What Happens to Your Transition Payment During Divorce?
Given the current state of the global economy and the ongoing impact of the coronavirus health crisis, unemployment is an unfortunate reality that people all over the world have been forced to deal with. Sadly, many of those people already experiencing unexpected job loss have also been confronted with another exceptionally difficult situation: divorce. Being laid off and facing the uncertainty and insecurity that comes with involuntary unemployment is never easy, but when paired with a divorce, an already tricky situation can become even more complicated and confusing. For one, in situations where dismissal and divorce coincide, if the terminated spouse receives a transition payment from his or her previous employer, the other spouse will want to know whether the law considers the transitional payment a community asset and, if so, how the payment will be divided in divorce. If you have received a transition payment upon being dismissed from your job and you are considering getting a divorce, you will want to know how to protect your assets. Contact our experienced divorce attorneys at Divorce Lawyers Los Angeles today for qualified legal help.
Transition Pay in the Netherlands
A transition payment, known as transitievergoeding in Dutch ( https://www.transitionpay.nl ), is a type of severance pay employers in the Netherlands are required to pay to employees whose employment contracts are terminated or not renewed on their employer’s initiative. The purpose of the payment is to help employees who suddenly find themselves involuntarily unemployed make up for lost income during the period of transition between jobs, and it has been a requirement in the Netherlands since 2015, when the Dutch Work and Security Act (Wet Werk en Zekerheid) was introduced. In January 2020, however, the transition payment requirement in the Netherlands was transformed by the Labor Market in Balance Act, or Wet arbeidsmarkt in balans (WAB).
The Labor Market in Balance Act
The principle aim of the WAB was to bring the labor market into balance and reduce the gap in legal protections and employment rights between Dutch employees with fixed-term (temporary) contracts and those with indefinite-term (permanent) contracts. To do so, the law implemented a number of changes, one of the most notable being an employee’s right to receive a transition payment from the first day of employment. Whereas under the previous Work and Security Act, employees were only eligible for transition pay after being employed for a minimum of two years, under the Labor Market in Balance Act, temporary and permanent employees in the Netherlands are now entitled to transition pay upon dismissal from employment or non-renewal of their employment contract, regardless of the duration of the contract. That means, if your indefinite-term employment contract is terminated on your employer’s initiative or if your fixed-term contract is not renewed, you may be entitled to a severance payment in the amount of one-third of your gross monthly salary for each year you worked, beginning from your first day of employment.
Transition Pay and Divorce
Transition pay is an important unemployment benefit for employees who have been involuntarily dismissed, to provide a source of temporary income until they can find a new job, during which time they may require additional training or education. However, if you are entitled to transition pay after being dismissed from your job and you are going through a divorce, you may be wondering what impact your divorce will have on your transition payment. The answer could be “a big impact,” but it really depends on your situation, most importantly whether the payment is considered separate or community property. As you may already know, community property and separate property is treated differently during the divorce process under California law. In most cases, community property, or property that you and your spouse owned together during your marriage, will be equally divided during your California divorce, while separate property, or property you owned before the marriage or inherited separately during the marriage, is not subject to division in divorce. But what about something like a severance package?
Community or Separate Property?
As an unemployment benefit, the key to finding out whether a transition payment is characterized as community or separate property lies in determining whether the right to the payment accrued during the marriage or after the parties were separated. If you are dismissed from employment before you separate from your spouse and you receive transition pay as a result of the dismissal, the payment is community property and will be divided between you and your spouse during your divorce, no matter how long before the separation the severance payment is received. However, if you are dismissed after you separate from your spouse and you receive transition pay from your employer, the payment will most likely be considered separate property, with some exceptions. The same goes for you if your spouse was dismissed and received transition pay before or after your separation.
One important exception here has to do with the specific timing of the transition payment. Say, for example, that you entered into an employment contract during your marriage and the contract required your employer to pay a severance payment upfront in case of dismissal. In this specific instance, the payment would be considered divisible community property, even if your employment contract is terminated after you separate from your spouse.
Contact Our Knowledgeable Divorce Attorneys for Help
If you are considering getting a divorce in Los Angeles, or if you have already begun the divorce process, you will want to know as much as possible about what could happen to your transition payment upon divorce. The issue of separate property versus community property is often the subject of significant debate in divorce proceedings and figuring out exactly what it is you are entitled to during the divorce process is not always straightforward, especially when job loss and transition pay are factored into the equation. That is why we always recommend consulting a knowledgeable Los Angeles divorce attorney as early as possible in the divorce process, especially if you are wondering how your transition payment or your spouse’s transition payment will be treated in divorce. Contact Divorce Lawyers Los Angeles today to discuss your case with a reputable divorce attorney who has experience handling divorces involving complicated community and separate property.