Imputing An Earnings Capacity For Calculating Child Support

The case of State of Oregon v. Vargas, decided March 24, 1999, involved the Appeal of an Order requiring Mr. Vargas, the father of three minor children, to pay $225.00 per month to the State of Oregon for child support. The mother of the children was receiving public assistance; therefore, the State sought reimbursement. At the time that Vargas was served with the request for support and at the time of the hearing, he was incarcerated at the California Rehabilitation Center, an institution that does not provide employment opportunities. Mr. Vargas advised the Court that he had no means of earning an income while incarcerated and requested the Court order child support in the amount of Zero Dollars ($0.00).

Child support is calculated pursuant to the statewide uniform guidelines. The Court normally uses the parent’s actual income to determine child support. However, it can in it’s discretion substitute the actual income with earnings capacity if consistent with the child’s best interest. Earnings capacity is composed of the ability and opportunity to work. The situations in which the Court is able to apply earnings capacity has changed from those situations where the support payor deliberately avoided financial responsibilities to any situations which is consistent with the best interest of the children. There are, therefore, only two limitations on the Court imputing an earnings capacity for an unemployed or underemployed parent. Those are when there is, in fact, no earnings capacity or that relying on earnings capacity would not be consistent with the children’s best interest.

Oregon argued that, while Mr. Vargas was not currently employed, he had a job prior to being jailed and he would most likely return to work upon his release, The Appellate Court disagreed, reversed the Order of the Trial Court, and stated the Trial Court abused its discretion when ordering Mr. Vargas to pay child support because both elements of the earning capacity standard must be satisfied regardless of the situation in which it is applied. If either element is not satisfied, earnings capacity cannot be substituted for actual income. The Court recognized that policy arguments could be made to support an opposite result for incarcerated parents, and it was also aware of other states that have found parents liable for child support despite a lack of earnings capacity while jailed. The Court stated that it was not suggesting that incarcerated parents are exempt from child support; it simply declined to create an exception to the rule of when earnings capacity could be applied. The Court further indicated that the current circumstances had to be considered. Oregon’s argument that Mr. Vargas had earnings capacity by virtue of his job prior to being jailed and the likelihood of his returning were not relevant to the current situation.