I find that the most commonly litigated issues relate to child support and spousal support. This is somewhat understandable. A recent case sheds some light on the aspect of “Imputing Income” to a non-working spouse or a spouse who is chronically underemployed.
In Charles McHugh v. Connie McHugh from the Fourth Appellate District from the State of California, Court of Appeal (Certified for publication on November 26, 2014), Mr. McHugh filed a motion to reduce his child support obligation because he lost his job as a commissioned salesman. In opposition, Ms. McHugh asked the court to increase his child support because Mr. McHugh lost his job for diverting business to his Father’s business. The employer had offered Mr. McHugh an opportunity to retain his job if he disclosed his misconduct and fully repaid restitution. The Trial Court denied Mr. McHugh’s request to reduce his child support and granted Ms. McHugh’s request to impute income to Mr. McHugh as though he were earning the same income as before.
Family Code section 4058, subdivision (b), grants trial courts discretion to set child support based on a parent’s earning capacity rather than actual income if the court finds the parent has the ability and opportunity to earn income at the level to be imputed. The court provided,”We affirm the trial court’s order exercising its discretion to impute income under section 4058, subdivision (b), because substantial evidence supports the findings that (1) Charles had the ability and opportunity to keep his job; (2) his termination was a voluntary divestiture of resources required for child support obligations because of his misconduct in diverting business to his father’s company to avoid his support obligations and deliberately failing to satisfy his employer’s conditions for keeping his higher paying job; and (3) imputing income to Charles was in the child’s best interests.”
The Family Code has granted the trial court discretion when imputing income to a parent based on his or her “earning capacity.” (§ 4058, subd. (b).) Specifically, section 4058, subdivision (b) states, “The court may, in its discretion, consider the earning capacity of a parent in lieu of the parent’s income, consistent with the best interests of the children.”
As the moving party seeking to modify the existing support order, Charles bore the burden to show not only that he lost his Amcor job, but also that he lacked the ability and opportunity to keep that job and continue earning at the same level. (Bardzik, supra, 165 Cal.App.4th at p. 1304; Eggers, supra, 131 Cal.App.4th at p. 701.) Here, it is undisputed Amcor fired Charles, but it also is undisputed Amcor gave Charles the opportunity to keep his job if he satisfied three conditions: (1) fully disclosing all information about his improper conduct; (2) paying Amcor restitution for the business he diverted; and (3) entering into a last chance employment agreement with Amcor. Accordingly, to obtain an order reducing his support obligations it was Charles’s burden to present evidence showing he could not satisfy these conditions, and therefore did not have the opportunity to keep his job.
We can all learn important lessons from this case when it comes to seeking a modification of support. First, people do not realize when they seek a support modification that it is possible for the court to modify in the other direction. For example, a party seeking to modify support downward may be surprised to have the court modify the support upward. Second, a party seeking a downward modification due to job loss must show that there was no possibility of retaining the job. Third, the court can impute income because California Family Code Section 4058 allows for the Court to set Child Support based upon a party’s earning capacity as opposed to actual income. Many people are surprised to learn this.
If you have any questions regarding Child Support, Spousal Support or Family Law, please call Attorney Keith F. Simpson today at (310) 297-9090. The Law Offices of Keith F. Simpson, A Professional Corporation, is a full service family law firm located in Manhattan Beach, California. You may also view the website http://www.simpsonlaw.net to contact Attorney Keith F. Simpson today!