The “Cheshire Cat” of Imputed Income

The “Cheshire Cat” of Imputed Income

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Family law permits the court to impute income to a non-working or under-employed parent or spouse for the purpose of determining support. Imputing income results when the court determines a non- or under-employed party has “earning capacity” not being exploited. Family Code, Sections §§4058(b), 4320(a)(c)(g), and 4331. Earlier cases interpreted authorizing statutes to require a finding of bad faith, or intentional behavior to avoid family financial responsibilities, before income was imputed. Philbin v. Philbin (1971) 19 Cal.App.3d 115, 121. Modern approaches abandoned the bad faith requirement, Marriage of Ilas (1993) 12 Cal.App.4th 1630, 1638. To determine if income should be imputed, the litigants may need to engage the services of a vocational expert to provide evidence to the court of a party’s employment options and the strength of the job market. Family Code, Section §4331.

The pre-conditions to application of earning capacity are 1) ability; 2) opportunity; and 3) willingness, the Regnery rule as evidenced in Marriage of Eggers (2005) 131 Cal.App.4th 695, 700-701. However, in Marriage of Bardzik (2008) 165 Cal.App.4th 1291, 1305, willingness was presumed, recasting the Regnery rule into a 2-pronged opportunity and ability examination. It also held that the opportunity element does not require showing the party would surely have received a job.

Child support cases impose another substantial pre-condition to imputing income. The court must find that using earning capacity is “in the best interests of the children”. Family Code, Section §4058(b); Marriage of Catalano (1988) 204 Cal.App.3d 543, 552 [parents’ agreement limiting court’s ability to modify child support violates priority of the children’s best interests]. Other factors restricting the application of earning capacity requires the amount imputed be grounded upon reasonable evidence and a reasonable work regimen. Marriage of Cohn (1998) 65 Cal.App.4th 923, 930; Marriage of Simpson (1992) 4Cal.4th 225, 235.

Also, the court may not arbitrarily commence using earning capacity without fair warning to the affected party. Marriage of Schmir (2005) 134 Cal.App.4th 43, 54. The importance of reason justifying a support award prevents imputing minimum wage earnings if the record contains no evidence substantiating that amount. Mendoza v. Ramos (2010) 182 Cal.App.4th 680, 685.

In closing, California law imposes a duty on parents to support their children and to use good-faith efforts to become self-supporting. Family Code, Section §§3900 and 4320(l). Though the option of imputing income can circumvent the obstacle of seemingly low wages, many difficult hurdles must be cleared before the court may employ it.