Guest blogging today is Jim Hart, an accomplished Family Law attorney in Cary, North Carolina. Jim addresses three frequent scenarios that arise at the intersection of Domestic Law and NC Workers’ Compensation Law:
1) When separation occurs after the injured worker is already receiving NC Workers’ Comp Disability Benefits, what is the effect of these benefits on spousal support, child support, and alimony?
2) What is the relationship between spousal separation agreements and workers’ compensation clincher settlements in North Carolina?
3) What is the effect of a workplace injury in NC on an existing agreement or court-order providing for spousal support, alimony, or child support?
SCENARIO #1. In this scenario the workplace injury occurs prior to the injured NC worker becoming separated from their spouse. The injury and associated loss of income may even be the reason for the separation. Here is the basic information you need to know about post-separation support, alimony and child support in North Carolina.
POSTSEPARATION SUPPORT. Except for in cases of Divorce from Bed and Board, a spouse may not file for post-separation support (PSS) until they are actually physically separated from their spouse. In deciding whether an award of PSS is appropriate, a judge must base the award on the financial needs of the parties, the income and income earning ability of each party, their separate and marital debt obligations, their expenses, and their legal obligations to support any other persons.
PSS is temporary in nature. An order for PSS can last anywhere from 12-18 months, or until a final alimony order is entered. The length of time that PSS needs to be paid is completely at the discretion of the trial judge.
In situations where an injured worker separates from his or her spouse, the biggest consideration is going to be the relative earning abilities of each spouse. Workers’ compensation benefits in North Carolina would certainly qualify as “other recurring earnings” under N.C.G.S. § 50-16.2A.
ALIMONY. Alimony is a more permanent type of spousal support. When determining whether alimony is appropriate in a given situation, a Judge must consider 16 different alimony factors in North Carolina. Among the most relevant factors for an injured worker are:
“[t]he relative earnings and earning capacities of the spouses;”
“[t]he ages and the physical, mental, and emotional conditions of the spouses;”
“[t]he amount and sources of earned and unearned income of both spouses, including, but not limited to, earnings, dividends, and benefits such as medical, retirement, insurance, social security, or others;”
“[t]he relative education of the spouses and the time necessary to acquire sufficient education or training to enable the spouse seeking alimony to find employment to meet his or her reasonable economic needs;”
“[t]he relative needs of the spouses;”
“[a]ny other factor relating to the economic circumstances of the parties that the court finds to be just and proper.”
COMPARING ALIMONY AND PSS. The main difference between PSS and alimony is the permanence of the support award. PSS is more of a “band-aid” to assist a spouse that has recently separated from his/her spouse. The extent of the worker’s injury and prognosis for future earnings would have a stronger impact on the amount and duration of an alimony award than on PSS. Since alimony is more permanent in nature, the court will be looking to get a firm understanding of the “whole picture” to determine the extent to which one party should be responsible for paying support to another spouse.
CHILD SUPPORT. Indemnity payments received under the NC Workers’ Compensation Act are subject to child support obligations. North Carolina, like many other states, has established child support guidelines pursuant to N.C. Gen. Stat. § 50-13.4 to establish presumptive levels of support.
Workers’ compensation clincher settlements in NC involve a lump sum award for future compensation, and should be allocated between wage replacement and medical components to determine the effect on child support obligations. Also, keep in mind in this situation that injured workers receive only 2/3’s of their pre-injury wage.
For more information about child support and NC workers’ compensation go here.
SCENARIO #2. This scenario involves issues of equitable distribution for a worker that was injured on the job in NC pre-separation and is now considering entering into a clincher agreement. The question is whether any or all of the payment from the NC workers’ comp clincher agreement is subject to equitable distribution.
EQUITABLE DISTRIBUTION IN NORTH CAROLINA. The threshold question is whether the property in question (i.e. the indemnity payments or clincher payment) constitutes “marital” or “separate” property under North Carolina law. Marital property is: “[A]ll real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of the separation of the parties, and presently owned, except property determined to be separate property or divisible property …” Separate property is: “all real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage . . .”
ANALYSIS OF EQUITABLE DISTRIBUTION AND WORKERS’ COMPENSATION IN NORTH CAROLINA. The seminal case on the issue of equitably distributing workers’ compensation benefits in North Carolina in a divorce proceeding is Freeman v. Freeman, 107 N.C. App. 644, 421 S.E.2d 623 (N.C. App., 1992). The Freeman case lays out the procedure for conducting a proper equitable distribution analysis of workers’ compensation benefits in North Carolina:
The party claiming property to be marital has the burden of proving by a preponderance of the evidence that the property was acquired by either spouse or both spouses during the marriage and before separation and that the property is presently owned…. If this burden is met, then the party claiming the property to be separate must show that the property meets the definition of separate property…. If both parties meet their respective burdens, then the property is classified as separate property…. Property acquired after separation may nevertheless be marital if the party claiming it to be marital proves by a preponderance of the evidence that the source of funds used to acquire the property is marital.
The Freeman case adopts the “analytic approach” to address whether workers’ compensation payments in NC are marital or separate property. The court held:
T[he analytic] approach classifies a workers’ compensation award as either marital or separate property depending on what the award was intended to replace. Because workers’ compensation benefits are generally treated as wage replacement… the majority of courts following the analytic approach have determined that the portion of the award which represents compensation for lost wages, loss of earning capacity, and medical expenses sustained during the marriage is marital property, and the portion representing payment for lost wages, loss of earning capacity, and medical expenses occurring after separation is the separate property of the injured spouse.
The amount of money from a workers’ compensation settlement in NC that is allocated to lost wages, loss of earning capacity, and medical expenses both prior to and after the date of separation will need to be properly accounted for. As a practical matter, the injured worker’s family law and NC workers’ compensation lawyer will need to work in conjunction with one another to draft appropriate settlement language in the client’s separation and property settlement agreements.
SCENARIO #3. In the final scenario, the worker is injured on the job while an order or agreement is in force ordering them to pay or receive PSS, alimony, and/or child support. Their post-separation/divorce work-related injury is most likely going to effect the payments under this agreement or court order.
INITIAL RECOMMENDATIONS. There are two threshold questions that must be answered:
- What type of payment is at issue?
- Is the worker paying or receiving these payments pursuant to a court order or a separation agreement?
CHILD SUPPORT ONLY PAYMENTS. If the payment is only child support, whether the payment is pursuant to a court order or separation agreement is irrelevant – child support may always be addressed by the courts in North Carolina.
WHEN PSS OR ALIMONY IS AT STAKE. If PSS or alimony is at issue, then the type of instrument (court order or contract) that provides for such a payment is very important. If the separation agreement has not become part of a court order it can be modified only by consent of both parties, not by the court. This is not to say that separation agreements cannot be modified, but the agreement itself must allow for modification of the payment in question.
STANDARDS FOR MODIFICATION OF FAMILY LAW ORDERS
Child Support. To modify a child support order in North Carolina, the trial court must make a finding that there was a “substantial change in circumstances” which warranted a change in the payment. The North Carolina Child Support Guidelines provide a “presumptive substantial change” in circumstances” when the existing order is at least 3 years old and there is a 15% deviation from the amount awarded under the existing order and the amount that would be awarded under the current guidelines.
PSS and Alimony. Both PSS and alimony payments may be modified based on a showing of “changed circumstances.” These changed circumstances must be “substantial”. “This substantial change of circumstances must demonstrate that the present amount of the award is either inadequate for the dependent spouse or unduly burdensome for the supporting spouse.”
How to institute a modification proceeding. A modification proceeding is a continuation of the original proceeding, thus the proper way to raise the issue of modification is by filing a “motion in the cause” in the action in which the original order for PSS or alimony was entered. The burden of proving the right to modify rests on the party seeking the modification, who must carry this burden by a preponderance of the evidence.
