Willful Underemployment Under NRS 125B.080(8)
Bruce I. Shapiro, Las Vegas, Nevada
Published in the Nevada Family Law Report, Winter 1998
Reprinted with permission from the State Bar of Nevada 2011
The parents of a child have a duty to financially support their child. Child support is set pursuant to the statutory presumptions contained in NRS 125B.070. NRS 125B.080(4) provides that the formulas in 125B.070 notwithstanding, Athe minimum amount of support that may be awarded by a court in any case is $100.00 per month per child, unless the court makes a written finding that the obligor is unable to pay the minimum amount.@ NRS 125B.080(4) goes on to provide that A[w]illful underemployment or unemployment is not a sufficient cause to deviate from the awarding of at least the minimum amount.@ NRS 125B.080(8) provides that, if an obligor is willfully underemployed or unemployed A to avoid an obligation for support of a child, that obligation must be based upon the parent’s true potential earning capacity.@ [Emphasis added].
There are only two Nevada cases directly discussing willful underemployment and both are relatively consistent with the case law in other states. The first, Rosenbaum v. Rosenbaum, was decided before the adoption of NRS 125B.080(8) in 1987. Rosenbaum involved an obligor who quit his job as an air traffic controller earning $19,000.00 per year in Missouri and moved to Las Vegas where he became employed by a bank earning $4,800.00 per year.
The obligor admitted to quitting his job, but claimed he left due to his wife’s misconduct and could not find a similar position in Las Vegas. The lower court refused to consider evidence concerning the husband’s prior income or his income potential finding Asuch evidence was speculation and not relevant to the issues.@ The Nevada Supreme Court, however, held that a trial court Ashould be allowed, but not required, in fixing the amount of alimony or child support to consider what a husband or father could in good faith earn if he so desired.@ The key is good faith. If one a intentionally holds a job below his reasonable level of skill or purposefully earns less than his reasonable capabilities,@ this should be considered in setting the financial awards. If, however, through circumstances beyond his control, [one] cannot in good faith obtain a job commensurate with his skills . . . the award should be in keeping with his ability to pay, having regard for all other factors which bear upon the issue.@
The second case, Minnear v. Minnear, involved an obligor who was a doctor, who had a stated income of $1,200.00 per month plus a net income of $18.31 on a numerous rental properties.@ The court found deliberate avoidance@ on the part of the obligor. The Nevada Supreme Court noted that the statute required a finding that the willful underemployment was Afor the purpose of avoiding an obligation for support of a child.@ The court, however, interpreted the statute as where a evidence of willful underemployment preponderates, a presumption will arise that such underemployment is for the purpose of avoiding support. Once this presumption arises, the burden of proving willful underemployment for reasons other than avoidance of a support obligation will shift to the supporting parent.@
The purpose of this article is to briefly explore several scenarios and analyze under which circumstances it may be appropriate for a trial court to impute income to an obligor parent for the purpose of calculating a child support obligation if that parent is willfully unemployed or underemployed (hereinafter collectively referred to as a willfully underemployed@). This issue typically arises in the following scenarios:
1. The obligor parent is terminated from his or her employment;
2. The obligor parent chooses a change in employment;
3. The obligor parent ceases employment to pursue an education;
4. The obligor parent has been incarcerated; and
5. The obligor parent ceases employment due to a marriage or to stay home with minor children.
1. Termination of Employment
In reviewing termination cases, the courts have focused on the a voluntariness@ of the termination, that is, whether the obligor lost his employment for a good faith reason. An obligor whose employment is terminated, through no fault of his own, from a job which he had held for many years, who subsequently conducts an exhaustive job search and depletes all of his assets should receive a reduction in his child support obligation. Similarly, if an obligor is subjected to a Aforced@ buy-out from his employer, the obligor may be entitled to a reduction. The obligor, however, will have the burden of showing that there was a Asubstantial likelihood@ that the obligor’s job would not continue. Under these circumstances, the court in Ms. B v. Mr. K., found that the obligor made a reasonable decision in quitting his job and was entitled to a reduction in his child support obligation.
A court may properly impute income to a party upon a showing that the party has the ability to earn more by use of his or her best efforts to gain employment equal to his or her capabilities. A court, however, should not impute income based upon a party’s prior extraordinary efforts, but rather upon reasonable efforts over an extended period of time. In Haas v. Haas, the husband had started a business in which he worked excessively long hours and earned a salary of $31,500, while the business earned an additional profit of $38,000 per year. Subsequent to the divorce being initiated, the husband claimed exhaustion. The husband did not sell the business, but rather went to work for another company earning $25,000.00 per year. The court ruled that child support should not be calculated on his prior a extraordinary efforts,@ but rather his Areasonable employment potential.@
In Carey v. Carey, the obligor, after his initial divorce, remarried and quit his job to a devote time to his two businesses and household duties.@ The court found that the businesses did not contribute a materially@ to his support. The obligor was for all practical purposes being supported by his spouse in a exchange for the [obligor’s] household duties.@ The court found that the obligor Aintentionally terminated his employment thereby substantially reducing or eliminating his actual earnings.@ The law is clear that, Aif an obligor, acting in bad faith, voluntarily worsens his financial position so that he cannot meet his obligations, he cannot obtain a modification of support.@
In Winfrey v. Winfrey, an obligor parent was terminated from his truck driving position ten days prior to trial. He was terminated because he refused to take an assignment that he believed to be dangerous and unlawful. The trial court found that although the obligor was terminated due to his own conduct, the court could consider the reason for his termination. If an obligor’s employment situation changes because of circumstances beyond his control, or is reasonable in light of all the circumstances, then it would be unfair to find the obligor voluntarily underemployed. There must then be a finding of a bad faith.
The case of In Re Marriage of Blum related to an obligor parent who lost his job after fifteen years when the plant where he was employed closed. The obligor found a lower paying job and requested a reduction in his child support obligation. The obligee conceded that the obligor lost his job through no fault of his own, but argued that the obligor could relocate to find a similar paying job. The court found that the obligor had valid reasons for not moving and his support should be based on his current employment, which was Anot a self-inflicted or a voluntary reduction in salary.@ The Iowa court recognized the importance of the children’s relationship to the obligor parent and did not find it reasonable to require the obligor parent to relocate.
By contrast, In Re Marriage of Imlay dealt with a traveling salesman who was terminated from his employment as a result of a conviction for driving under the influence. The court found that obligor’s loss of employment was the Aresult of deliberate conduct on [the obligor’s] part which jeopardized his children’s interests.@ The obligor argued that the loss of his employment was not as a result of an intent to evade his child support obligation, but as a result of a poor performance. The court held that the obligor’s loss of employment was a foreseeable consequence of the obligor’s drunk driving and subsequent driving under the influence conviction. The court found that a party who changes his employment status has the burden of showing that the change was made in good faith. Further, many courts find that the obligor has duty to a mitigate@ his loss of income by demonstrating a good faith effort
2. Change in Employment
A trial court may appropriately consider any substantial economic reversal resulting from a change in employment. The change to a lower paying job, however, will always be suspect. The party petitioning for modification based on a reduced earning capacity must carry the burden of showing his changed employment status was made in good faith.
When considering a temporary reduction in child support due to a change in employment, the court must also look at numerous factors, primarily whether the obligor parent’s motives are good. The court must look at the age of the child to determine whether the child will actually receive a benefit from a future greater earnings capacity. The court should also look at the obligor’s payment history to help determine the obligor’s motives.
In McKinney v. McKinney, the obligor was earning $13.45 per hour before he was laid off. Nine weeks later, the obligor found employment in a different city earning only $11.50 per hour. Several months later, the obligor was offered his original employment. The obligor, however, refused to return because he had become settled in a new city and believed the new job to be more secure. The appellate court affirmed the trial court’s determination that the obligor did not deliberately and willfully leave@ his initial employment and refused to find that he was willfully underemployed. The appellate court found that although the Kentucky statute did not specify a bad faith@ requirement in order to find willful unemployment, Asuch a requirement must be implied.@
A party may not avoid his obligation of support by an act of voluntary retirement or by giving up his profession to pursue a career in an unrelated field. A reduction in ability to pay child support brought about through a voluntary change in circumstances is not, in itself, sufficient to mandate a modification of support. But at the same time, the position that self-imposed changes should never be the basis of a modification is too extreme. A balancing approach is required. The timing of the change is crucial in such a situation. This circumstance is particularly fact specific. A divorce decree should not freeze a parent paying child support into his or her existing employment. One acting in good faith should be able to make an occupational change even though that change may temporarily reduce his ability to meet his financial obligations to his children. Ordinarily, one makes a change in his occupation with the hope of improving his prospects for the future. When parents are living together, the standard of living of the children rises and falls with the changes in the parents’ fortunes. This readjustment should not be any different because of a divorce. A noncustodial parent should be allowed a reasonable choice of a means of livelihood and the chance to pursue what he or she honestly feels are the best opportunities even though the financial returns may, for the present, be less.@
3. Education
Cases involving a parent who would like to quit his or her existing employment in an attempt to continue an education or become reeducated are amongst the most difficult for courts. Jones v. Jones, dealt with a situation in which an obligor quit his employment so that he could attend college. At the time of the divorce, the obligor was a mill worker. Shortly after the divorce, the obligor’s union, and consequently the obligor, went on strike. After returning to work subsequent to the strike, the obligor’s wages were reduced. As a result, the obligor decided that he wanted to return to college in order to pursue a career in psychology. The obligor then quit his job, enrolled as a full-time student and obtained two part-time jobs. The district court’s subsequent refusal to decrease the obligor’s child support was upheld by the appellate court. The court did not find that the obligor’s action was in bad faith, but based partially on the fact that the obligor failed to consult the obligee, that he gave no warning about his decision, and that he had a poor payment history, the appellate court did not find sufficient cause to decrease his child support.
In Massingill v. Massingill, however, the obligor, who was a doctor, left his practice as an internist to reenter medical school for the purpose of becoming board certified in a specialty. The obligor’s reasons for leaving his practice were the influx of physicians in his field, fewer available patients and Medicare restraints. He testified that by becoming certified in a specialty he would be able to earn twice his present income. The trial court reduced the obligor’s child support and alimony obligations, finding that a parent whose change of circumstances is due to his voluntary termination of employment can obtain a reduction in child support payments while engaged in further education pursuits.@ The court held that the obligor must demonstrate that there has been a change in circumstances, that the change is reasonable and justified, that the change is being made in good faith and not attempting to avoid a support obligation, and that a reduction will not deprive the child of reasonable support.
In Marriage of Nordahl, the parties had been married twenty-one years. At the time of the divorce, the wife was 39, had custody of the parties’ minor child, was unemployed, attending college full-time with a 3.5 grade point average, and expected to obtain an undergraduate degree so that she could become self-supporting. For the purposes of setting the husband’s child support and alimony obligations, the court imputed the sum of $1,000.00 per month to the wife as income. The appellate court found that it was unfair to impute income to the wife and penalize her effort to become self-supporting.
In Pattee v. Pattee, the court found that the obligor did willfully quit his employment to take a lesser paying job. The obligor, however, did not take a lesser paying job with the intention of paying less support for his children, but rather to enhance his future earning capacity which will also benefit the children. The Alaska Supreme Court remanded the case back to the trial court to determine why the obligor became a student, how long he would be a student and what were his career goals. The result in the above-referenced cases may appear harsh, but some courts opine that the children of the parties should not be forced to finance the noncustodial parent’s career change.
4. Incarceration
With regard to incarcerations, the underlying policy is obvious, a person who has a support obligation should not profit from his criminal conduct, particularly at his children’s expense.@ Why should a convicted criminal be relieved from his or her child support obligations when an obligor who voluntarily quits or reduces his income is not afforded relief? Courts have handled the issue of whether incarceration is a change in circumstances warranting modification of a child support obligation in different ways. Some courts deny modification of a support obligation if the incarcerated parent possesses other assets which could be used to satisfy the obligation. Other courts have determined that incarceration does not justify reduction or suspension of child support obligation whether other assets are available or not. A few courts have held that a parent incarcerated for a crime other than nonsupport is not liable for child support while incarcerated unless it can be affirmatively shown that the parent has assets from which to make payments.
Most courts, however, have found that criminal conduct Aof any nature cannot excuse the obligation to pay support.@ Courts have also held that an incarcerated parent cannot be found in contempt for not paying while in prison, but the obligation nevertheless continues. These courts additionally find, however, that post-incarceration collection of arrears Amust be flexible and consider the parent’s post-release financial circumstances.@
Pursuant to NRS 125B.020, all parents have a duty to support their children. This obligation should not change because a parent has become incarcerated. A similar analysis may be used for a obligor parent in drug rehabilitation, although courts generally find that drug rehabilitation is not a proper basis to modify a support award. This trend is supported by the belief that a parent who stops working as a result of criminal conduct should nevertheless continue to be responsible for the support of his or her children. Although incarceration is not itself a voluntary situation, it is the foreseeable consequence of behavior that is voluntary and intentional.@ Additional factors to consider in an incarceration are:
1. The length of the incarceration;
2. The earning potential of the parent following release;
3. The amount of the current child support award; and
4. The amount of arrears that will accrue during the incarceration.
5. Marriage
If an obligor parent ceases employment due to the fact that he or she has married and no longer needs to work, should that parent be relieved of his or her child support obligation? What about those cases where an obligor parent chooses not to work in favor of taking care of children of a subsequent marriage?
Few would take the position that remarriage should absolve the obligation of support, but how should child support be calculated in such cases? Should the obligor parent’s income be considered, based on community property interest, as one-half of the new spouse’s income? No Nevada statute or case law provides for imputing wages to a noncustodial parent who marries and chooses not to work outside the home. Generally it would make the most sense to base the obligor’s child support obligation on the obligor’s previous income and to maintain the previous obligation.
In states utilizing the income-share method of calculating child support, the custodial parent’s income is a major factor in calculating a support obligation. In Canning v. Juskalian, the custodial parent stayed home with her two-year-old child of a subsequent marriage. The court found that it was proper to impute the custodial parent’s income based on earning capacity and rental income.
Between the parties’ separation In re Marriage of Noel, and the date of their divorce, the mother had two children and was expecting a third. The father was awarded custody of the of two of the parties’ three children and the father agreed that mother would pay no child support. The lower court, however, refused to approve the agreement and imputed the mother’s income at minimum wage. The Montana Supreme Court found that it must apply its discretion in a realistic manner, taking into account the actual situation of the parties.@ The Montana Supreme Court found that if the mother was going to work, the court must take into consideration the cost of the mother’s day care expense for the children of her subsequent relationship.
The mother In Re Marriage of Pote was only able to work 20 hours per week while caring for a child with Down’s Syndrome from a subsequent marriage. The court found that the mother’s reduced income was a involuntary@ and income should not have been imputed. Similarly, in Rojas v. Rojas, the wife filed for divorce after a twelve-year marriage. The parties six-year-old child was then diagnosed with leukemia. The parties agreed that the wife would take off six months from work to care for the child. It was expected that the child’s leukemia would go into remission by that time, thus enabling the mother to resume her employment as a receptionist. The lower court found that it was ‘necessary’ for the mother to stay home part-time to care for the needs of the child and therefore no income should be imputed to the her. The appellate court opined that the mother had a legitimate reason for staying at home with the child, but since the needs of the child only would allow her to work part-time, a part-time income should have been imputed.
There are many factors to be considered when a court is faced with imputing income to a parent who wishes to stay at home to raise minor children. Courts should avoid creating economic a disincentives@ that would prevent a parent from remarrying and remaining at home to raise children. The court must consider the age, maturity, health and number of children in the home as well as the availability and cost of appropriate child care providers. The court must also consider the custodial parent’s employment history, including recency of employment, earnings and other financial resources.
Conclusion
Several trends have emerged in willful under- and unemployment cases. First, many courts are reluctant to reduce child support obligations. Although a temporary decrease in child support may benefit a child in the long run, many courts believe that the child should not have to financially suffer in the short term. The courts are also paying more attention to the obligor’s long-term earning ability, rather than short-term earnings. Lastly, any voluntariness@ in a parent’s diminished earning capacity is a substantial impediment to obtaining a downward modification in a support obligation. The Nevada Supreme Court’s decision in Minnear may be consistent with the national trend, but the presumption of Awillfulness@ to any reduction in income is not consistent with the plain language of NRS 125B.080(8).
Although courts should be reluctant to decrease a child support obligation to the immediate detriment of the child, the courts should be become more receptive to temporary reductions in obligations that will allow the obligor parent to increase his or her earnings potential and ultimately provide the child with additional support. Initially, the court should look at the intent of the obligor and his or her payment history. If the obligor has quit or reduced earnings for a good faith reason, the court should then review other factors. The court should especially consider whether the reduction in support would create a financial hardship for the custodial parent and children and whether the children are young enough to realize the benefit of a future increased child support payment.
In sum, courts should be open and flexible for reductions in child support based on good faith reasons that will result in an enhanced child support award in the future. After all, the plain reading of the statute states that willful underemployment exists when done Ato avoid an obligation for support of a child.@
End Notes
. NRS 125B.070 provides as follows:
Definitions.
1. As used in this section and NRS 125B.080, unless the context otherwise requires:
(a) A Gross monthly income@ means the total amount of income from any source of a wage‑earning employee or the gross income from any source of a self‑employed person, after deduction of all legitimate business expenses, but without deduction for personal income taxes, contributions for retirement benefits, contributions to a pension or for any other personal expenses.
(b) A Obligation for support@ means the amount determined according to the following schedule:
(1) For one child, 18 percent;
(2) For two children, 25 percent;
(3) For three children, 29 percent;
(4) For four children, 31 percent; and
(5) For each additional child, an additional 2 percent, of a parent’s gross monthly income, but not more than $500 per month per child for an obligation for support determined pursuant to subparagraphs (1) to (4), inclusive, unless the court sets forth findings of fact as to the basis for a different amount pursuant to subsection 5 of NRS 125B.080.
. 86 Nev. 550, 471 P.2d 254 (1970).
. 107 Nev. 495, 814 P.2d 85 (1991).
. Ronan v. Ronan, 621 S.2d 518 (Flor. Dist. App. 1993).
. 601 N.Y. Supp.2d 980, 1598 Misc.2d 817 (1993).
. Haas v. Haas, 552 So.2d 221, 224 (Fla. App. 1989).
[xv] . Id.
. 615 A.2d 516 (Conn. App. 1992).
. Willis v. Willis, 820 P.2d 858, 859 (Ore. App. 1991).
. 602 So.2d 904 (Ala. App. 1992).
. Keplinger v. Keplinger, 839 S.W.2d 566, 538 (Ky. App. 1992), citing McKinney, v. McKinney, 813 S.W.2d 828, 829 (Ky. App. 1991).
. 526 N.W.2d 164 (Iowa App. 1994).
. Id. at 166. See also Cohn v. Cohn, 461 N.E.2d 1028 (Ill. App. 1993).
. 621 N.E.2d 992 (Ill.App. 1993).
. See In Re Marriage of Seanor, 876 P.2d 44, 48 (Colo.App. 1993).
. In re Marriage of Imlay, 621 N.E.2d 992, 994 (Ill. App. 1993).
. Matter of Marriage of Case, 879 P.2d 632 (Kan.App. 1994).
. 813 S.W.2d 828, 828-29 (Ky.App. 1991).
[xxxix] . Villano v. Villano, 414 N.Y.S.2d 625, 629 (1979).
. In re Rome, 621 P.2d 1090, 1092 (1981).
. Sabatka v. Sabatka, 511 N.W. 107, 110 (Neb. 1994).
. Wallen v. Wallen, 407 N.W.2d (Wis.App. 1987).
. 806 P.2d 1170, 1172 (Ore. App. 1991).
. 564 So.2d 770 (La.App. 1990).
. 834 P.2d 838 (Colo.App. 1992).
. See generally Oberg v. Oberg, 869 S.W.2d 235 (Mo. App. W.D. 1993) at 236-238.
. Noddin v. Noddin, 455 A.2d 1051 (Miss. 1993); Proctor v. Proctor, 773 P.2d 1389 (Utah App. 1989).
. In re Marriage of Phillips, 493 N.W.2d 872 (Iowa App. 1992); Ohler v. Ohler, 369 N.W.2d 615 (1985); Cole v. Cole, 590 N.E.2d 862 (1990).
. Lewis v. Lewis, 637 A.2d 70, 73 (D.C.App. 1994); Clemans v. Collins, 679 P.2d 1041 (Alas. 1994); Commissioner of Human Resources v. Bridgeforth, 604 A.2d 836 (1992); Nab v. Nab, 757 P.2d 1231 (Ind. App. 1988); Meyer v. Nein, 568 N.E.2d 436 (Ill. 1991); Pierce v. Pierce, 412 N.W.2d 291 (Mich. 1987); Glen v. Glen, 848 P.2d 819 (Wyo. 1993).
[lxi] . Willis, supra.
. Lewis v. Lewis, 637 A.2d 70, 72 (D.C.App. 1994); Oberg at 237.
. Davis v. Vance, 574 N.E.2d 330 (Ind. App. 1991); Mooney v. Brennan, 848 P.2d 1020 (Mont. 1993); Koch v. Williams, 456 N.W.2d 299 (N.D. 1990); Parker v. Parker, 447 N.W.2d 64 (Wis. 1989).
. Dept. of Health & Rehab. Serv. v. Schwass, 622 S.2d 578, 579 (Fla. Dist app. 1993).
. See Note, Devaluing Caregiving in Child Support Calculations: Imputing Income to Custodial Parents Who Stay Home With Children,@ 61 Missouri L.Rev. 429 (1996).
. See Rodgers v. Rodgers, 110 Nev. 1370, 887 P.2d 269 (1994); Jackson v. Jackson, 111 Nev. 1551, 907 P.2d 990 (1995). Compare to Lewis v. Hicks, 108 Nev. 1107, 843 P.2d 828 (1992).
. 597 N.E.2d 1074 (Mass.App.Ct. 1992).
. 847 P.2d 246 (Colo. App. 1993).
. Id. at 248. See also Rojas v. Rojas, 656 So.2d 563 (Fla. App. 1995).
. 656 So.2d 563 (Fla. App. 1995).