Court Cases & Orders Saving the Family Business

Parents’ Joint Decision for Wife to Start Business Can Still Result in Her “Intentional Underemployment”

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Written by Russell Alexander / (905) 655-6335

Parents’ Joint Decision for Wife to Start Business Can Still Result in Her “Intentional Underemployment”

At first blush, the facts in Lavie v. Lavie appear unremarkable, but on closer look, they gave the Ontario Court of Appeal the opportunity to clarify a narrow issue about how the wife’s business venture – that both parents agreed to – could still result in her being “intentionally underemployed” for child support purposes.

The parents separated after about 10 years of being together.  The mother had worked as a teacher, but when her second child was born they agreed that she would leave the profession to be more available to their children.  They mutually decided she would start a business venture, namely a child play center called “Balls of Fun”, to allow her more flexibility around child-care.

She started the business a few years prior to separation and earned about $15,000 in the last year they were together. Meanwhile, the father had been working as a TV sports show editor earning $78,000 per year, until he was terminated and given a severance package in 2012.

When the parties went to court for equalization of their Net Family Properties, the trial court imputed about $70,000 in income to the father, but declined to impute any income to the mother at all.  The judge reasoned that the decision for the mother to quit teaching and open Balls of Fun had been made jointly, so she could not be “intentionally underemployed.”  The judge calculated equalization and child support accordingly.

The father appealed, claiming it was wrong for the trial judge to have imputed income to him, but not to the mother, in these circumstances.  He claimed that – simply put – each parent must earn what they are capable of earning, to meet their legal obligation to support their children.

The Appeal Court agreed.

Admittedly, the father had certainly consented to the Balls of Fun venture, since it was worth the short-term sacrifice in favour of building a business that was good for the future of the family.  Ultimately, the vision was for them to both work in the business at some future point.

Still, the trial judge had taken the incorrect legal approach to the underemployment issue: The mutual decision of these parents to open Balls of Fun during the marriage was irrelevant at this later, post-separation stage.  As the Court said:

[I]f a parent is earning less than she or he could be, he or she is intentionally underemployed. From the time she chose to start [Balls of Fun] and to earn $15,000 per year rather than the over $70,000 per year, [the mother] would have earned returning to teaching, she was intentionally underemployed. There was also no basis on the record to find that [the mother] could not resume her teaching career at the time of separation or at the time of trial. In fact, the trial judge found that her teaching career had not been compromised by her marriage or assumption of household responsibilities.

The Court clarified that the Federal Child Support Guidelines authorize a court to impute income to “intentionally underemployed” parents, except where that underemployment is necessary to serve the child’s own needs.  Here, the mother started Balls of Fun to “improve their family life”; she did not do out of any “requirement” to meet the child’s needs, as that term is used in the Guidelines.

In the end, the trial judge should have imputed income to neither of the parties or else to both of them.  Imputing income only to the father was incorrect.  In this post-separation stage, they were each running separate households and sharing parenting responsibilities equally, so it was appropriate to impute an income of $70,000 to each of them. Doing the math, this, in turn, would result in neither of them owing support to the other.

The lower court judgment was varied accordingly.

For the full text of the decision, see:

Lavie v. Lavie

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About the author

Russell Alexander

Russell Alexander is the Founder & Senior Partner of Russell Alexander Collaborative Family Lawyers.