In 2022, the Alberta Court of Appeal in Peters v Atchooay changed course and adopted the reasonableness test for imputing income to calculate child support.
The amount of child support a parent pays is based on their income. For many parents, figuring out their income means looking at their tax return. However, sometimes a parent’s tax return does not reflect their true income. In these cases, the law allows a judge to “impute” their income for to calculate child support. Imputing income might be necessary where a parent earns non-taxable income, lives in another country, or is self-employed.
Imputing income may also be necessary if a parent is underemployed or unemployed. The Federal Child Support Guidelines (and mirroring provincial guidelines) allow a judge to impute a parent’s income where that person is “intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the [parent]” (section 19(1)(a)).
The (old) deliberate evasion test
It is up to the court to interpret this section and impute an income it “considers appropriate”. For over 20 years, judges in Alberta interpreted this section differently than judges in other Canadian provinces. The 2001 Alberta Court of Appeal decision in Hunt v Smolis-Hunt limited imputing income under this section to circumstances where a parent deliberately sought to evade their child support obligations. A judge had to find proof a parent specifically intended to undermine or avoid their support obligations. This is the “deliberate evasion test”.
In all other provinces, judges considered whether a parent’s choice of employment that did not maximize their earning capacity was reasonable (“the reasonableness test”). The Supreme Court of Canada did not weigh in to clarify the issue. Using the deliberate evasion test in Alberta meant it was much more difficult to impute a parent’s income in cases of under- or unemployment. That changed in the 2022 Alberta Court of Appeal decision in Peters v Atchooay.
The (new) reasonableness test
Courts of appeal usually do not change the law made in past decisions. Canada’s common law legal system relies on following precedents set by earlier decisions. This provides certainty and stability to our justice system. However, a court can reconsider binding precedent in limited circumstances. In granting permission to do so, the court considers the age of the decision, whether the decision created settled expectations, how other appeal courts treated the issue, whether the court overlooked authority, and whether the decision had an obvious flaw. In the Peters case, the appellant’s lawyer sought and was granted permission from the Court of Appeal to reconsider the decision made in Smolis-Hunt.
The Court of Appeal noted much has changed in the family law landscape since it decided Smolis-Hunt in 2001. In 2001, the Court of Appeal prioritized a parent’s personal agency and freedom to choose their own career path. But in 2022, the Court of Appeal concluded that child support, like parenting, should be decided in the context of the overall best interests of the child and a child’s right to be supported by their parents. In Peters, the Court of Appeal concludes the “deliberate evasion test” does not align with the Guidelines and has proven to be impractical. Therefore, the interpretation of the law in Alberta must change, and judges should now apply the “reasonableness test” like the rest of Canada.
In Peters, the Court outlines three steps to analyze whether to impute a parent’s income for being under- or unemployed:
- Is the parent intentionally under-employed or unemployed?
- Do the listed exceptions to imputation apply? (As in, do the needs of a child or the reasonable education or health needs of the parent require under- or unemployment?)
- Should the court use its discretion to impute income? This involves deciding if the voluntary under- or unemployment is reasonable in the circumstances.
Considering the reasonableness of a parent’s employment does not mean they must maximize their earning potential at all costs. The Court notes:
For most parents with child support obligations, there is likely a range of reasonable career options and a parent is not always compelled to choose the one that provides the greatest income. Some leeway must be given to a parent to organize [their] working life in a way that promotes [their] own self-actualization. On the other hand, a parent must weigh in the balance [their] obligations to support a child and cannot unfairly disregard the needs of a child.
So long as a parent’s employment decisions are reasonable in all the circumstances, and in light of the fact that they have a child to financially support, the Court will likely not impute their income. A very high-income earner does not have to sacrifice their health, well-being, or parenting time simply to maintain a high level of support. For example, consider a parent who earned a high income by working out of town during the relationship but who then takes a lower income after the separation to prioritize shared parenting. They are making a reasonable decision.
The Peters decision finally brings Alberta in line with the rest of the country on this issue.
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DISCLAIMER The information in this article was correct at time of publishing. The law may have changed since then. The views expressed in this article are those of the author and do not necessarily reflect the views of LawNow or the Centre for Public Legal Education Alberta.