Is a Settlement From An Employment Lawsuit Marital Property in Maryland?

In a 2010 case an appellate court considered whether funds received by the ex-wife as a settlement in an employment discrimination claim were marital property. The couple was married in 1998 and had two children, ages 10 and 4 at the time of trial in this case. The ex-wife was an attorney and the ex-husband was a clerk with the IRS. The ex-wife filed for divorce on the grounds of constructive desertion. The ex-husband filed a counterclaim on the same basis. They had lived apart for 1 year beforehand. The court granted the divorce on that basis.

During the marriage, the ex-wife’s employment with her law firm was terminated as of December 31, 2002. She filed a discrimination lawsuit against the firm and its partners and employees, alleging violations of the Family and Medical Leave Act. She settled the case in 2006 and was paid $550,000. These were paid in two installments.

In a joint statement to the court in connection with the divorce proceedings, she claims she kept $300,000 from the settlement. She contended that the settlement didn’t specify which portion represented what element of damage and therefore, the settlement could not be characterized as marital property. The ex-husband argued that the settlement was marital property. The trial court found that the lawsuit was based on employer practices that had occurred during the marriage. However, it did not find that the settlement was marital property.

The ex-husband appealed the decision. He again argued that the entire settlement counted as marital property. This was the first time the issue was addressed in the courts. The appellate court explained that the Marital Property Act does no show a preference for classifying property as marital rather than non-marital.

Whoever asserts a marital interest in property must produce evidence to prove the property’s identity and value. The appellate court explained that only marital property must be equally distributed under the Maryland Code. “Marital property” is property that one or both parties acquired during the marriage.

The court looked at prior case law that considered whether workers’ compensation benefits were marital property. In one of those cases, the appellate court had said that if the purpose of workers’ compensation was to compensate someone for lost wages, the settlement was characterized as marital property.

On the other hand, if the award compensated for lost pre or post-marital wages or medical expenses paid from non-marital property, the award should be treated as non-marital. Similarly, personal injury settlements for injuries suffered during a marriage have been treated as marital property.

The appellate court explained that the determination of a property’s identity turns on the underlying nature of damages that the recovery is supposed to remedy, not just the timing of the claim. This is called the “analytical approach.” The identification of marital and non-marital property is a question of fact. In this case, the ex-wife’s cause of action against her employer arose while she was married to her ex-husband and living with him.

Therefore, the court found that the settlement was compensation for lost marital wages and it was an abuse of discretion for the trial judge to determine otherwise in this case. The ex-husband had been unfairly restricted in his efforts to prove that it was marital property. The appellate court sent the case back for a full opportunity for discovery for both parties. The trial court was directed to identify and value the marital portion of the settlement proceeds.

Property division during a divorce can be time-consuming and complex. If you are planning to divorce, contact an experienced Maryland family law attorney for representation. Our office may be able to help you through this difficult time.

More Blogs:

Dissipation of Marital Funds in Maryland, Maryland Divorce Lawyer Blog, November 26, 2013

Neglect in Maryland Family Law Cases, Maryland Divorce Lawyer Blog, November 12, 2013


Contact Information