The COVID-19 coronavirus pandemic has plunged our world into a once in a lifetime crisis—we have not seen anything like this in the United States since the Spanish Flu pandemic of 1918. Many aspects of our society have ground to a virtual halt, and our economy has been decimated. Restaurants, hotels, airlines, manufacturers, small businesses and large businesses alike, are shuttered and at risk of going out of business. Fear of the loss of employment and income is pervasive. How will this pandemic impact one particular family law issue, the issue of the payment of alimony? The divorced individual paying alimony asks, “How can I possibly be expected to pay now?”
Understanding Alimony in NJ & COVID-19
Alimony is often the most contentious economic issue in a divorce case and that is understandable given the raw emotions and resentment involved between divorcing spouses and the economic pressure on each of them in facing the reality of having a subset of the prior family income. The COVID-19 crisis exacerbates that dynamic, with the divorcing parties facing a given set of obligations and expenses and a likely unknown fraction of future income due to the economic ramifications of the pandemic. To what extent will income be impacted and for how long? The politicians, pundits and medical experts seem to give contradicting predictions of the duration of the crisis. Will the COVID-19 crisis cause merely a temporary economic setback with income slightly down overall for the year, or on the other end of the spectrum, will it result in the destructions of businesses and permanent losses of income, or perhaps, will it be something in between these two extremes?
Legally, alimony is a function of income, and as income changes, it is logical that alimony should be changed. As a general proposition, the law provides that alimony may be modified upon a showing of a changed circumstances under Lepis v. Lepis and subsequent case law. Therefore, if there is a substantial change in income there is a legal basis for seeking a change in alimony. However, New Jersey case law has also developed the principle that the change in income must be substantial, and not merely temporary, and cases have arisen as to what period of time should have to pass before a court will recognize a situation which warrants modification. In a scenario such as the COVID-19 crisis, the decrease in income may be more obvious and more severe than in many other everyday type situations presented to courts in the past. However, an essential variable remains unknown: how long will this crisis and the economic impact last? How long must a payor wait before seeking relief from the court to modify alimony?
It appears there is a clear answer for those who are employees, that is, those identified as “non-self employed” workers. The New Jersey alimony statute, N.J.S.A. 2A:34-23, modified in 2014, clearly addresses the issue of the timing of a modification application where the payor is unemployed or “has not been able to return to or attain employment at prior income levels.” The statute in subsection (k) provides that no application may be filed until the unemployment or reduction in income has lasted for at least 90 days. Although this may delay the filing of an application, it might not delay the actual benefit to be ultimately awarded. The statute provides that the court may grant relief which is retroactive to the date of “the loss of employment or reduction of income.”
Furthermore, despite the 90 day time frame set forth in the statute, we are confronted by an unprecedented situation and there may be a genuine legal issue as to whether that time frame should still apply. An argument might be made that with businesses physically closed it would be extremely difficult for a person who has lost his or her job to obtain a new one prior to the end of the crisis. Accordingly, it may be that a family court, as a court of equity, might be called upon to relax the 90 day requirement in light of the circumstances and as a matter of justice, but this is an issue which will have to be addressed by the courts in the days ahead.
In assessing the application of the “non-self employed” individual, the court must consider the following statutory factors under N.J.S.A. 2A:34-23(k):
- The reasons for any loss of income;
- 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;
- 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;
- 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;
- The impact of the parties’ health on their ability to obtain employment;
- Any severance compensation or award made in connection with any loss of employment;
- Any changes in the respective financial circumstances of the parties that have occurred since the date of the order from which modification is sought;
- 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;
- 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
- Any other factor the court deems relevant to fairly and equitably decide the application.
But again, in an application filed based on the economic impact of the COVID-19 coronavirus, many of these factors might be more obvious than in situations the courts have typically considered. For example, where government actions have curtailed or closed business operations, there may be no reasonable dispute about the factual circumstances underlying the alimony modification application.
Should NJ Alimony Payments be Modified for Business Owners as a Result of COVID-19?
What about the business owner or other self-employed individuals? The New Jersey alimony statute, N.J.S.A. 2A:34-23, addresses those payors in a separate section (l). Interestingly, there is no requirement that the reduction in income must have lasted for at least 90 days before filing in cases involving self-employed individuals. However, the applicant will certainly still have to address the legal issue of whether the change is a substantial one that warrants relief or whether it is merely a temporary change which does not warrant modification. The statute requires a comparison of the benefits from the business to the business owner at the time the alimony obligation began and at the time of the application. Specifically the statute provides the application “must include an analysis that sets forth the economic and non-economic benefits the party receives from the business, and which compares these economic and non-economic benefits to those that were in existence at the time of the entry of the order.” These statutory provisions recognize that the business owner has more flexibility in how economic benefits are paid out, whether as salary or distributions, for example, or through indirect, but real economic benefits such as the payment of expenses or other perquisites. The court must consider all of these economic benefits in evaluating the alimony modification application.
The New Jersey alimony statute also specifies a range of relief that can be granted by the court. Aside from simply modifying the support obligation, N.J.S.A. 2A:34-23(m) provides that a court can order a temporary remedy. The court can temporarily suspend support or reduce support according to specific terms. The moving party should be aware that the statute also specifies that the court can direct that support be paid from assets pending further proceedings—something which might completely undermine the moving party who seeks relief on periodic payments and winds up having the court essentially take assets away and give them to the supported ex-spouse. The court also has to the power to direct a periodic review of the situation so what might have been envisioned as a straight-forward request might lead to an ongoing examination in multiple legal proceedings.
Finally, it should be noted that the statute provides that the court may enter any other order which the court finds appropriate to assure fairness and equity to both parties. This gives the court considerable flexibility. It also provides any party seeking relief with a legal basis for arguing for what should be the right result in any alimony modification application related to this unprecedented world crisis.
NJ Alimony Payors have Legitimate and Logical Questions about Alimony Payments in Light of COVID-19 Hardships
With the pandemic all around us, alimony payors are now raising the legitimate and logical question of how can they be expected to pay alimony at the same levels as previously. The 2014 amendments to the New Jersey alimony statute, N.J.S.A. 2A:34-23, discussed above, supplement the basic legal principles about modification of alimony and provide further specific statutory factors to be considered. New Jersey law does provide an answer to the question being asked by alimony payors and it does provide a mechanism in order to obtain relief. Family law attorneys will now be using these tools to try to address the difficult legal issues created by the impact of the COVID-19 coronavirus and obtain fair results for their clients.