What happens when an alimony-paying spouse loses his or her job and subsequently obtains new employment with a lower salary, rendering him or her unable to afford making the same alimony payments? A recent decision by the New Jersey Superior Court opines on the standard for adjudicating applications for alimony reductions in light of amendments to New Jersey’s alimony statute.
In Mills v. Mills, ex-husband sought a reduction of his alimony obligation after losing his long-term employment and getting a new job in the same field, but with a significantly lower paycheck. The parties divorced in 2013 and executed a Marital Settlement Agreement (“MSA”), which required ex-husband, a sales manager in the flooring industry, to pay $330 in weekly, limited duration alimony and $250 in weekly child support to his ex-wife, a teacher. The MSA required ex-husband to make alimony payments for eight years, but did not contain a provision regarding what would happen to ex-husband’s support obligation in light of a substantial change of circumstances, such as loss of employment or reduction in income. The MSA was, however, expressly based upon a stipulated financial baseline of ex-husband earning gross income of approximately $108,000 per year, and the ex-wife earning approximately $59,000 per year.
In January 2015, ex-husband involuntarily lost his job when his company downsized. He was awarded $35,000 in severance, which he used to temporarily continue making the support payments. After looking for a new job in the same field, ex-husband took a similar position with another company in the flooring industry, but at a significantly lower salary of approximately $76,000 per year, with bonus opportunities. Once ex-husband had exhausted the severance payment, he sought a reduction of his alimony obligation based on a change in circumstances.
His ex-wife contested the application, essentially asserting that ex-husband had an income potential of at least $108,000, was underemployed and failed to sufficiently demonstrate that he could not continue to earn his prior income. In support of his decision to accept the lesser-paying position, ex-husband asserted that his commitment of time and effort to his previous employer was how he incrementally increased his prior income at his old job, a process that could not be easily duplicated by simply walking into a new position with a new company and immediately commanding the same salary. Given the lack of guidance in the MSA as to how such issues should be resolved, the court considered whether the 2014 amendments to New Jersey’s alimony statute, which address alimony reduction applications, should be applied even though the parties were divorced and executed the MSA before 2014.
The court noted that prior to the adoption of the 2014 amendments, alimony reduction applications were governed exclusively by case law, which sometimes led to inconsistent and highly fact-sensitive results. For example, if an applicant declined to accept a lower-paying job following loss of employment, the recipient spouse could rely on case law which says one cannot be content to wait for the right job to appear and remain unemployed while obligated to support one’s family. Alternatively, if an applicant accepted a lower-paying job following loss of employment, the recipient spouse could rely on case law which says it is not enough to show any job and that earning income can still be imputed in certain circumstances. Therefore, under the old piecemeal framework, a paying-spouse often faced a “catch-22” scenario when deciding whether to accept lesser-paying work in light of a desire to reduce his or her support obligation.
In 2014, the New Jersey Legislature amended the State’s alimony statute and added a new provision, which addresses situations when the paying-spouse loses his or her job and seeks a reduction of alimony as a result. The statute sets forth a list of factors for consideration on an application to modify an existing alimony obligation of such an alimony-paying spouse:
(1) The reasons for any loss of income;
(2) Under circumstances where there has been a loss of employment, the obligor's documented efforts to obtain replacement employment or to pursue an alternative occupation;
(3) Under circumstances where there has been a loss of employment, whether the obligor is making a good faith effort to find remunerative employment at any level and in any field;
(4) The income of the obligee; the obligee's circumstances; and the obligee's reasonable efforts to obtain employment in view of those circumstances and existing opportunities;
(5) The impact of the parties' health on their ability to obtain employment;
(6) Any severance compensation or award made in connection with any loss of employment;
(7) Any changes in the respective financial circumstances of the parties that
have occurred since the date of the order from which modification is sought;
(8) The reasons for any change in either party's financial circumstances since the date of the order from which modification is sought, including, but not limited to, assessment of the extent to which either party's financial circumstances at the time of the application are attributable to enhanced earnings or financial benefits received from any source since the date of the order;
(9) Whether a temporary remedy should be fashioned to provide adjustment of the support award from which modification is sought, and the terms of any such adjustment, pending continuing employment investigations by the unemployed spouse or partner; and
(10) Any other factor the court deems relevant to fairly and equitably decide the application.
The court noted that the new statutory language does not draw a clear distinction between situations when one obtains a new job in the same field as opposed to a new field. Moreover, the amended statutory language does not expressly provide a specific standard for statutory analysis in situations when the paying-spouse actually obtains new employment at significantly lower pay, and then seeks to reduce an existing support obligation over the recipient’s objection. Accordingly, the court grappled with how to reconcile pre-amendment case law and the new statutory framework.
Ultimately, the Mills court developed a two-step inquiry, which it found to be consistent with the pre-amendment case law and the express language of the statute: “(1) Was the supporting spouse’s choice in accepting a particular replacement employment opportunity objectively reasonable under the totality of the circumstances?; and (2) What, if any, resulting support adjustment should occur that is fair and reasonable to both parties, given their respective situations?”
Applying the two-step inquiry and the statutory factors to the facts in Mills, the court found ex-husband’s decision to accept the lower-paying position to be objectively reasonable. In so holding, the court noted that the starting salary enabled him to support himself and still honor the majority of his prior agreement to pay support. Moreover, the opportunity for potential performance bonuses made the decision objectively reasonable. Turning to the second step of the inquiry, the court addressed how to adjust the obligation in fairness to both parties. Asserting that the financial burden should be shared among the parties and not shouldered solely by the recipient spouse, the court adjusted the ex-husband’s weekly alimony and child support obligation to $250 and $194, respectively.
Next, the court addressed the retroactive applicability of the statutory amendments to an MSA which was executed prior to the adoption of the amendments. In holding that the statutory framework could apply to a pre-2014 divorce, the court highlighted several key considerations. First, these parties did not include a provision in the MSA regarding the standard of review of alimony based upon the ex-husband’s loss of employment and decrease in financial circumstances. Second, there had been no prior post-judgment adjudication, or even litigation, of the issue prior to the present application. In such a scenario, the court found it was appropriate to apply the statutory framework, especially considering that the loss of employment took place after 2014. The court noted the apparent legislative intent to prevent the amendments themselves from becoming an independent basis for a party to unilaterally attempt to un-do a contractual agreement, or to obtain a do-over on every alimony case previously decided before the amendments became law. Logically, the court asserted, the allowance of such an unreasonably expansive retroactive process could swamp and overrun the entire family court system with litigants looking for a “second bite at the apple.”
This trial court decision provides insight for a divorced party paying or receiving support who may experience a change in rights or obligations resulting from an unexpected loss of employment. As with many other judicial interpretations of the 2014 alimony statute amendments, we have a cautionary tale for those drafting and entering into MSAs. In order to protect from unanticipated changes in the law and ever-evolving standards of review, it is important to expressly provide what standards will govern the agreement, because a court can only enforce the terms of a contract which are expressly negotiated.
Katherine A. Nunziata is an associate in the Family Law Practice Group of Riker Danzig Scherer Hyland & Perretti LLP and a contributor to the Riker Danzig Family Law Blog. Katherine’s interest in family law stems from a desire to help others while navigating a difficult process, and she brings a high level of compassion and zeal to her practice. Katherine is a resident in the Morristown, New Jersey office and can be reached at 973-451-8445 or email@example.com.