Edward R. Weinstein, Esq.Edward R. Weinstein, Esq.

As To Alimony Or Child Support, May A Court Impute Income On Someone If They Already Have A Full Time Job?

As a seasoned divorce attorney, I have often argued in New Jersey Family Courts that the other party is “voluntarily underemployed” in order to reduce the amount of support that they should be paying to my client.  Often, the other lawyer will argue, “Well Your Honor, my client does have a full-time job.”  It is times like this that I and the other lawyers at my divorce law firm argue that the Family Part of New Jersey Court’s must also consider that person’s employment history, education and experience and job obtainability.  A simple example would be a doctor who earns $300,000 per year.  However, just as he realizes that his marriage is heading for a divorce, he quits his job and obtains full-time employment at Home Depot.  In this case, before the divorce is finalized, the court would certainly see through this transparent attempt to reduce support and impute the $300,000 upon the doctor.

In Elrom v. Elrom, the New Jersey Appellate Division examined whether a Family Part court could impute income on someone for alimony and child support even if that person was already working full-time. The appellate panel found that a court could do this. The panel held that when determining someone’s ability to earn income, Family Part courts must consider that persons work experience, past salary and employment history, and the current availability of jobs. Furthermore, Family Part courts should weigh the needs of the children as these needs also have a bearing on a parent’s ability to earn income.

Ex-husband, Elad Elrom, appealed from a final judgment of divorce dated November 19, 2012. Specifically, he challenged the income that was imputed on to him for the purpose of determining alimony and calculating child support. Both Elad and his ex-wife Jordana represented themselves at trial and gave testimony in regards to their incomes. Elad and Jordana married in February of 2005 and separated five years later in September of 2010. During the course of the marriage, two children were born to them.

Jordana was an attorney licensed to practice in New York and New Jersey. While she was earning $ 175,000 a year, she lost her job just before her first child was born. In 2009 she started working part time, about ten to fifteen hours per week. After her separation, she was earning $ 67.50 per hour. She then found an associate’s position that paid her $ 80,640, but then lost that job before trial. She claimed that child-care responsibilities forced her to confine her job search to New Jersey firms. As a result, she asked the court to impute a salary of $ 80,640 to her.  Elad worked as a software engineer, web developer, technical writer, and entrepreneur. He had worked for such heavy weights such as Weight Watchers, MTV, HBO, and Sigma. He changed jobs right before trial and started working as the chief technical officer for ChatAnd Inc., and earned a salary of $ 120,00 with the potential to earn up to $ 295,000. He also owned a consulting company called Elrom LLC., worked with several start-up companies, and sponsored an annual technology trade show.

At trial Jordana claimed that while they were married, Elad received money from “clients on the side” as well as royalties from books that he had authored. Moreover, she claimed that she found out that on February 2, 2012 he had started a company in Las Vegas called Effective Idea, LLC, and took $ 67,978 out of Elrom LLC’s account and transferred it to an account at Banca Privada d’ Andorra. Elad contended that an income of $120,00 per year be imputed to him.

After the trial the judge awarded Jordana $ 1,000 every week in alimony for three years, based on the difference in her and Elad’s income. Elad was further required to $ 697 to Jordana every week in support. This amount included child care and insurance premiums, as well as fifty percent of the kid’s medical costs. The judge found that Jordana’s last job represented her income and so he imputed $80,640 per year. Furthermore, the judge overruled Elad’s contention to limit his earning ability to $120,000. Instead, he considered his past earnings from his LLC and personal bank accounts. As a result, the judge imputed income on to Elad in the amount of $230,731.42.

In the ensuing appeal, Elad challenged he imputed income levels for both himself and Jordana. He argued that the income level that was imputed on to him was too high, while the income level imputed onto Jordana was too low. According to Elad, the imputation of income should be reserved for people are voluntarily and intentionally underemployed or unemployed without just cause. He argued that because he was working his circumstances did not trigger income imputation. He further argued that his salary should have been accepted as is, as an appropriate earning level in the calculation of support. He also contended that the principles behind income imputation require that Jordana’s income be increased, and that the judge incorrectly accepted her last salary. The New Jersey Appellate Division found that Elad’s arguments were without merit as applied and that the factual record contradicted his arguments.

The New Jersey Appellate Division stated that income imputation is a matter of discretion, and is not a precise or exact determination. Instead this inquiry requires a Family Part judge to analyze the individual’s capacity to earn income, and job availability. Family Part courts have the power to impute income to calculate child support when a parent is, without cause, voluntarily underemployed or unemployed. This power is stated in the 2005 New Jersey Supreme Court case of Caplan v. Caplan, which held that a parent’s ability to earn income, or “human capital” should be “activated for the purpose of evaluating his or her obligation” and the amount of income that “should be imputed” to the parent.

New Jersey courts have always peered beyond a parent’s alleged claims of limited finances and financial opportunity, in deciding matters of support. Family Part courts will exercise their power to compel a parent to what is just and in the best interest of the child. Therefore, the court has the power and the right to realistically assess a parent’s potential earning capacity, and review potential earning power rather than actual income, when trying to impute the ability to pay support. This power is also enumerated in the New Jersey Child Support Guidelines, which state that if a court finds that either parent is voluntarily unemployed or underemployed without cause, it may impute income on to the that same parent. This imputation of income needs to based on: earning capacity and potential employment based on prior work history, qualifications, educational background, and the possible job opportunities in the area. Furthermore, the Family Part can impute income based on that same parent’s former income at a former job, and if potential earnings cannot be reasonably determined then income may be imputed on that parents most recent wages.

These legal principles, according to the New Jersey Appellate Division, also apply when calculating a party’s alimony obligation. In addition a failure to submit proof of financial information forces a judge to impute income, as well as when someone is self-employed. This is because someone self-employed controls the method and means of their own earnings and is thus in a better position to present an unrealistic portrait of their actual income.

With all these afore-mentioned legal principles, and in light of the credibility of Elad’s testimony, the New Jersey Appellate Division rejected his contention that income imputation did not apply because he held a full time position. The appellate panel found that the factual record supported the trial court judge’s finding that Elad’s field of expertise, and his wage history, showed a significant earning capacity, that was clearly in excess to his last documented salary of $ 120,000 a year, and therefore there was strong grounds to impute additional income. Ultimately, the New Jersey Appellate Division concluded that the Family Part used a reasonable and fair method to calculate a realistic level of income in consideration of support, that was based on credible evidence submitted in the factual record.

If you are facing a child support or alimony problem, please contact my office today.