What a Tech Layoff May Mean for Your Divorce

Tech layoffs often come in waves, and like waves, they can be unexpected. Layoffs often also occur at inopportune times, including during a divorce, which can create additional uncertainty during an already uncertain period. However, one thing will likely remain certain: A lawyer who’s experienced in tech divorces should be able to answer many of the questions you have about what impact a tech layoff could have on your divorce, whether it’s impending or you are currently enmeshed in the divorce process. Below are a few of the most common concerns.

How a Layoff Can Affect Spousal Support and Child Support Calculations

If either you or your spouse is laid off during a divorce, it can affect the way in which support is calculated. Washington courts consider income when calculating both child support and spousal support. Consequently, a sudden decrease in earnings can alter what one spouse is expected to pay or would have otherwise expected to receive. 

That being said, courts also understand that layoffs can happen, especially in a tech hub like Seattle and Washington state in general. With this in mind, a judge will consider whether the person who was laid off is entitled to receive severance pay, unemployment benefits, or some other form of compensation. 

They will also consider the likelihood of that spouse finding a position to replace the one they lost. If unemployment appears to be temporary, the court may still reference previous earnings in its calculations. On the flip side, if the layoff suggests that it will lead to a career change or a sharp drop in income for the foreseeable future, the calculation for spousal support and child support could drop significantly.  

Regardless of whether you are the spouse who was laid off from their tech job or you are married to someone who was, it’s important to keep detailed records about such details as severance packages, unemployment benefits, and efforts at securing a new position. If there is a question, information about such income can help clarify whether unemployment is bona fide or a strategic attempt to appear financially disadvantaged in order to evade paying their fair share of support or maintenance. 

What Happens to Equity, Bonuses, and RSUs After a Tech Layoff

Equity, bonuses, stock options, RSUs (restricted stock units), and deferred compensation are often part of a tech owner or employee’s compensation. After a layoff, what’s due to that person can become convoluted fast. This is especially true for tech startups, whose futures are tenuous to begin with. If a layoff occurs during the divorce process or immediately before it, the fate and timing of this compensation are relevant.  

A Seattle family law attorney experienced in divorces involving a tech layoff will take great care to distinguish between what compensation has vested and what remains outstanding. Anything vested during the marriage will typically be deemed marital property and, therefore, subject to division according to Washington state’s community property laws. Additionally, Washington law provides a formula to calculate what portion of any unvested compensation will also be treated as community property.

Even if some aspects of compensation occurred prior to marriage, depending on the disposition of that compensation after the marriage, it, too, may be considered community property. Again, having thorough records can make tracing compensation and accurately categorizing it easier.  

How to Time Your Divorce Around Employment Changes, Including a Tech Layoff

The timing of filing can dramatically impact the amount of a spouse’s court-ordered obligations in a divorce, especially one involving a tech layoff. Moreover, the impact — good or bad — is often unpredictable. 

Consider the following scenario. If you’re the higher-earning spouse who just got laid off, filing sooner rather than later may lock in a lower support or maintenance level while you are unemployed. However, filing too soon can result in the court declining to lower your obligations if the court concludes there is insufficient evidence to show you’ve tried to secure reemployment but have been unable to.  

Conversely, if you are the individual in this depiction whose spouse was just laid off, you may want to file immediately to ask the court to use the most recent income figures rather than allowing time to pass so unemployment doesn’t become the new status quo. The scenarios are endless, and having a strategy in place with input from your attorney is prudent. 

In addition to a tech layoff potentially affecting support and asset division, it can also impact the overall tone of a divorce, as unemployment can cause significant stress on a good day. During a divorce? A tech layoff could alienate divorcing spouses who started out amicable. Consulting with a Seattle family law firm whose team members are well-versed in divorces involving tech workers and empathetic to the emotions involved early on in the process can help prevent a relationship from devolving further. 

Protecting Yourself Financially Following a Tech Layoff Amid Divorce

When divorce and a tech layoff collide, it can feel like a double whammy. These are usually the times when people panic and act in a way (often in a negative manner) that they wouldn’t have under normal circumstances. Should this happen or be happening to you, it’s best to stay calm. 

Instead, take stock of where you and your spouse are financially. Specifically, review (and compile records of) your savings, severance package, unemployment benefits, and any other relevant financial documents related to the job that was lost. Next, create a budget that reflects your and your spouse’s current financial picture. 

If your spouse won’t stick to a budget, don’t follow their lead. You don’t want any surreptitious behavior to come back and haunt you later, nor do you want to make any sudden moves, such as borrowing from your 401(k) without speaking to a financial advisor and a family law attorney first, so you understand the consequences.

Speak to a Seattle Family Law Attorney for Guidance About What a Tech Layoff May Mean for Your Divorce

A tech layoff can cause a ripple effect during or just preceding a divorce. Exactly what that ripple effect will be may depend on the legal strategy you employ, given your unique circumstances and objectives. A Seattle divorce lawyer who understands the issues implicated in a tech divorce, including one impacted by unemployment, can, along with guidance, offer options when it seems to be in short supply.

At Elise Buie Family Law, our team of Seattle family law attorneys has vast experience negotiating divorces on behalf of tech employees, early founders, and their spouses. We can support you during yours. Contact us today or schedule a convenient time to talk.