Post-separation salary increases and spousal support
Once a spousal support order has been granted, the question may arise as to how to treat the payor’s income increase in the future. After all, parties with children will become accustomed to disclosing their incomes each year and adjusting child support appropriately unless otherwise agreed to—does the same apply to spousal support? According to cases like Thompson v Thompson, the court has discretion to determine whether a party will be entitled to the payor’s post-separation income increase for the purposes of spousal support (unless otherwise agreed to).. However, to get a better understanding of this question, a brief recap of spousal support awards will be necessary.
Spousal support law is broken down into two separate analyses. First, a recipient must prove they are entitled to spousal support on either a compensatory, non-compensatory or contractual basis. Compensatory support recognizes the contribution, either directly or indirectly, that the recipient has made to the family, over and above financial contributions. For instance, a typical compensatory argument is that one spouse stayed home to look after the children, allowing the other spouse to go to work and earn money. As such, the spouse who stayed home might have an argument that they should be entitled to ongoing support because of these sacrifices, to promote fairness upon the marriage or relationship breakdown. Non-compensatory support recognizes the bond that two people create when they are in a relationship of permanence, and how spouses may become financially dependent on the other. The law has given parties the opportunity to argue for support based on economic hardship alone. Contractual grounds pertain to any agreement the parties may have made.
The second analysis, after entitlement, has regard to the amount and length that spousal support should be awarded for. These figures are determined through formulae that take into consideration things like the amount of money the parties are making and the length of their relationship.
Not infrequently, a payor of spousal support will have progressed in their career after their relationship is over, with a post-separation increase of income. In what circumstances can the recipient spouse share in this increase of income? The leading case, Thompson v Thompson, 2013 ONSC 5500, was recently updated in Kinsella v Mills, 2020 ONSC 4785—the applicable principles are set out below:
1. A recipient spouse is not automatically entitled to increased spousal support based on a payor spouse's post-separation increase in income.
2. The question of whether there should be a sharing of post-separation income increases is not an "all or nothing" matter. Partial sharing of such increases, and/ or sharing for a specified period of time, are issues that the court should also consider when the issue arises.
3. The determination of whether there should be any sharing of income increases, and if so the extent of any such sharing, must take place within the framework of the general spousal support objectives and factors set out in the relevant legislation. Accordingly, in a proceeding governed by the Divorce Act, the factors and objectives outlined in section 15.2(4) and (6) must inform the overall analysis.
This paragraph is stating that the type of spousal support (i.e., compensatory or non-compensatory), and the original reason for spousal support, are going to be relevant in this analysis. Further, reference was also made to section 15.2(4), which outlines factors such as “the condition, means, needs and other circumstances of the spouse, including the length of time the spouse cohabited; the functions performed by each spouse during cohabitation; and any order, agreement or arrangement relating to support of either spouse.”
4. The basis of a spouse's entitlement to spousal support is an important consideration. In both compensatory and non-compensatory cases, the court's assessment of the needs of the recipient and ability of the payor spouse to pay are significant factors that should inform the court's analysis regarding sharing of post-separation income increases. However, in cases involving non-compensatory claims, the focus tends to be on maintaining a reasonable standard of living as measured by the standard enjoyed during the relationship, and this is a factor which may impact the decision as to whether a recipient should benefit from the payor's post-separation income increases. Nonetheless, the circumstances of each case must be carefully considered to ensure a just outcome, having regard for all of the objectives and factors outlined in the relevant legislation. The needs of the recipient spouse are always a very important part of the spousal support analysis and may support a sharing of post-separate income increases in in purely needs-based claims in appropriate circumstances. For instance, a long-term relationship involving financial dependence by the recipient spouse coupled with evidence of significant ongoing need may support sharing of post-separation income increases. Even in shorter or mid-length relationships, a strong non-compensatory claim based on factors such as illness, disability or other considerations may support some sharing of income increases to ease the transition to a new post-separation reality.
As we will see next, although the court has stated that both types of spousal support may garner access to post-separation income increases, compensatory support is the ideal candidate for this sort of case. After all, post-separation income increases may be directly attributable to the sacrifices made by the recipient spouse during the marriage.
5. The existence of a compensatory element to a support claim is an important factor in determining entitlement to share in post-separation increases in income. In addressing this factor, the court must keep in mind the various different indicia of compensatory entitlement and not simply the assumption of child care and home management responsibilities. In these cases, the general strength of the compensatory claim is an important factor. The analysis should therefore include consideration of the length of the relationship, the extent of the recipient's contributions and sacrifices both during the relationship and post-separation and the duration of time during which those efforts and sacrifices were made.
6. Another important consideration in compensatory situations is whether the recipient's efforts and contributions during and after the relationship contributed to the payor's financial advancement during the relationship and post-separation. As the British Columbia Court of Appeal held in Helle, at para. 39, the court should consider the extent to which the payor ended up in favourable circumstances as a result of the joint enterprise of the relationship. Evidence that the recipient's sacrifices and contributions during the relationship supported the payor's financial progression post-separation will typically support a sharing of post-separation income and a higher amount of such sharing. In assessing whether and to what extent the recipient's efforts contributed to the payor's ability to advance financially, the court must maintain a broad perspective of the various means by which a spouse's contributions and sacrifices can support the other spouse's success both in the short and long-term, including for example assuming primary responsibility for home-management matters, taking on primary child care responsibilities during and/or after the relationship ended, assisting in the establishment and operation of the payor's business or subordinating their career to that of the payor so that the payor could focus on the development of their skills and career.
7. The fact that the recipient spouse has continued to be a primary caregiver for the children post-separation is a factor that supports a sharing of post-separation income increases, since this often allows the payor to continue to focus on their career advancement. On the other hand, the fact that the payor has primary care or shared care of children post-separation may also be relevant to whether sharing of such increases is appropriate, and the amount of any such sharing.
8. The sharing of post-separation income increases is not necessarily dependent on the recipient spouse having sacrificed their own career advancement during the relationship for the benefit of the payor spouse's progression in their career. However, evidence that they did so is a further factor that may support a sharing of the increases.
9. In compensatory cases, evidence that the knowledge, skills, expertise, credentials and/or connections that enabled the payor to increase their income following the separation were acquired and developed during the relationship is a factor that will favour sharing of post-separation income increases.
10. The courts often consider the length of time that has passed from the separation until the increase in income occurred. The closer the temporal link, the more likely it is that the court will find that the recipient's efforts supported the other party's post-separation financial success.
The courts recognize there is great value in the resolution of court proceedings and litigation. Family cases tend to drag on, preventing parties from disconnecting from their ex-spouse's life. If time was not a factor in this analysis, the parties could never get legal and financial closure from the other. As such, a recipient of spousal support has a stronger argument shortly after separation.
11. Another important consideration is whether there were any changes in the payor's career post-separation that explain the increase in income, such as a new job, position or business reorganization. However, in these circumstances, the court must still consider whether the change in position was attributable to the knowledge, skills and experience that the payor had acquired during the relationship with the support of the recipient's efforts.
12. The courts also consider whether the increase in income is primarily attributable to the payor's decision following the separation to increase their work effort through means such as working more overtime, accepting work that is more lucrative but involves significant personal sacrifices or taking on extra jobs. These types of circumstances may support no sharing, or only partial sharing, of income increases following the termination of the relationship.
13. Evidence that the increased income was attributable to specific, unusual events following the separation, such as unexpected changes in market conditions, is a factor that may weaken a claim to share in the increase.
14. Evidence that the recipient spouse has not taken reasonable steps towards achieving self-sufficiency is another factor that courts have considered in determining whether there should be a sharing of post-separation income increases, and if so, the extent of any such sharing. In such situations, the shortcomings in the recipient's self-sufficiency efforts will also be relevant to determining whether income should be imputed to them, but it is not inappropriate to consider the issue from both lines of analysis.
This factor recognizes that a recipient spouse is still responsible for earning their own money, to their level of ability and potential. Otherwise, they will be hard pressed relying on the argument that they are facing economic hardship unless there are circumstances which justify it.
15. Evidence that the payor has also made contributions to the recipient's career advancement post-separation will also be relevant.
Obvious takeaways? This analysis pays particular attention to the circumstances surrounding compensatory spousal support. Generally, recipients of compensatory spousal support have a better argument for the post-separation income increase because there is likely some degree of connection between that income increase and the recipient’s contribution. However, as stated, this analysis is discretionary and will depend on the unique factors of each case. As such, recipients who were granted non-compensatory support, based on grounds of hardship, may still have a claim to the payor’s increase in income depending on the circumstances. An important starting point is to undertake a regular spousal support analysis having regard to the objectives of support awards; this will likely inform whether the recipient should share in the income increase.