To Impute, Perchance to Deem (Act 1)
Case Law Review – October FDRIO Newsletter
A separated couple comes to you for mediation. They had a rocky relationship. The mother conceived their daughter when she was just 19, while yet still in high school. The father was 25, sharing an apartment with his cousin and working sporadically as a reluctant tool and die maker, a job he fell into. They separated a bit later and the father even started a court case to determine paternity, but then they reconciled and married (!) then, sadly, separated on a final basis within a year of marriage.
The father never earned much, in his $21/h job. He had never accepted overtime opportunities which were paid at a rate of $30/h. From the time the child was born until their final separation, he earned upward of $30,000 – $33,000. Around the time of separation, the father quit. He didn’t look for alternate work for about two years. To help him out while he figured out what he wanted to do with his life, the father’s parents put him on their company payroll declaring him at about $25,000, but really it was a means to deduct the personal expenses they were paying on his behalf, not actual cash. Ultimately, he decided to return to school, first on a part time basis and thereafter on a full-time basis. His goal: to become an elementary school teacher.
The father is now 30 years old, the mother 24 and their daughter 5. They’ve resolved parenting, where their daughter resides primarily with the mother. They are coming to you on the issue of child support. The father has one and a half years left of school to go. He doesn’t think he should be required to pay any child support while he remains a full-time student. He’s doing this for the family, to get a stable, higher paying job that he would enjoy, and the family will benefit from as a whole. He has a definite plan and is staying true to it. Even the mother would concede that he has really put his heart into it and the results are reflected in high grades.
The mother, on the other hand, thinks that at this point in his life, with a 5-year-old daughter, the father should at least be working part time and studying part time. He still has a trade; his skills are still in demand. She is demanding that he continue working and pay support based on “a reasonable” $30,000. He can finish and upgrade his life on his own time.
Now take a moment to think about how you would approach this mediation, the tools you’d use and who (or with whom) you’d want to start the substantive conversation. Perhaps you may personally be thinking they should split their difference down the middle?
This article is the first of three dealing with imputing income in the context of mediation, addressing the underlying legal considerations. The second article will focus on the pitfalls of lazily relying on imputation to resolve disagreements about income for support. The final article will be on practical considerations and possible alternatives before resorting to imputing income.
So, after thinking about your approach, now consider that the facts above formed the basis of the Court of Appeal decision of Drygala v. Pauli, 2002 CanLII 41868 (ONCA). The mother’s position here was the trial decision. The Court of Appeal’s decision, released 17 years ago remains today as the ‘go-to’ for determining whether income should be imputed on the basis of Section 19(1)(a) of the (Federal) Child Support Guidelines which states that:
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.
Stated inversely, there is a duty to seek employment in a case where a parent is healthy unless the “intentional” unemployment or under-employment is required for the needs of the child or reasonable educational needs of the spouse. The court determined this duty from the preamble of the Guidelines: “to establish a fair standard of support for children to ensure that they benefit from the financial means of both parents after separation.”
The appeal court outlined a test for this specific subsection, which I will quickly summarize and parse:
- Is the spouse intentionally under-employed or unemployed?
- If so, is the intentional under-employment or unemployment required by virtue of his reasonable educational needs?
- If the answer to question #2 is negative, what income is appropriately imputed in the circumstances?
The decision is famous for clarifying (at that time) that “intentionally” does not mean intentionally for the purpose of defeating a child support claim. That is, there is no bad faith requirement that parent chooses to earn less. Rather, the word intentional means “a voluntary act”, a decision in the party’s control. Once that is proven, the legal burden shifts to the party found to be intentionally under- or unemployed to justify it. In Drygala, the first part of the test was easily passed.
The second part, “reasonable educational needs”, is trickier. The word “reasonable” simply means the party is pursuing a course of selection that is realistic and toward a productive career aspiration. “Needs” is linking the level of unemployment or under-employment to the “reasonable” education. As the court writes:
How many courses must be taken and when? How much time must be devoted in and out of the classroom to ensure continuation in the program? Are the academic demands such that the spouse is excused from pursuing part-time work? Could the program be completed over a longer period with the spouse taking fewer courses so that the spouse could obtain part-time employment? If the rigours of the program preclude part-time employment during the regular academic school year, is summer employment reasonably expected? Can the spouse take co-operative courses as part of the program and earn some income in that way? These are the types of considerations that go into determining what level of under- employment is required by the reasonable educational needs of a spouse.
The court found that the father passed the reasonable test, but his position did not pass the “needs” test. He had to balance his desire to increase his educational level for a better job in the future, with his role as a financially supporting parent to address the needs of his daughter now.
Now we come to the third and perhaps most important part. Given that his education was reasonable, then what income is appropriately imputed in the circumstances per s. 19(1)(a)? The court found the trial decision (which provided no explanation on arriving at the $30,000 amount) did not account for the reasonable aspect of the education, which if taken on a part time basis would allow the father part time work, which they calculated at $16,500, being one half $33,000, his highest income before quitting. The court used this amount specifically in absence of evidence it really wanted: Context of “the age, education, experience, skills and health of the party, information on the types of jobs available, the hourly rates for such jobs and the number of hours that could be worked.”
The above is a synopsis for just one scenario dealing with imputing in reference to child support. For further substantive understanding of situations of imputing, I would refer you to two articles available online (n.b. I credit the Shakespearean title of the first as a personal influence):
- To Be, or Not to Be: Imputing Income under Section 19(1) of the Federal Child Support Guidelines, Sondra Gibbons (LSO Summit, March 2019)
- The Imputation of Income: An Art or a Science?, George Karahotzitis and Melanie A. Larock (LSO Six Minute Lawyer, November 2016)
In context of the mediation, although the “down the middle” solution nicely correlated to what the court determined in Drygala, there is a very serious risk involved for failing to address how the amount was arrived at. That risk will be discussed in a forthcoming article.
Shmuel Stern is a family law lawyer currently on sabbatical, taking courses at Cleveland Marshall School of Law. Follow him on twitter @corollaryrelief