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The Cost of Divorce To Your Business

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by Diana L. Martinez Collaborative Lawyer and Mediator, Law and Mediation Office of Diana L. Martinez

Divorce takes an emotional, physical, and financial toll on spouses and their children. But the potential negative effects of divorce don’t stop with the family directly involved. They often spill out past the front door and affect many other people.

When a valued employee is going through the trauma of a divorce, the divorce can affect the entire workplace. The cost to employers can go well beyond absenteeism for a few days here and there to attend court hearings or meetings with the lawyers. Trying to accommodate the employer and the divorce process can prove challenging.

Courthouses are open only between 8:30 a.m. and 4:30 p.m. Most lawyers’ offices are only open between 9 a.m. and 5 p.m. While some lawyers can be more flexible, most judges and courts cannot. The higher the conflict in the divorce, the more court appearances and the more time spent with the lawyers and in court.

Additionally, less obvious costs include:

  • “Presenteeism”: The employee who is physically present at work, but unable to focus as a result of the divorce.
  • Employees wasting valuable work time talking with co-workers about their divorce.
  • An employee leaving work early due to anxiety attacks or illness related to stress.
  • Childcare difficulties when the employee can no longer depend on his/her spouse to cover such tasks.

A depressed or distracted employee can end up with impaired judgment which negatively impacts his or her overall job performance. It can lead to safety concerns, injuries, mistakes, and accidents.

In one example, a company’s manager was served with divorce papers two days before the company was to submit a binding bid on a three-year contract for the company’s products through a county bidding process. The employee did his best to balance work with the depression, anger, and fears he experienced due to limited time with his children and concerns about spousal support and child support. The manager submitted the binding bid with an error committed by the distracted employee in the bid. When the company’s bid was opened, it was the lowest bid by approximately 25 percent. The county accepted the bid and the company was forced to abide by it, losing hundreds of thousands of dollars for those three years.

Employers value their loyal and dedicated employees who produce high quality work year after year. But imagine the same kind of employee suddenly hemorrhaging money in legal fees, expert fees, and custody evaluations; or when the same employee is on medication for depression, or is receiving harassing phone calls or disruptions at work from an irate soon-to-be ex-spouse. Even the most understanding and patient employer is ill equipped to provide the safety or emotional support the employee really needs.

Unfortunately, in a worst-case scenario, this can cost the employer a truly valuable employee. It can cost the employee his or her job at the worst possible time, adding to his or her financial hardship and stress.

These same challenges often continue one, two or even five years after the divorce is completed. The higher the conflict during the divorce, the longer the recovery will take. The more time spouses spend in contested court battles during their divorce, the more likely they will continue to battle over modifications to orders after the final judgment is entered.

Many couples facing divorce have found an alternative to the high stress and high cost of a litigated divorce. Spouses who co-create their agreements through an out-of-court process such as mediation or Collaborative Divorce spend less time in court when compared to a litigate divorce, and experience far less stress. Often, they are able to work with a divorce coach, a trained mental health professional, who can help manage the anger, sadness, or frustration they experience.

Children also tend to recover faster when their parents are able to communicate well and act as a team in support of their children. This also adds up to fewer lost workdays because of stress, anxiety, child illness, or childcare challenges after the final divorce decree.

Human resource professionals are starting to recognize the advantages of Alternate Dispute Resolution for all civil matters faced by their employees, including divorce, and often recommend employees consider these methods for divorce and other legal issues.

As an employer, consider these options to help your valued employees navigate the difficult process of divorce:

  • Be sure your human resources personnel know about out-of-court divorce options. Are they versed in conflict resolution skills? Understanding the emotional and financial trauma is the first step in assisting a valuable employee through the divorce transition. Having the skills to acknowledge the hardship and refocus the employee so they are fully present during work hours requires training and education.
  • Mediation and Collaborative Practice groups offer general conflict resolution training. The skills taught in such programs are transferable to family conflicts, as well as interoffice conflicts, which can arise during the divorce process.
  • Many employers recognize the benefits of offering needed support for employees experiencing trauma through Employee Assistance Programs (EAP). EAPs often include referrals to mental health professionals and divorce lawyers. Does your EAP provider have knowledge about out-of-court divorce options? Can it provide a referral to a Collaborative Divorce practice group or family law mediators?
  • Collaborative Divorce, like mediation, is an out-of-court, solutions–focused process for completing a divorce. Because it is an out-of-court process, an employee can meet with their professionals outside of work hours including evenings and weekends.
  • The Collaborative Process is especially useful in high-conflict or more complex divorces typically taking two to three years to resolve through the court system. Most Collaborative Divorces are resolved within 12 months, and can cost far less than a comparable litigated courtroom case.
  • Divorce Options Workshops: These workshops are held in the evenings and weekends. A family law lawyer, divorce financial professional and a divorce coach present information about the divorce process, and answer general questions. Taking the mystery out of the divorce process itself reduces the anxiety and stress typically associated with an impending divorce. Some programs are offered at no cost while others charge a nominal fee.
  • Provide online resources such as:
    • International Association of Collaborative Professionals
    • Collaborative Practice California
    • Collaborative Divorce Solutions of Orange County
    • Southern California Mediation Association

We all experience conflict in various aspects of our lives. The conflict can either escalate to the point of losing an employee, spouse, or friend, or it can strengthen those same relationships. It can mean the difference between a productive employee and happy customers or a company with a high employee turnover and a reputation for rude staff. Companies that support their employees during personal challenges like divorce will reap the benefits in terms of their bottom-line and their reputation.

When 50/50 Isn’t Always Equal in a California Divorce

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by Diana L. Martinez Collaborative Lawyer and Mediator, Law and Mediation Office of Diana L. Martinez

California is one of nine “community property” states as it relates to divorce. This means that assets and debts acquired and incurred during your marriage will be divided equally upon divorce. Exceptions exist for specific items received during marriage that are deemed “separate property” under the law. This includes gifts and inheritance.

This is one of the most misunderstood concepts in divorce law. Spouses often believe their divorce will be easy if they just split all of their property in half, or “50/50.” While strong emotions present a barrier to resolving issues during a divorce, not far behind is the misunderstandings by couples about the concept of what is “fair” when it comes to dividing up assets and liabilities.

From extensive experience as a mediator, consultant, and Collaborative Divorce lawyer, I am a strong advocate for giving spouses a greater voice in the outcome of their divorce. I am also a strong proponent of ensuring divorcing spouses have as much information as possible to make the best decisions moving forward.

Although the courts are required to enforce the laws, spouses in a divorce, with few exceptions (typically related to minor children) are not limited by the law; they can create their own, unique, agreements, based on their goals and values. Laws controlling the division of assets and debts, the amount you receive or pay in support, and the amount of time granted with your children exist to guide you IF you and your spouse are not able to resolve these items together. If you can’t resolve your differences, a judge will make the decisions for you. He or she is required to enforce the law, regardless of your personal goals and values.

You and your spouse may have some understanding of the law. But in negotiating your agreement, you may be better served by accepting less than the law allows in return for a greater benefit elsewhere. The benefit could be a better co-parenting relationship, or the opportunity to reduce or eliminate spousal support. It may even be the creation of balance where the laws aren’t able to provide it.

Annette and John Peterson provide a case study worth discussing as an example. The Petersons were able to resolve all disputes in their divorce except one: Annette’s pension benefits of approximately $100,000. This roadblock stalled the Petersons’ divorce for six years, from February 2010 until the California Supreme Court rendered its decision in January 2016.

In retrospect, after nearly six years of legal fees, lost time from work, and stress, Annette and John might have preferred finding a compromise outside of the contested court process. State laws governing pensions and federal laws governing Social Security created the sense of imbalance that Mr. and Mrs. Peterson fought so hard to correct, as each, individually, deemed most “fair”.

In California, pension benefits are community property when earned during marriage. Pension benefits are a form of deferred compensation for services rendered. Non-financial contributions to pension benefits, or “service credits,” are also considered “a form of deferred compensation for services rendered” and, therefore, community property.

But Social Security benefits are separate property under federal law. Federal law preempts state law. Social Security is not transferable, nor can it be assigned by the wage earner. There are, however, derivative rights upon divorce if:

  • you and your spouse are entitled to receive Social Security;
  • your marriage lasted 10 years or longer;
  • the ex-spouse did not remarry;
  • the ex-spouse is age 62 or older; and
  • the benefit the ex-spouse is entitled to received based on his/her own work is less than the benefit he or she would receive based on his/her former spouse’s work.

If each requirement is met, an ex-spouse could elect to receive either all of his/her own Social Security, or one-half of his/her former spouse’s Social Security, but not both.

As an employee of the County of Los Angeles, Annette did not contribute to Social Security. Instead, the County contributed to a defined pension plan for Annette through the Los Angeles County Employees Retirement Association (LACERA). As an attorney in private practice, John contributed to Social Security through mandatory payroll deductions.

Annette’s LACERA benefits totaled between $200,000 and $216,000. Based on Social Security calculations, John’s Social Security benefits totaled $228,000. Annette attempted to argue that the laws governing LACERA pensions and the laws governing Social Security created unequal benefits. Annette and John would split her LACERA benefits in their divorce (approximately $100,000 to each). But John would keep all of his Social Security benefits.

The trial court ruled in John’s favor, creating an actual 150% windfall for John ($328,000 from 50% of Annette’s LACERA and 100% of his Social Security). Annette asked the California Supreme Court to correct this unfair situation, suggesting the court give John less than half of her LACERA pension benefits.

The Supreme Court let the trial court’s ruling stand, citing the requirement under California law that community assets be divided equally in a divorce. Since Social Security is not a “community asset,” the court correctly divided the community assets and could not deviate from that equal division, even when it creates an unequal division overall.

But the Supreme Court pointed out that it was completely within Annette and John’s power to create their own, more equal solution, even though the court under the law could not.

So let’s go back to Annette and John’s original circumstances. What was the value to John if he had agreed to give Annette all of her LACERA benefits, instead of insist on following the state law giving him a far greater share? What would have been the value to Annette to propose an alternate payout to John to resolve this issue?

As of 2010 in California, the average cost of a divorce where the parties were represented by lawyers was approximately $50,000 each. This amount is on the low end for a contested divorce in Orange County, and it does not include the legal fees for an appeal. Over the period of six years, based on 2010 estimates, Annette and John would have spent more than $100,000 each. Resolving your divorce early and collaboratively can save on legal fees, lost work time, and other intangible and emotional costs.

Managing emotional trauma and stress for yourself and your family offers priceless benefits, far beyond feeling a sense of entitlement or unfairness. Attorneys frequently fail to focus on these practical impacts because they are hired as legal advisors and guides, not as therapists. Attorneys are not equipped to help people through their fears; they are not trained mental health professionals.

Alternative (also known as “consensual”) dispute resolution models often incorporate legal and non-legal professionals to help educate and guide couples through unexpected emotional landmines, often resulting in less, or better managed, conflict, and better informed and well reasoned results.

For example, the Collaborative Divorce model incorporates guidance from a “divorce coach” to help manage the emotions of divorcing spouses, often saving the spouses tens, if not hundreds of thousands of dollars, as well as years of stress embroiled in a contested divorce, and the subsequent modifications to orders after trial. The outcomes tend to be far more satisfying to both spouses, and result in fewer or no additional hearings after judgment to modify those orders.

Making decisions based on accurate legal and financial information, as well as balancing the practical impact on your family and finances often results in far greater and lasting benefit for you and your family. Sometimes, there is too high a price for the short-term gain of getting everything you can under the law.