A familiar but unfortunate situation that arises in divorce and custody cases is what is known as “willful underemployment.” Sadly, in the bitterness and anger that often goes hand-in-hand with family law, some individuals would rather reduce – or eliminate – their income than pay support for their child or spouse.
First, let’s discuss the forms of support that are sometimes awarded pre-trial or pre-evidentiary hearing in divorce and custody cases. First and foremost, there is child support. NRS 125B.020 states that both parents of a child “have a duty to provide the child necessary maintenance, health care, education and support.” Subsection (4) of this statute makes it clear that this obligation does not only extend to children born to married couples, but parents that are not married as well.
The next statute – NRS 125B.030 states that the “physical custodian” of a child may recover a “reasonable portion of the cost of care, support, education and maintenance” from the other parent. The parent who will pay support and the parent who will receive it may differ depending upon the type of custody the parents have. If a parent has sole physical custody (visitation to the other parent is at the discretion of the custodial parent) or primary physical custody of a child (one parent has the child more than 60% of the time), that parent is considered the “custodial” parent and has the right to receive support from the noncustodial parent.
If two parents have joint physical custody of the child, the court considers both parents’ incomes in determining child support. The amount of child support is statutory, and based upon a percentage of gross monthly income. The amounts are outlined in NRS 125B.070, and are as follows: 18% for one child, 25% for two children, 29% for three children, 31% for four children, and an additional 2% for each additional child. The court can deviate from these percentages based on certain narrow considerations.
If, for example, a parent has one child and cares for that child 70% of the time, he or she has primary physical custody and is entitled to child support from the other parent at 18% of his or her gross monthly (meaning pre-tax) income. If that same parent, however, shares joint physical custody with the other parent and they both care for the child 50% of the time, the court would use the formula outlined in Wright v. Osburn. Under that formula, the child support award would be 18% of the higher-earning parent’s gross monthly income minus 18% of the lower-earning parent’s gross monthly income.
In addition to child support, the court also has the authority to make an award of alimony in divorce cases, which usually takes the form of either monthly or a lump-sum payment from one spouse to the other after the divorce is finalized. Unlike child support, there is no statutory formula the court uses to determine an alimony award, and the amount and duration of alimony is largely up to the judge. There are factors the court considers, which are outlined in NRS 125.150, and include the income and earning capacity of each spouse.
In looking at the law regarding child support and alimony, it is obvious how a person voluntarily reducing their income could have a drastic effect. Willful underemployment can take several forms. A person may voluntarily reduce his or her work hours to reduce their income, for instance. A person who regularly works overtime may stop working overtime. Some individuals quit their jobs entirely to avoid support. There are even instances where an individual “plans” for a divorce by stashing money away to support him or herself so that they can quit their job and have no income for the purposes of child support or alimony.
Individuals who take these actions to reduce their income often believe that they can “cheat” the system and avoid paying support or lower their support obligations until the divorce or custody matter is finalized. The law and the courts, however, are prepared for these situations.
For child support, NRS 125B.080(8) states: “If a parent who has an obligation for support is willfully underemployed or unemployed to avoid an obligation for support of a child, that obligation must be based upon the parent’s true potential earning capacity.” In the past, it was somewhat unclear how a parent could show that the other parent was willfully underemployed “to avoid an obligation for support of a child.” The landmark case on the subject, Minnear v. Minnear, was decided in 1991, and clarified that when there is evidence of willful underemployment, a rebuttable presumption arises that the willful underemployment is for the purpose of avoiding paying child support. The presumption can only be overcome if the underemployed parent can show a reason other for avoiding support why he or she is underemployed.
When the court is satisfied that a parent is willfully underemployed for the purposes of avoiding child support, instead of basing child support off that parent’s actual income, it will determine the parent’s “true potential earning capacity” and base child support from that instead. For example, if a parent was earning $3,000.00 per month until he or she was served with a custody complaint, after which that parent reduced his or her hours to reduce that income to $2,000.00 per month, and the court finds that parent is willfully underemployed, instead of child support being $360.00 per month (18% of $2,000.00), the court could order child support of $540.00 per month (18% of $3,000.00).
When willful underemployment is argued in alimony cases, unlike child support, the court is not required to make a finding as to why an individual is willfully underemployed. The court can use a spouse’s income from prior to the willful underemployment, or use evidence of that spouse’s expenditures (especially when those expenditures are more than the spouse claims to make) to set an alimony award.
It is therefore much more difficult for a spouse/parent to try to “cheat” the system by taking actions to reduce his or her income to avoid paying support. An experienced attorney can bring a clear and concise argument in front of the court to request the court use an underemployed spouse/parent’s earning capacity, as opposed to his or her income, to set a child support and alimony award.