DETERMINING “EARNING CAPACITY” IN IMPUTED INCOME CASES

Laura W. Morgan
Family Law Consulting

When a parent is determined to be voluntarily unemployed or underemployed without a good faith reason, or for the reason of avoiding child support, a court is authorized to impute income at “earning capacity.”

The determination of earning capacity is a factual matter, to be determined by the court on the basis of the evidence in the record. Beaudoin v. Beaudoin, 24 P.3d 523 (Alaska 2001) (because the father offered evidence that the mother was employable but chose not to work, the father’s claim of voluntary underemployment required an evidentiary hearing); Bimonte v. Martin-Bimonte, 679 So. 2d 18 (Fla. Dist. Ct. App. 1996); Seilkop v. Seilkop, 575 So. 2d 269 (Fla. Dist. Ct. App. 1991) (it is error to impute income without a sufficient factual finding of what amounts the court is imputing and from what sources or bases the court derives its figures); Pettit v. Pettit, 612 N.E.2d 1090 (Ind. Ct. App. 1993) (party to whom income is to be imputed is entitled to evidentiary hearing); Spilovoy v. Spilovoy, 488 N.W.2d 873 (N.D. 1992) (error to impute income to stay-at-home mom where there was no evidence or specific findings as to what her income could be); Brooks v. Rogers, 18 Va. App. 585, 445 S.E.2d 725 (1994) (wife failed to present evidence that spouse could have earned greater amount or engaged in conduct to his economic disadvantage, and therefore income would not be imputed).

The most common type of evidence is the party’s earnings history. T.K.T. v. F.P.T., 716 So. 2d 1235 (Ala. Civ. App. 1998) (imputed income for engineer based on earnings history); In re Marriage of Jaeger, 883 P.2d 577 (Colo. Ct. App. 1994) (capacity is based on average income of three years prior to drop in earnings); Wendel v. Wendel, 805 So. 2d 916 (Fla. 2d DCA 2001) (despite husband’s advanced degrees, maximum husband had ever earned was $65,000; error to impute greater earning capacity); Stein v. Stein, 701 So. 2d 381 (Fla. 4th DCA 1997) (it is error to impute income at level never earned); Stodtko v. Stodtko, 636 So. 2d 814 (Fla. Dist. Ct. App. 1994) (it is error to impute income higher than party ever earned); Havener v. Havener, 700 So. 2d 533 (La. Ct. App. 1997) (the last salary earned is the best estimate of obligated spouse’s earning capacity absent evidence that work is available only at lower salary); Holdsworth v. Holdsworth, 621 So. 2d 71 (La. Ct. App. 1993) (earning capacity is income of most recent job party left voluntarily); Atkinson v. Atkinson, 420 Pa. Super. 146, 616 A.2d 22 (1992) (earning capacity must be based on the party’s work record and employability); Hill v. Hill, 869 P.2d 963 (Utah Ct. App. 1994) (impute income based on earnings history); Hall v. Hall, 858 P.2d 1018 (Utah Ct. App. 1993) (where party has highly unique and specialized skills, court should consider earnings in profession in general, and then make adjustments for party’s unique skills); Niemiec v. Virginia Dep’t of Social Services ex rel. Niemiec, 27 Va. App. 446, 499 S.E.2d 576 (1998).

Earnings history, however, may paint an inaccurate picture. A party may not be able to earn at the last, best job because of changes in the job market or changes in the person’s health or education. Thus, specific evidence should be presented about the current state of the job market in the appropriate geographic area. Specific evidence should be presented that this person can obtain a specific job. Presentation of want ads, for example, without further evidence, is insufficient. Finally, if counsel is utilizing the services of a rehabilitation expert, the expert must tailor his or her testimony to the specific party, and not speak in generalities about the job market and the average person. See Berryhill v. Reeves, 705 So. 2d 505 (Ala. Civ. App. 1997) ($9.00 per hour sustained, where evidence showed husband had been offered a job at that rate); State ex rel. Dunnavant v. Dunnavant, 676 So. 2d 1329 (Ala. Civ. App. 1996) (error to impute income to husband where there was testimony that there was no job available); Gilchrist v. Gilchrist, 660 So. 2d 1005 (Ala. Civ. App. 1995) (where wife had not passed state nursing boards yet, it was error to base support order on premise that she had); A.H. v. W.P., 896 P.2d 240 (Alaska 1995) (trial court erred in imputing income to mother based on her earning history, where evidence showed current inability to maintain such earnings due to mental disability); Oregon v. Vargas, 70 Cal. App. 4^th 1123, 83 Cal. Rptr. 2d 229 (1999) (earning capacity must be based on ability and opportunity to work); In re Marriage of LaBass, 56 Cal. App. 4th 1331, 66 Cal. Rptr. 2d 393 (1997) (in determining earning capacity, newspaper want ads were admissible to show range of salaries available, but not conclusive as to earning capacity); In re Marriage of Paulin, 46 Cal. App. 4th 1378, 54 Cal. Rptr. 2d 314 (1996) (earning capacity is composed of ability to work including such factors as age, occupation, skills, education, health, background, work experience and qualifications; willingness to work exemplified through good faith efforts and due diligence; meaningful attempts to secure employment from an employer willing to hire); In re Marriage of Elmer, 936 P.2d 617 (Colo. Ct. App. 1997) (father’s entire employment history, including stints as mechanic, was relevant in determining earning capacity); Werblood v. Birnbach, 41 Conn. App. 728, 678 A.2d 1 (1996) (husband’s earning capacity was determined by fact that both husband and wife had doctoral degrees, husband had more years post-doctoral work, yet husband made less than others in profession with comparable levels of experience); Knight v. Knight, 746 So. 2d 1117 (Fla. 4th DCA 1999) (court imputed salary of $250,000 to husband, based on salary in medical practice before bankruptcy); Iglesias v. Iglesias, 711 So. 2d 1316 (Fla. 2d DCA 1998) (newspaper want adds are not sufficient to show earning capacity, as they do not show this person would be hired or what terms of employment were); Hinton v. Smith, 725 So.2d 1154 (Fla.2d DCA 1998) (where wife was supposed to complete two-year course to earn accounting decree, but she failed to finish, court held it was appropriate to impute income, but only at what she could earn with present credentials, not what she could earn if she had degree; thus, expert testimony about prevailing earnings for persons with degree she did not have was not probative); Burkhardt v. Bass, 711 So. 2d 158 (Fla. 4th DCA 1998) (salary of entry-level banking job obligor could get with skills and job history would be imputed); Abdella v. Abdella, 693 So. 2d 637 (Fla. DCA 1997) (earning capacity is to be determined by salary of last job that party left voluntarily, not last job from which party was terminated); Beard v. Beard, 575 So. 2d 1331 (Fla. DCA 1991) (it is error to impute income where evidence shows obligor is working full-time in a job commensurate with current education and training); Lewis v. Lewis, 569 So. 2d 1342 (Fla. DCA 1990) (evidence of earning capacity may include the Department of Health and Human Services imputed income calculations); Duncan v. Duncan, 262 Ga. 872, 426 S.E.2d 857 (1993) (earning capacity cannot be determined solely by reference to work history; education, special training, and funds available must also be considered); State Dep’t of Health and Welfare ex rel State of Oregon v. Conley, 971 P.2d 332 (Idaho Ct. App. 1999) (court must look to employment potential and probable earnings based on work history, qualifications, prevailing job opportunities, earnings level in the community; evidence that father was unemployed, but could earn $6-8/hr. as mechanic supported imputation of income); Henderson v. Smith, 915 P.2d 6 (Idaho 1996) (not error to base earning capacity of attorney who had practiced for 20 years on average earnings of attorneys in area); Carmichael v. Siegel, 754 N.E.2d 619 (Ind. Ct. App. 2001) (lack of consideration of mother’s work history could not support imputation of income); DeBoer v. DeBoer, 669 N.E.2d 415 (Ind. Ct. App. 1996) (court would impute income to wife at minimum wage level, where wife had high school diploma, work experience, good health, and history of volunteering at children’s school; case contains excellent discussion of why it is necessary to impute income); Elliott v. Elliott, 634 N.E.2d 1345 (Ind. Ct. App. 1994) (potential earnings are determined by work history, occupational qualifications, and salary levels in community); Castaneda v. Castaneda, 615 N.E.2d 467 (Ind. Ct. App. 1993) (potential income is determined by party’s work history, occupational qualifications, prevailing job opportunities, and salary levels in community); Gonzales v. Gonzales, 474 N.W.2d 581 (Iowa 1991) (in assessing earning capacity, a court must look not to what a person might have done or could have done with his or her life, but what that person actually has done); Martin v. Martin, 716 So. 2d 46 (La. Ct. App. 1998) (necessary to look at job market); Glover v. Glover, 677 So. 2d 659 (La. Ct. App. 1996) (income to be imputed t wage of last steady work, rather than at wage of job offered but rejected); Osborn v. Osborn, 724 So.2d 1121 (Miss. Ct. App.1998) (earnings history in construction held, rather than current unemployment income, would be considered, where husband had regularly experienced brief periods of unemployment); Monnig v. Monnig, 53 S.W.2d 241 (Mo. Ct. App. 2001) (trial court’s imputation income to husband was not supported by evidence concerning husband’s work history and skills); Rivers v. Rivers, 21 S.W.3d 117 (Mo. Ct. App. 2000) (husband’s earning potential based on law degree, though husband was nonpracticing consultant); Bullard v. Briem, 969 S.W.2d 880 (Mo. Ct. App.1998) (minimum wage not enough, given past earnings, technical education, skills); Walker v. Walker, 936 S.W.2d 244 (Mo. Ct. App.1996) (evidence that husband could “weld a little” and that there were welding jobs available paying $7.00 per hour was not enough to impute where there was no evidence that husband possessed qualifications for job); Schroeder v. Schroeder, 924 S.W.2d 22 (Mo. Ct. App. 1996) (earning capacity is what he or she could earn by use of his or her best efforts to gain employment suitable to his or her capabilities); Woolsey v. Woolsey, 904 S.W.2d 95 (Mo. Ct. App. 1995) (in determining mother’s income capacity, court should consider that she had not worked outside the home for 13 years and she was no longer licensed in her held); Wagner v. Wagner, 898 S.W.2d 649 (Mo. Ct. App. 1995) (trial court may impute income to spouse according to what spouse could earn by use of best efforts suitable to capabilities); Kjos v. Brandenburger, 552N.W.2d 63 (N.D. 1996) (evidence insufficient to impute income, where there was no evidence of what work was available, amounts earned in community by persons of similar qualifications); Goddard v. Goddard, 256 A.D.2d 545, 682 N.Y.S.2d 423 (1998) (imputation of income upheld based on father’s earnings history); Ciampi v. Sguelia, 252 A.D.2d 757, 676 N.Y.S.2d 243 (1998) (impute income based on 32 years as mechanic, owned half interest in auto repair shop, worked for 18 years at auto dealership); Bistrian v. Bistrian, 176 Misc.2d 556, 672 N.Y.S.2d 976 (Sup. Ct. 1998) (court could impute bonuses and raises that husband should have received from family business but did not); Collins v. Collins, 241 A.D.2d 725, 659 N.Y.S.2d 955 (1997) (income could be attributed to father who had not worked in seven years, based on his experience and education); McCauley v. McCauley, 172 Misc. 2d 611, 659 N.Y.S.2d 722 (Sup. Ct. 1997) (impute income to ex-husband based on wife’s earnings, because they had same professional degrees and relative experience); Monson v. Monson, 583 N.W.2d 825 (N.D. App. 1998) (income imputed in light of ex-husband’s business acumen, farming and business experience, physical abilities); Badovick v. Badovick, 713 N.E.2d 1066, 128 Ohio App. 3d 18 (1998) (improper for trial court to impute income at salary level of husband’s prior job when it admitted it would take a “miracle” for husband to find a job at his prior salary level; expansive discussion on how to determine potential income); Malenfant v. Malenfant, 433 Pa. Super .139, 639 A.2d 1249 (1994) (earning capacity is the amount a party can realistically earn given his or her health, age, mental and physical condition, training, and work history); Tanner v. Tanner, 955 S.W.2d 337 (Tex. Ct. App. 1997) (although obligor had real net income of $196 per month, evidence showed he was skilled mechanic with earning capacity of $4,000 per month); Reese v. Reese, 984 P.2d 987 (Utah 1999) (not appropriate to impute at federal minimum wage where wife had an earning’s history of $8.00 to $11.00 per hour); In re Marriage of Peterson, 80 Wash. App. 148, 906 P.2d 1009 (1995) (though husband held law degree, he had never practiced law but was a bailbondsman; it was error to impute income as though he were a practicing attorney).

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