Imputed Income: Get a “Real” Job

During marriage (or domestic partnership) spouses (and domestic partners) have a duty to support each other as outlined by Family Code §§ 4300 et seq. However, once either spouse or partner has objectively indicated the end of their marriage or relationship, California Family Law changes the tone and focus of that support obligation. Instead of mutual support being the guiding principle, self-support becomes the accepted aim, wherever reasonably possible. Spouses, domestic partners, and family law judges must examine the relevant circumstances, and determine if, when, and to what extent, one of the parties must continue to supply finances for the other’s living needs. Fam. Code §§ 4320(a)(c)(l), 4330, 4331, 4336.

A popular but widely misunderstood aspect of post-separation support is known as “imputed earnings”. This general term describes when one spouse or partner alleges that the financially weaker party is not using their education, training, talent, experience, energy, etc., to improve their employment capacity, prospects, or position. Thus, if certain conditions are met, the financially weaker party should have earnings “imputed” or assigned to them based on their earning ability rather than actual earnings. In the event the Court imputes income, the spousal support order will change and the financially weaker party will receive a reduced amount of support. Fam. Code §§ 4320(a)(1), 4331.

Many mistaken beliefs about imputed earnings have historical routes as earlier cases interpreted the law to require bad faith on the part of the support recipient before imputed earnings could be assessed against them. Philbin v. Philbin (1971). The modern rule, possibly as a further reflection of the “no-fault” nature of California Family Law, rejected the need for an element of bad faith. Marriage of Ilas (1993). Three conditions must exist to impute earning capacity: 1) ability to work; 2) opportunity to work; and 3) willingness to work. This is known as the Regnery Rule. Marriage of Regnery (1989); see also: Marriage of Eggers (2005).

Some cases present variations on the 3-part Regnery Rule. In Marriage of Bardzik (2008), willingness was presumed, recasting the Regnery Rule into a 2-pronged opportunity and ability test. Marriage of Bardzik (2008) also held that the opportunity element does not require showing the financially weaker party would receive a job. Thus, the facts in a specific case will cause greater or lesser emphasis on the 3 elements of the Regnery Rule for imposing the support reducing sanction of income imputation. As this has become one of the more heavily litigated issues in family law cases, parties will often have to employ the service of a trained employment professional, known as a Vocational Evaluator. Fam. Code § 4331.

The purpose of a Vocational Evaluator is to provide evidence to the Court of a party’s employment options, the strength of the job market and help determine what the party could be earning if they were employed. The analytic procedures utilized by Vocational Evaluators differ in their level of complexity. Costs for the examination and report preparation can range from a few to several thousand dollars. However, many parties are able to find and agree to the use of a Joint Vocational Evaluator, whose recommendations are presumed adequate by both sides. This leads to significant savings in legal expense and a fairer allocation of cost.

Some other factors the Court may consider in deciding to increase or decrease a spouse’s earnings capacity is if the supporting spouse previously worked many hours or multiple jobs to achieve a family goal no longer relevant to the parties. Marriage of Cohn (1998); Marriage of Simpson (1992). Also, the court may not commence imputing higher earnings without fair warning to the affected party. Marriage of Schmir (2005). In essence, reason must underly a support award; even minimum wage may not be imposed if no proof exists it is attainable. Mendoza v. Ramos (2010).

Good sense and fairness have as important a role in the issue of spousal support as in other areas of the law. As previously mentioned, the Court’s goal is for both parties to become self-supporting. In the event one party refuses to make efforts to become self-supporting by seeking employment, imputed income is one method utilized by the Court to create a fair spousal support order. For other cases, where the parties have been together raising a family and building an affluent life, support will likely continue at a relatively high level for many years (or for life). Fam. Code §§ 4320(a)(2)(b)(f)(h), 4336. On the other hand, regardless of the length of the marriage or domestic partnership, if the children are grown and both parties have ample income or assets to pay their reasonable needs, it is quite possible neither will receive spousal support. Fam. Code § 4322.

“Get a Real Job” *Credit to George Thorogood.