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My Spouse Was Laid Off And Given A Severance. How Will This Affect Our Pending Divorce?

My Spouse Was Laid Off and Given a Severance. How Will This Affect Our Pending Divorce?

ATKBy Adam T. Kronfeld of Duff & Kronfeld, P.C. posted in Family Law on Tuesday, September 12, 2017.

A party losing their employment, whether voluntarily or involuntarily, can have earth-shattering ramifications for a divorce at any stage, whether during the divorce process or after a divorce decree has already been entered. This is particularly true where spousal support or child support is being paid by one party to the other. Typically, a loss of employment income can be a trigger for a reduction of those support amounts, as the payor will claim they do not have sufficient income to pay support at the same level. Where the loss of employment is involuntary, such a request may well be granted. However, the payor receiving a severance from their employer could change that outcome in several ways.

The easiest situation to envision is one in which a payor of support is involuntarily laid off by their employer, not due to any fault of their own, and given a payment of several months’ salary to help them as they look for new employment. In that situation, if the party finds new employment – let’s say at about the same salary- before the severance runs out, then it wouldn’t appear that there has been any overall change in that party’s income. In other words, if the employee is terminated and paid three months’ salary, and starts a new job at the same salary on the first day of month number four, then nothing has really changed and there probably isn’t any basis for modifying a support obligation. However, if the severance were to run out and the party still did not have a comparable new job, or had a new job paying less than the prior job, then a request for a change in support may then be appropriate.

The situation becomes more complicated when the severance is meant to encompass a longer term- say, a full year’s salary-and the employee very quickly finds a new job, long before the severance expires. Now, for all intents and purposes, that party’s income- at least for that year -may have gone up substantially. In that circumstance, it could be appropriate for the spouse who is the recipient of spousal and/or child support to seek an increase in the support amounts. In particular, Virginia law supports at least child support being recalculated in such a circumstance, and leaving it to the payor to have it reduced again at the “expiration” of the severance payment period. Spousal support may be less of a given, because the Court must consider not just the payer’s increased ability to pay, but also the recipient’s actual need for spousal support, which may have already been set by the prior amount of payment.

A severance received prior to the divorce being final may also be considered as asset of the marriage that can be divided like any other property. This will require a more nuanced analysis, because the timing of the receipt of the severance will impact whether it is marital property, as will the basis upon which it was paid. If the payment was required as part of a formal employment contract, how it is treated may differ from another scenario in which it was only the generosity of the employer that resulted in the payment being made.

If you or your spouse are experiencing or anticipating an issue such as this in your separation or divorce, do not hesitate to contact an attorney at Duff Kronfeld & Marquardt P.C. at (703) 591-7475 to discuss your particular circumstances and what your rights or obligations may be.

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