Impute Income to Voluntarily Unemployed Spouse
In most maintenance or child support cases, both spouses are working, or one has a legitimate reason to not be working, so the incomes for purposes of calculating family support are readily ascertainable. But in cases of “voluntary unemployment”, that is not necessarily the case, and some guesswork is involved.
Colorado’s alimony statute requires trial courts to consider one spouse’s voluntary unemployment, and to “impute” an income to a non-working spouse who is voluntarily unemployed or voluntarily underemployed:
“If a party is voluntarily unemployed or underemployed, maintenance shall be calculated based on a determination of potential income; except that a determination of potential income shall not be made for a party who is physically or mentally incapacitated or is caring for a child under the age of thirty months for whom the parties owe a joint legal responsibility or for an incarcerated parent sentenced to one year or more.”C.R.S. 14-10-114(8)(c)(IV) (Emphasis added).
The child support statute has a similar voluntary unemployment provision (C.R.S. 14-10-115(5)(b)(I). While a family law judge cannot actually compel a spouse to work, for purposes of determining spousal maintenance or child support the court will pretend the person is working, and impute an income based upon his/her earnings potential.
Family law attorneys have long applied the voluntary unemployment provision to both spouses in a divorce, the payor who owes alimony, and the payee who receives support.
But a recent unpublished decision from the Colorado Court of Appeals regarding voluntary unemployment may change things up a bit. In Kjerstad, the spouses agreed at the time of their divorce that the husband would pay the wife modifiable alimony of $15,000/mo, based upon the husband then-earning $45,000/mo, and the wife apparently not working (her income and employment status at the time of divorce is not clear from the opinion).
Six years later, the husband filed a motion to modify or terminate alimony, arguing that his income had dropped significantly to $13K/mo, with total assets worth under $600K. he further asserted that the wife was voluntarily unemployed.
The trial court denied the motion to modify, finding the husband not credible, and that his income was higher than he claimed. The husband appealed, and fared no better with the Court of Appeals.
Standard to Modify Alimony
The standard to modify alimony in Colorado is not whether the court now would have ordered a different amount, but whether changes in circumstances make the original maintenance amount unfair:
“After determining whether there has been a change in the parties’ circumstances, the district court turns to whether, as a result of this change, the maintenance award has become unfair. § 14-10-122(1). At this stage, however, the inquiry is not governed by the same standard as an original award, for to do so would give no real meaning to § 14-10-122 and would result in the filing of motions to modify each time there is any change in the earning ability or needs of a party. Thus, the question in such a case is not whether, based on the current financial circumstances of the parties, the court would have ordered the same amount of support. Instead, the question is different: Have the terms of the original award become unfair, i.e., unconscionable.”Kjerstad, ¶ 11 (Cleaned Up).
The husband had argued that his own change of income warranted a reduction in maintenance, but as we write in a companion blog on this case, the court added future commissions to his income and decided it had not changed enough to justify relief.
But the husband argued the court should have also considered that the wife was not working, and was voluntarily unemployed.
Impute Income to Payee if Voluntary Unemployment?
The appellate court upheld the trial court findings as to the husband lacking credibility and on a depletion of assets issue, before moving on to the other interesting issue – should the court impute an income to a payee spouse who is voluntarily unemployed?
Note that the Colorado alimony law provision quoted above provides for the imputation of income to “a party” who is voluntarily unemployed not simply to the payor or the payee. This suggests that the voluntary unemployment status applies to either party.
Moreover, in a prior published decision, the court of appeals had previously very clearly indicated that both parties are held to the same standard, and the voluntary unemployment standard analysis “would apply if an obligee spouse took early retirement and sought to increase maintenance on this basis.” Swing, at 501.
But in the new case, the court of appeals held the trial court properly did not consider the wife’s alleged voluntary unemployment:
“we are aware of no published appellate decision that holds that a court may consider whether a spouse who receives maintenance is voluntarily underemployed when considering whether the spouse who must pay maintenance has established a change in circumstances warranting a modification of maintenance.”Kjerstad, ¶ 34.
“No published appellate opinion”??? How about Swing, where the court stated that the voluntary unemployment analysis applies to both parties? That’s not binding – that’s merely “dicta” from the Swing court, since it was not a central part of its holding, where only the payor spouse had taken early retirement. Kjerstad, ¶ 35.
Moreover, even that language would not apply, since in Swing the alimony review was triggered by the husband not working, not the payee’s unemployment, whereas in Kjerstad the basis of the husband’s motion was the husband’s own drop in income, not the wife’s employment situation.
A literal read of the Kjerstad holding appears to be that because the husband filed the motion to modify, and the wife was not working at the time of the original divorce, nor at the time of the hearing, nothing had changed in her status, so her own potential voluntary unemployment was irrelevant:
“But in this case, wife has done nothing to change her circumstances. Nor does she seek to increase husband’s maintenance obligation. And there is nothing in the parties’ original agreement that suggests that she was expected to take steps to wean herself from the need for maintenance. Thus, the Swing dictum is entirely inapposite. We discern no basis for reversal.”Kjerstad, ¶ 36.
Without knowing more about the expectations regarding the wife working at the time of the decree, it’s hard to follow this reasoning – it appears to be suggesting that since the wife was not working at the time of the divorce, it’s inappropriate to consider the fact that she’s not working now.
And that would be quite a leap, so I’m wondering if perhaps the real message is that when deciding whether there is a sufficient change to trigger a maintenance review, the court will not consider the wife’s potential voluntary unemployment if she was also previously unemployed.
However, if the court were to find that the husband’s income reduction was, on its own, sufficient to trigger an alimony modification, then it’s hard to conceive of the court disregarding the impact of the wife’s potential voluntary unemployment when it comes to setting a new amount.
So my interpretation of this decision is thus: When the payor’s income reduction is not sufficient to trigger an alimony modification, whether or not the payee may be voluntarily unemployed is irrelevant.
Voluntary unemployment is a concept which arises not just in alimony modification cases, but in contempt, where voluntary unemployment cannot be used to determine a payor has the ability to pay, even just recently, where a physician spouse’s proposal to retire early with a 95% pay cut was deemed voluntary unemployment for purposes of establishing spousal maintenance.
For a complete discussion of spousal maintenance, see our Alimony in Colorado article in the Colorado Family Law Guide. And for a more detailed discussion of family support after retirement, see our Child Support & Alimony After Retirement article.
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