Divorce Day is said to be the first Monday of the new year, when family lawyers' phone lines ring off the hook after couples had spent a fraught Christmas together. It has been a stock tabloid front page every January. Those of us working in family law know it is a bit more subtle and sophisticated than that, but it is true that there is something about the new year that can give people the impetus to do something about a marriage which perhaps has been unhappy for a while.
Whilst capital assets (properties, investments) are often central to a financial settlement between a couple, employment income is also key. But separating couples should bear in mind the potential chicken-and-egg link between marital breakdown and loss of employment. A strained marriage can impact on an employee's performance at work, and problems in the workplace are often taken home and can put pressure on a relationship.
Loss of employment leading to marital breakdown
We see time and time again a divorce arising out of one party experiencing a torrid time at work, potentially resulting in the end of employment. Our home lives and work lives are (rightly or wrongly) increasingly intertwined and many of us draw much of our identity from our work. When things are not right at work, this can lead to things not being right at home.
Not addressing work-related issues when trying to resolve relationship issues may therefore not result in a complete solution. The loss, or potential loss of employment can then have a significant effect on the financial arrangements relating to the divorce as discussed below.
Marital breakdown leading to loss of employment
Experiencing the loss of a relationship, navigating even the most amicable of divorces and adjusting to new living arrangements can be distracting and disruptive. It is naive to think that this will not often have an effect on work performance. If employees in this situation do not tread carefully, they can find themselves in a difficult situation at work, either having their performance managed or being forced out of work altogether.
There is no specific protection in employment law for those going through marital breakdown. Whilst the law does protect discrimination on the grounds that an employee is married, it does not protect against discrimination on the grounds that someone is single or getting divorced. Only in very particular circumstances (e.g. where employment is connected to a religious organisation or where the couple work for the same employer) could marital breakdown potentially give rise to a discrimination claim.
The situation should therefore be managed proactively by the employee. Explaining the difficulties may help buy time. Other strategies may be to take a short sabbatical of a few months to fully focus on family matters. Taking parental leave is also an option if children are involved, and there is protection for employees against detriments on the grounds that they have taken parental leave although this will not protect against action taken for other reasons, such as performance issues.
Employment issues and financial arrangements
During a divorce, it is not uncommon for the higher earning spouse to claim their job is at risk, or that they won't be paid a bonus in the future (despite having had one for most of the marriage). It is a well-known tactic – but there can be some truth in it.
Sorting out the finances during a divorce – particularly if there is conflict – is a time consuming, stressful, emotional and often drawn out process. Sometimes there will be issues about the children, too. It is not inconceivable, then, for someone's performance at work to dip during that time. The other spouse may want to wait to see if that unlikely bonus is awarded or point to the previously successful years and say that even if there is a dip in performance now, once the divorce is over, they can throw themselves back into work and reap the rewards.
Some employees may have share incentives as part of their remuneration package which usually pay out over some years. It is important to look at the terms of those carefully and what the specific criteria are – does the employee have to do anything beyond continue to turn up for work and not be fired?
Both parties have a duty to maximise their earning capacity, and evidence about that might be admitted in contested proceedings. There might need to be medical evidence – for example, if one spouse claims there are mental health reasons why they cannot go back to work in the same industry or at the same level, and the other refutes that and is relying on that income to secure a higher spousal maintenance award.
Dealing with the documents
When a divorce is combined with a dismissal, it is important to ensure that any settlement agreement has appropriate confidentiality provisions that allow the employee to share the information contained in the document with the ex, or soon to be ex, partner. Both spouses have a duty of full and frank disclosure in financial remedy proceedings, and the family courts will require this information. Steps taken to defer bonus or other payments would need to be disclosed – and if they weren't, that non-disclosure could be a reason to set aside and potentially open up the settlement with costs consequences for the non-disclosing spouse.
It is possible that an employee may be offered a severance package in the midst of divorce proceedings. This can cause an issue if it appears that the employee is voluntarily giving up their role. Often an employee may well be best advised to take an agreed package rather than continuing with any performance, redundancy or disciplinary process as this can afford the employee the best chance of the biggest financial package and the best chance to agree a narrative around departure that can assist in finding alternative work. Sometimes, whilst an employee appears to be making a 'choice' to leave, the alternative is so unviable that, in reality, there is little choice. Distinguishing this situation from a situation where an employee and employer are colluding to manipulate payments can be impossible. Proving the latter requires hard evidence, which can be difficult and disproportionately expensive to obtain, although it may be possible to seek disclosure of documents relating to the negotiations of the settlement agreement or proposed settlement agreement.
If, after a divorce, a party paying spousal maintenance loses their job and/or has a significant drop in income, they can apply to the court to reduce the level of maintenance. But that in itself can be an expensive exercise – the process is now quicker than it used to be, but still involves financial disclosure from both parties (including bank statements) and court hearings, unless the former couple can reach agreement outside of court or agree to arbitrate it.
Anticipating potential issues with the interaction between work lives and marital breakdown can help parties manage issues at work to reduce the chance of loss of income or job. Parties should also be alive to the possibility that work situations may change (for better or worse) in the aftermath of a divorce and that agreements may need to be adjusted later to address this.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.