Imputation of Income or Under-Employment?
In Lynch v. Lewis, 2020 ONCJ 2 by Justice Sherr provides a good example of when income may be imputed when that party claims non-affordability to pay child support.
Facts of the case:
Father was 37 years old. He lives with his father. He has no other children. The father graduated from the Social Service Work program at Seneca College in 2004. He has worked in the social work sector. When the existing order was made, he was working full-time for a community service provider. The father testified that he lost this job on August 1, 2018 when the service provider lost its government contract. The father said that he subsequently went on Employment Insurance.
The father stated that he has been working about 20 hours each week since September 2019 assisting persons who have Huntington’s disease. His pay stubs indicate that he is earning $22.16 per hour at this job. The father issued his motion to change on September 24, 2018.
On February 1, 2019, Justice Carolyn Jones made a temporary without prejudice order reducing child support to $423 each month from October 1, 2018 to May 31, 2019, with support to revert back to $696 each month on June 1, 2019. The father has only paid $500 for support since June 1, 2019. Based on the records of the Director of the Family Responsibility Office, the father owes the mother child support of over $4,900.
The father asks that support be set at $350 each month starting on August 1, 2018. He says that he cannot afford to pay the support amount in the existing order. He testified that he has looked for full-time employment and is hopeful that he will be able to work full-time in the near future.
The mother asks that the father’s motion to change be dismissed. She feels that the father is deliberately under-employed and will remain so until his child support obligation is reduced. She submitted that the father’s lifestyle has not changed and that he has unrevealed and unexplained sources of income.
Powers of court: child support
(2.1) In the case of an order for support of a child, if the court is satisfied that there has been a change in circumstances within the meaning of the child support guidelines or that evidence not available on the previous hearing has become available, the court may,
(a) discharge, vary or suspend a term of the order, prospectively or retroactively;
(b) relieve the respondent from the payment of part or all of the arrears or any interest due on them; and
(c) make any other order for the support of a child that the court could make on an application under section 33.
 Section 19 of the guidelines permits the court to impute income to a party if it finds that the party is earning or is capable of earning more income than they claim.
 Imputing income is one method by which the court gives effect to the joint and ongoing obligation of parents to support their children. In order to meet this obligation, the parties must earn what they are capable of earning. If they fail to do so, they will be found to be intentionally under-employed. See: Drygala v. Pauli,2002 CanLII 41868 (ON CA),  O.J. No. 3731(Ont. C.A.).
 The onus is on the party seeking to impute income to the other party to establish that the other party is intentionally unemployed or under-employed. The person requesting an imputation of income must establish an evidentiary basis upon which this finding can be made. See: Homsi v. Zaya, 2009 ONCA 322 (CanLII),  O.J. No. 1552. (Ont. C.A.).
 Once a party seeking the imputation of income presents the evidentiary basis suggesting a prima facie case, the onus shifts to the individual seeking to defend the income position they are taking. See: Lo v. Lo,2011 ONSC 7663; Charron v. Carriere, 2016 ONSC 4719.
 The court must have regard to the payor’s capacity to earn income in light of such factors as employment history, age, education, skills, health, available employment opportunities and the standard of living earned during the parties’ relationship. The court looks at the amount of income the party could earn if he or she worked to capacity. See: Lawson v. Lawson,2006 CanLII 26573 (Ont. C.A.).
 A person’s lifestyle can provide the basis for imputing income. See: Aitken v. Aitken,  O.J. No. 2780 (SCJ); Jonas v. Jonas,  O.J. No. 2117 (SCJ); Price v. Reid, 2013 ONCJ 373 (CanLII).
 The court will exercise its discretion and not reduce the child support ordered in the existing order for the period prior to September 1, 2019, despite the father’s loss of his full-time job, for the following reasons:
a) The existing order is based on a 2017 annual income for the father of $46,992. He actually earned $52,195 and underpaid support in 2017.
b) The father earned $37,182 for the first 7 months of 2018. This projected to an annual income of $55,773. The father was underpaying support for the first seven months of 2018.
c) The father did not notify the mother about his increases in income despite the requirement in the existing order to provide annual financial disclosure by June 1st.
d) Despite claiming that he was in financial trouble after he lost his job in August 2018, the father’s financial statements filed showed that he had annual expenses of over $33,000 for the year completed in November 2019, yet his net worth increased by over $15,000 from September 2018 until November 2019. This informs the court that he had other sources of revenue during this period.
e) The father’s bank accounts from January to August 2019 showed average monthly deposits of about $4,200, confirming again that he had additional sources of revenue.
f) The father maintained his lifestyle during this period. He has a vehicle he values at $40,000 and he spent over $1,300 each month on it while claiming that he could not afford to pay child support.
g) The father testified that his priority during this time was to reduce his credit card debt (it was reduced by over $3,000). He prioritized his debt payments at the expense of the children.
h) The father significantly delayed providing the financial disclosure ordered by the court. At trial, he was still unable to set out how much money he has received from each income source in 2019.
i) The father did not act in good faith by only paying $500 to the mother after June 1, 2019 despite having access to considerable funds.
 The father testified that he had lent his credit card to his aunt and that many of the funds deposited into his bank account were repayments of monies his aunt had charged on this card. He provided no proof of this (such as credit card statements or direct evidence from his aunt) despite multiple opportunities to provide complete financial disclosure. He did not claim that his aunt owed him money on any of his financial statements – this was raised for the first time during his cross-examination. The court does not accept the father’s explanation about these deposits. The court finds that the father had other revenue sources from August 1, 2018 until September 1, 2019.
 The court will exercise its discretion and reduce the father’s child support obligation starting on September 1, 2019 due to the change in circumstances arising out of the loss of his full-time job and his inability to obtain comparable full-time employment.
 Based on the father’s evidence, he has been earning annual income of about $23,046 from his present job ($22.16 per hour x 20 hours per week x 52 weeks) since September 2019.
 However, the analysis does not stop there. The court agrees with the mother’s submission that the father is deliberately underemployed.
 The father acknowledged that he has no medical limitations or educational reason for not being able to work full-time. He was asked if he had expanded his job search outside of the social service sector. He said he hadn’t – he wants to work in his field.
 The father’s desire to work in his field is understandable. However, after being unemployed for over a year, it was no longer reasonable, as of September 1, 2019, for him to restrict his job search to his chosen field. He has an obligation to support his children to the best of his ability.
 The father could and should have been working part-time in a minimum wage job, such as a retail job, after September 1, 2019 to supplement his income and properly support the children. The court will impute additional annual income of $13,104 to him. This is calculated by multiplying 18 hours each week at $14 per hour.
 This means that starting on September 1, 2019, the father’s annual income will be imputed at $36,140 for support purposes. The monthly guidelines table amount for two children at this income is $547.
The Court ordered that there shall be no change to the existing order prior to September 1, 2019.
b) The existing order is changed to provide that starting on September 1, 2019, the father shall pay the mother the guidelines table amount for two children, based on his imputed annual income of $36,140, in the amount of $547 each month.
What are the important take-aways from the case above? –
Analysis of financial statements – the 13 and 13.1 forms – lawyers emphasize how important it is to fill in these forms carefully and thoroughly. These are sworn documents that merit great scrutiny from the opposing counsel. The Judge analyzed these forms and found that the father’s expenses were far greater than his revenue – leading to more questions than answers.
Bank statements analysis – showing pattern or revenue and expenditure.
Father’s lifestyle analysis – this was a big giveaway for the father because father’s lifestyle analysis showed that his lifestyle was far greater than what was being claimed.
Delay in producing financial disclosure – timely financial disclosure is critical. Despite this requirement, clients often delay producing disclosure, thus jeopardizing their interests.
It is important to have a good lawyer to guide you in your path in analyzing and making decisions relating to under-employment claims or claiming imputation of income. This means analyzing all of the circumstances described above and advising clients accordingly.
At Shankar Law, we are happy to assist and guide you through whatever challenges you have in your spousal, and matrimonial life, while keeping your stresses and tensions to a minimum. We work primarily in three counties: Huron, Bruce, and Grey and span several cities (Southampton, Kincardine, Goderich, Wiarton, Hanover, Dundalk, Walkerton, Meaford, Markdale, Chatsworth), through our two locations in Port Elgin and in Owen Sound.