Admittedly, the title is a bit of a misnomer as when a payor benefits from an employment change - and an increase in income - he/she is obligated to advise the child-support recipient and adjust child support accordingly.

The focus of this article is where a payor has an employment change which results in less, or complete loss of income.

As with any legal issue, the first place to look for an answer is always the statute book, as statutes trump other sources of law, such as the common law, equity or judge’s decisions.

Since May 1, 1997, Canada has benefited from a law that while catalogued as a regulation pursuant to the Divorce Act, is nonetheless one of the most widely known and widely used instruments of law in the country; the federal Child Support Guidelines ("CSG").

The most important section of law in the context of a payor’s income reduction is ¶19(1)(a) of the CSG, which is as follows (emphasis added):

"The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following: 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...."

Child supportWhere the loss of income does not result from the payor’s actions, there is no basis for a claim to impute. As stated in Drygala v Pauli:

"Read in context and given its ordinary meaning, intentionally means a voluntary act. The parent required to pay is intentionally under-employed if that parent chooses to earn less than he or she is capable of earning. That parent is intentionally unemployed when he or she chooses not to work when capable of earning income. The word intentionally makes it clear that the section does not apply to situations in which, through no fault or act of their own spouses are laid off, terminated or given reduced hours of work."

As James MacLeod wrote in the 2006 Canadian Annual Review of Family Law, at page 230:

"A court should not impute income on the basis (sic) a person is intentionally unemployed/underemployed if the employment problems apparent is undergoing are real and not self-engineered."

The word may means that the law, as expressed by a judge, does not make imputation automatic. The wording used merely extends the option to the adjudicator, something lawyers referred to as extending judicial discretion.

It is a rare thing in law to have a fact imputed upon a litigant as it is contrary to fundamental principles of justice. It is a statutory allowance that ought not to be used lightly.

However, family law is particular in this regard and as nowhere else, legal cartwheels are regularly performed in order to ensure that children, quoting from ¶1 of the CSG:

"... benefit from the financial means of both spouses after separation both parents."

Secondly, the law generally extends that option where the under or un-employment is intentional but not where, though intentional, it is required by the reasonable educational or health needs of the payor.

Since 1997, the courts have published thousands of legal decisions crossing t’s and dotting i’s in the CSG.

Some jurisdictions appear to interpret the CSGs conservatively, others quick and ready to maximize child-support liability regardless of other facts, relevant though they may be. Because of this, the courts and Canadian provinces are often reluctant to follow a precedent issued by a peer or superior-level court in another jurisdiction, requiring Canada's Supreme Court to intervene more often than then they would probably like to advance and harmonize child-support law from Newfoundland to British Columbia.

  One significant area of discord is whether or not a child-support recipient seeking to have a Court impute income must establish bad faith or an intent to invade child-support obligations on the part of the payor.

In Hunt v Smolis-Hunt, the three Alberta Court of Appeal judges could not agree on this issue but a majority found:

"... that before a court will impute income, there must be a deliberate course of conduct related to the purpose of the (CSG). A court should only impute income ... when it has evidence of the obligor’s intention to avoid or undermine child support obligations."

This is contrary to the conclusions reached elsewhere such as in Drygala v Pauli where the Ontario Court of Appeal unanimously agreed with the statement that:

"... (T)here is no need to find a specific intent to evade child support obligations before income can be imputed."

In that case, Mr. Pauli had a dispute with his employer about overtime and consequently quit his $30k/annum blue-collar job and enrolled in university to train as an elementary school teacher. The mother took exception to his loss of income and asked the court to impute income. In the result, the Court of Appeal came down halfway between the two parties and imputed upon Pauli income at half of what he was earning before his university enrollment.

Judges are known to essentially compromises between two positions put before at income imputation hearings. Another example would be Gawryliuk v. Gawryliuk in which Justice Lee of the Alberta Court of Queen's Bench was faced with a recipient seeking an imputed income of $76,000, and a payor claiming a CSG income of $71,000. In the result, income was imputed to be $72,000.

In Barker v Barker, the British Columbia Court of Appeal, in 2005, stated its disagreement with Hunt v Smolis-Hunt:

"(A) parent who chooses to work less than a regular work week must justify that choice by the needs of the children or suffer the loss personally.  He cannot effectively transfer part of the cost of that choice to his children.... (T)he intent to evade or minimize the payment of child support is not required for a finding of intentional underemployment or unemployment."

In most cases, an application to impute income is the only way to arrive at justice.

Here are two such examples:

  • In Shadian v Mehrizi, a payor in Canada for six years since arriving from Iran, showed himself as unemployed at trial even though he had a Masters in Business Administration, was in good health and had a "reasonable command" of English. Imputed: an income of $12,000/annually.
  • In Lalonde v Lalonde, the payor, Mr. Boyd Lalonde was involved in a very long acrimonious family law case fully disclosed in the law report. Mr. Lalonde had taken a scuba diving course and was not making sufficient attempts to find employment. Imputed: an income of $27,000.

The availability of overtime income is a hot issue not, of course, when the payor shows more of it, but when he suddenly or gradually shows less of it.

In Zovko v Zovko, the Saskatchewan Court of Queen's Bench was faced with just such a scenario and where the payor’s income had dropped from $78K to $50K. Assuming future overtime even though the payor’s sworn evidence was that it had dried out, the Judge Wright imputed his income to be $58K.

A payor’s criminal activities often raises income imputation issues. In Blumer v Blumer, a very creative Victoria lawyer (other than myself!) asked the judge to impute income based on the payor’s alleged drug trafficking. Although attracted to the idea, the judge declined adding that "I am concerned that the court would appear to be encouraging or requiring him to continue his criminal activity." Instead, income was imputed based on his most recent legitimate income.

In RPD v RJE, the Court held that a person incarcerated, even though obviously as a result of his own actions, is not intentionally underemployed for the purposes of the CSG. Justice Tuck noted that the child support payor:

"... is incarcerated by the laws of Canada. Many of his fundamental freedoms have been removed. It is not a case of the respondent not looking for employment or feigning his inability. His inability to be gainfully employed in the public workplace has been contravened. This is not a case where the payor has a current potential to earn an income and is not so earning."

It is unfortunate that in the though well-intentioned judicial zeal to pursue appropriate financial contribution towards child-support, many a baby is thrown out with the bathwater. There are, however, a line of cases, albeit under constant heavy fire, which allow a payor to avoid the draconian imposition of imputed income even where a drop in their income was as a result of their own volition, an often legitimate "short-term pain for long-term gain" proposition for the dependent children.

In 2006 Annual Review of Family Law, at page 229, James McLeod writes of the majority decision in Hunt v Smolis-Hunt as follows:

"The majority accepted that a parent has a right to make bona fide long-term career plans even if they involved a short-term income reduction without the risk that a court will impute income. A person should not have to make all of his or her employment/career decisions based on how it affects his or her ability to pay child support."

In Beisel v Henderson (also cited as VGB v. EH), the Saskatchewan Court considered an inter-jurisidictional support application with an imputed income twist, and declined to impute income adding that:

"Any analysis of s. 19(1)(a) requires a three-step process.

"Firstly, the court must determine whether the parent is intentionally under-employed or unemployed.

"Secondly, if the parent is intentionally under-employed or unemployed, the court must determine whether any of the exceptions set out in s. 9(1)(a) apply. Those exceptions cover situations where the under-employment or unemployment is required by reason of (1) the needs of a child of the marriage; (2) the needs of any child under the age of majority; (3) the reasonable educational needs of the payor; or (4) the reasonable health needs of the payor.

"Finally, if a court determines a parent is intentionally under-employed or unemployed and that none of the exceptions set out in s. 19(1)(a) apply, then the court must decide whether to exercise its discretion and impute income.

"Payor spouses are still entitled to make decisions in relation to their career path so long as those decisions are reasonable at the time they are taken considering all the circumstances."

In Furlong v Furlong, the Alberta Court of Appeal refused to interfere with a lower court's decision to not impute income on a payor who had quit the military rather than transferred to another base, and go back to school.

In Goudie v Buchanan, a Newfoundland court declined to impute income on a payor who had caused a reduction in his income because his choice was "a bone fide and anticipated career choice in order to establish a more satisfactory and secure future which could benefit his children when they reach university ages."