In the context of support obligations, when a party is underemployed and is earning less than they are able to, they may face having income imputed to them. During a relationship, the parties may make family plans, change or give up employment, and act as a caregiver to children. But once a relationship ends, what weight do these joint decisions carry, and in what circumstances can wages be imputed to a party?

There Must be a Justification to Impute a Minimum Wage

Section 19(1)(a) of the Federal Child Support Guidelines enables courts to impute additional income when a spouse is intentionally unemployed or underemployed.

Pustai v. Pustai was a case before the Ontario Court of Appeal in which the wife argued that the trial judge erred in imputing income to her. At trial, the judge concluded that the appellant wife had undisclosed income, and the Court imputed an annual income of $40,000 to her. However, the judge did not explain how the imputed amount was determined.

On review before the Court of Appeal, the Court cited Drygala v. Pauli and explained that courts cannot arbitrarily select an amount of income to impute. Instead, “there must be a rational basis underlying the selection of any such figure,” and any amount must be supported by evidence. In Pustai v. Pustai, there was clear evidence of undisclosed income, which warranted imputing some income, however, the Court of Appeal did not find there was a rational basis to impute $40,000. When considering her level of education and limited employment training, the Court of Appeal determined that it would instead be appropriate to attribute the amount of income which the wife could earn in a full-time minimum wage position.

Onus on Spouse Seeking to Input Income to Provide Evidence of Under-Employment

In Crossley-Chaumont v. Royer, the husband sought to reduce his spousal support obligation. He alleged that there had been a material change in circumstances in addition to arguing that income should be imputed to the wife, suggesting that she should be able to earn $35,000 each year. The caselaw has been clear that when a spouse chooses to earn less income than they are capable of earning, they may be found to be intentionally underemployed. However, the onus is on the spouse, claiming that income should be imputed to provide an evidentiary basis that the other party has been under-employment.

In this case, the wife received disability benefits, however, she was under an obligation to try to find employment. The evidence showed that she pursued education and obtained several short-term contracts. She tried to work but had limited success, which the judge found was reasonable given her mental health issues. The husband cited Pustai v. Pustai, suggesting that imputing a minimum wage income to a support recipient who had little employment training and had not worked outside of the home during the marriage was reasonable.

The judge disagreed with this argument as there was no evidence the wife had undisclosed income, which was the case in Pustai v. Pustai. Moreover, Pustai v. Pustai did not deal with a party who had health issues and was receiving disability benefits. Therefore, there was no basis for imputing income to the wife.

Income Imputed When Party Signalled Availability for Full-Time Employment

Courts have explained that in assessing whether to impute income to a party, any underemployment must be considered against what can reasonably be expected of a party in light of their background, education, and experience.

In Kahro v. Kahro, the husband sought to impute a minimum wage income to the wife on the basis of her previous work experience and university degree. However, the wife argued that she had not worked outside of the home for nearly a decade and that it would take her some time to regain the skills for employment. While the wife admitted she was obligated to try to become self-sufficient, she alleged it was unrealistic that she should be contributing to her own support at the time. She argued that the parties’ youngest child had just started full-time school, and her childcare responsibilities restricted her from full-time employment.

Justice Kurz acknowledged that the wife’s argument was compelling and that courts “should be reluctant to impute income to a stay-at-home wife and mother whose youngest child is four years old, has just started in school and has not worked during the lifetime of her children.” However, that was not determinative due to the unique facts of this case. The wife had run as a candidate in a provincial election, and in doing so, she signalled that she was available for full-time employment as a Member of Provincial Parliament. Furthermore, the parties had been separated for a year and a half, and she had not offered an education plan that would place her in the workforce. Consequently, the judge was prepared to impute the wife’s annual income at $30,000.

Bad Faith Not Required to Find a Party is Underemployed

In Lavie v. Lavie, the appellant husband appealed a decision dealing with the division of property and support payments. He challenged the trial judge’s findings and alleged that income should have been imputed to the respondent wife. The wife had worked as a teacher but left the profession after the parties’ second child was born. The parties jointly agreed that she would not return to her teaching career and would instead stay home with the children. However, she later began operating a child play centre and continued to operate the business following the separation.

Based on the evidence, the trial judge determined that her income from the business was $15,000 and declined to impute an income equal to a teacher’s salary. The judge found that the wife was not underemployed, so there was no basis to impute income. In particular, he noted that opening the business was a joint decision to improve their family life, and it allowed the respondent more flexibility with the children. The husband challenged this, arguing that a teacher’s salary should be imputed as the wife was still qualified to work in this position.

The trial judge looked to Drygala v. Pauli, which held that parents must earn what they are capable of earning to meet their legal obligation to support their children. However, the Court of Appeal explained that “there is no requirement of bad faith or intention to evade support obligations inherent in intentional underemployment.” The reasons for underemployment are irrelevant, while what matters is that a party is earning less than they could be. Consequently, the respondent was underemployed during the relevant period, during which she chose to earn $15,000 from operating the play center rather than over $70,000 as a teacher. Furthermore, the trial judge acknowledged that returning to her teaching career had not been compromised by her household responsibilities during the marriage.

Although the parties originally jointly decided that the respondent would not return to teaching, that decision was made when they lived in a single household. For the Court of Appeal, the situation changed when they moved to two separate households, which carried greater expenses. Therefore, there was a basis to conclude that the respondent was intentionally underemployed.

Final Takeaways Regarding Imputing Income

There is no need to find that a party tried to evade their support obligations before income can be imputed. Parties are expected to earn what they are capable of earning, otherwise, they may be found to be intentionally underemployed. However, imputing a minimum wage to a support recipient will not always be appropriate, and each case depends on their unique facts.

The Family Law Lawyers at NULaw in Toronto Advise Clients on Support Obligations and Imputing Income

In addition to advising on divorce and separation matters, NULaw also handles other family law disputes, including child support and spousal support awards. Our skilled team of family law lawyers advise clients of their ongoing obligations with respect to support payments and the consequences of failing to abide by these requirements. Regardless of changes in circumstances, we are committed to protecting you and ensuring that you can move forward comfortably. Contact us online or call us at 416-481-5604 to learn more about your options or speak to a member of our team.