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DivorceDivorce For Profit?

May 28, 2009

Much has ado has been made of the pilots being sued by Continental Airlines because they divorced in order to get partial distributions of their pensions. As reported in Freakonomics:

Continental Airlines is suing nine of its pilots, reports ABC News, claiming they faked divorces in order to draw down their pension funds before retirement. The airline became suspicious when some of the couples continued living together and all nine couples eventually reunited. Continental believes the pilots became worried about the safety of their pension funds, especially after seeing what’s happening at other airlines.

The airline claims that the divorces were shams. The couples all continued to live together and most did not even tell their friends and family about the divorces.

On the other hand, the parties were legally divorced. By getting divorced, even temporarily, they lost the rights afforded married couples, like for instance, the right to continued health coverage. If their tax year ended while they were divorced, the parties could not file joint tax returns.

In fact, the Continental Airline employees gambled that after making generous settlements, their spouses would re-marry them. Indeed, the parties would be hard-pressed to complain that the divorce settlement should be set aside because it was procured by their joint “fraud.”

Many marriage and divorce decisions are economically motivated. Some couples wed to obtain healthcare coverage. Others refrain from marriage to protect their social security status. Still others divorce as part of an elder care plan.

What these Continental employees did was lawful; the employer should not have the right to question the legitimacy of the employees’ marriage or divorce.

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