaulting a co-worker:

[16] I should not condone an action by a parent that impairs the parent’s ability to provide support. The act of assaulting a co-worker is an action that the court should not condone with a variation order in favour of the applicant. The reasons advanced for inability to pay must be examined and the inability must arise from a legally acceptable reason. Termination for assaulting a co-worker should not create a legitimate inability to pay justifying a variation. While it cannot be said that the applicant got himself fired to avoid his obligation to support his children and I doubt that what he had it in his mind was to avoid his responsibility, the question remains whether or not those actions should be condoned by the court. I think not.

In Costello v. Costello, 2012 ONCJ 399 (CanLII), a father sought to reduce support for two children (pursuant to a separation agreement) and rescind arrears, on the basis that he was no longer earning $70,941.00. He had lost his employment as a probation officer because of two criminal convictions for impaired driving. Justice Zisman concluded that the court should not exercise its discretion to vary the father's current support obligations for the following reasons:

[60] Based on all of these factors, I would not exercise my discretion to vary the father’s current support obligation. The father certainly cannot expect a court to exercise its discretion to reduce his child support obligation, when he loses a well paying job because of his own reckless behaviour, fails to abide by court orders for disclosure, fails to provide any proof of any sincere efforts to find alternate employment and when he is content to work part-time for minimal income.

In Gordon v. Wilkins, 2020 ONCJ 115 (CanLII), the payor was a lawyer who had been earning in excess of $200,000, but lost his license to practice law because of misappropriation of trust funds. The payor argued that because he was no longer earning any income, he could not afford to pay child or spousal support. Although Sherr J. did recognize that the father's income had been reduced, he also found that this income reduction was directly attributable to the father's own misconduct and reckless behaviour. Sherr J., therefore, found that the father was deliberately unemployed by his own actions, without reasonable excuse, and imputed income of $150,000 to him for a six-month period, following which the income imputation would be reduced to $100,000:

[34] In this case, the mother is not submitting that the father is presently earning annual income of $150,000. She is asking the court to impute income in this amount to him on the basis that this is income that he could and should be earning.

[...]

[36] In Rogers, Justice Pazaratz found that the father was intentionally unemployed due to his own reckless behaviour, without reasonable excuse. He imputed the base income that the father had previously earned for support purposes.

[37] Many courts have taken a similar approach.

[...]

[47] The court is also not bound to impute income at the payor’s previous income level if it decides to impute income due to the payor’s reckless behaviour or misconduct. It can impute income in an amount different than what the payor had been earning, or it can impute different amounts of income for different time periods. Courts have a significant degree of discretion when imputing income. See: Menegaldo v. Menegaldo, 2012 ONSC 2915; Tillmans v. Tillmans, 2014 ONSC 6773.

[48] In Samaroo v. Monasar, 2016 ONCJ 47, where a payor had unjustifiably quit his job in 2014 and had not found comparable employment by the time of trial, this court decided to maintain the payor’s support obligation from the time he quit his job, and only reduce it beginning in February, 2016. This was determined to be a fair balancing of the consequences of the payor’s decision to quit his job.

[...]

[67] The court accepts that there has been a reduction in the father’s income since his licence was revoked. He can no longer work as a personal injury lawyer. This was not an attempt by him to avoid his support obligations.

[68] The reduction in the father’s income is directly attributable to his own misconduct and reckless behaviour. The court finds that he is deliberately unemployed by his own actions, without reasonable excuse. Income should be imputed to him.

[69] It is likely, based on the evidence produced at this point, that the father earned annual income well in excess of $200,000 from 2017 until his licence was revoked in August 2019. This is even without grossing up his income for paying taxes on a lower reported income to the CRA.

[70] It appears that the father had the ability to pay significant support to the mother from the proceeds of the sale of his home and chose not to do so.

[71] The father has limited his job search to insurance claims positions. He should be widening this search and working.

[72] Balancing these factors, the court will impute the father’s income at $150,000 (the figure sought by the mother) for the purpose of the temporary support calculation for the period from October 1, 2019 until March 31, 2020. Starting on April 1, 2020, the father’s annual income shall be imputed at $100,000 for the purpose of the temporary support calculation. This recognizes the reality that the father is no longer earning $150,000.

[73] This order will take the place of the support terms in the court’s September 20, 2019 order.

[74] The monthly guidelines table amount for two children at an income of $150,000 is $2,077. At an income of $100,000 it is $1,471 each month.

[75] These findings are made in an effort to have a just temporary support regime. At trial, the court will hopefully have the benefit of comprehensive financial information about the father and the evidence will be more thoroughly examined. The trial judge will be better positioned to determine whether imputation of income at this level should be changed.

In Malcolm v. McGee, 2017 ONCJ 357 (CanLII), the payor was fired from their job due to misconduct. The Court observed:

[47] The court must determine how to allocate the consequences of the father’s poor decisions. The mother argues that the father should bear the entire cost of these decisions – the child should not receive any less support.

[48] The court agrees with the mother to some extent. However, at a certain point, an existing order can become unrealistic and unjust due to a payor’s changed circumstances – no matter if those changed circumstances were caused by the payor’s misconduct. The court should conduct a contextual examination of all the circumstances in determining the support amounts it should order.

The court balanced these factors by maintaining support at the father’s prior income level for seven months before reducing it to reflect his actual income:

[44] There has been a change in circumstances since the existing order was made. The father lost his job in October, 2016 and went on Ontario Works. He is earning far less income at his present job.

[45] There is no issue that the father’s reduction of income since 2016 is due to his misconduct.

[46] There are several victims of the father’s poor decisions. The mother and child have not received child support since October, 2016. The father said that he is in default of his other child support order. The father has also suffered. He had to go on Ontario Works and lost an excellent job. He is now in arrears of two support orders and struggling to meet his obligations.

[...]

[49] The court has considered the following factors in addition to those discussed above:

a) The father had a good payment history until he lost his job. He expressed pride at court that he had previously met his financial responsibilities.

b) The father did not lose his job to avoid his support obligations. He felt pressured to support both of his children, feared losing his job after failing his eye test, and as a result, made the series of poor decisions

c) The father acknowledged and regretted his misconduct that led to the loss of his job and default in his support obligations.

d) The father did not delay in bringing his motion to change when his circumstances changed.

e) The father immediately took steps to improve his employability after losing his job. He completed the bus driving course, took and passed the eye exam and obtained his BZ driver’s licence.

f) The father actively looked for work and obtained a part-time job upon completing his bus driving course. Shortly after, he found a better job with the courier company.

g) The court finds that the father has taken reasonable steps to maximize his income earning ability since he was terminated.

h) The father has another child to support.

i) The father expressed pride in his work ethic and abilities as a driver. He has been consistently employed and has an excellent driving record. He is ambitious and hopes to one day becoming a driving trainer.

j) The father has a realistic opportunity to obtain full-time employment with his present employer and advance in the organization.

k) Even if the father does not obtain full-time employment with his employer, he is capable of obtaining part-time employment to supplement his current income within the next few months. The court has the expectation that he will do this. The father has experience in construction, moving, landscaping, maintenance, working in hotels and as a server, in addition to his driving experience.

l) The father was on pace in 2016 to earning close to $54,000 before he was terminated. The mother did not move to retroactively increase support, but the father was slightly advantaged in 2016 paying child support lower than the guidelines table amount for his actual income.

m) The father did not pay any support to the mother after he was terminated from his job, even after he started working in March, 2017. The father should have made efforts to pay some child support after March, 2017.

[50] Taking into consideration all of these factors, the court finds that it wouldn’t be just to indefinitely impute the father’s income at the level he was earning prior to his termination. Instead, the court will order that:

a) The existing order will not be changed for the period prior to the date of the trial (May 31, 2017). This recognizes that the father’s reduced income was due to his own misconduct. This means that the father’s request to rescind arrears accumulated pursuant to the existing order is dismissed.

b) For June, July, August and September of 2017, the father’s annual income will be assessed at $27,924 for support purposes. This calculation is based on the father earning $17.90 an hour, for 30 hours a week. The monthly guidelines table amount at this income is $227.

c) Starting on October 1, 2017, the father’s annual income will be imputed at $37,232. This calculation is based on the father earning $17.90 an hour for 40 hours a week. The court finds that the father should be earning this level of income by October, 2017. The monthly guidelines table amount at this income is $327.[7]

[51] This order will result in there being support arrears of $3,211.88, as set out in paragraph 30 above. The sum of $68.88 is owed to the assignee – the balance of arrears ($3,143) is owed to the mother. The court will give the father an opportunity to get his financial situation stabilized before it orders him to pay the arrears. It will also give him a lengthy period of time to pay the arrears to reduce the immediate financial pressures on him. The order will provide that the father may pay the arrears at the rate of $125 each month, starting on January 1, 2018. The order will not preclude the Family Responsibility Office from collecting arrears from any government source, such as income tax or HST returns, or lottery or prize winnings.

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