Ever since California enacted the no-fault divorce law in 1969, divorce rates have steadily risen. While it’s uncertain whether divorce rates would have remained stable without this law, the nationwide adoption of no-fault divorce laws correlates with the surge in divorce rates. Presently, first marriage divorce rates hover around 50%, escalating to 67% for second marriages. These figures, coupled with the unquantified “invisible divorce rate” — couples in unhealthy relationships — highlight the significant costs of marital issues for businesses.
According to the Harvard Business Review, divorce costs U.S. businesses approximately $150 billion annually. Despite this substantial financial burden, businesses often fail to take proactive steps to quantify and manage this stealth risk. Unlike other risks, divorce risk cannot be transferred to insurance carriers, leaving businesses to self-insure with limited resources and tools.
Compounding these challenges, the divorce industry continues to grow, estimated at $28 billion annually, with an average cost of $20,000 per divorcing couple. While some divorces proceed without litigation (“pro se”), those with high contentiousness and financial complexity are more likely to result in costly litigation, affecting approximately 25% of marriages.
The Problem for Businesses:
The mismatch between divorce case characteristics and the family court process exacerbates challenges for businesses. While family courts efficiently handle amicable divorces, they struggle to accommodate highly contentious or financially complex cases, leading to prolonged disputes and additional costs. These “avoidable costs” extend beyond financial expenses, encompassing time, energy, and health, directly impacting business bottom lines through decreased productivity, increased absenteeism, resignations, and stress contagion among employees.
Moreover, divorce-induced financial stress adds another layer of concern for businesses. PricewaterhouseCoopers’ annual financial wellness survey consistently identifies financial stress as the top stressor in families’ lives, exacerbated by divorce as individuals grapple with worries about their future financial security.
Many business leaders turn to Employee Assistance Programs (EAPs) to support employees during divorces, offering access to legal counsel and therapy. However, the effectiveness of these programs is uncertain, with potential delays in therapy timelines and the risk of attorneys exacerbating costs. Additionally, delicate conversations surrounding divorce management further complicate risk management outcomes for businesses.
The Divorce Risk Solution:
Businesses must treat divorce risk like other systemic threats, such as cyber risk. This involves investing in awareness training for leaders and staff and implementing hands-on support strategies for affected employees. Collaborating with Certified Divorce Coaches can empower employees to navigate divorce effectively, avoid common pitfalls, and understand the complexities involved. Similarly, engaging Certified Divorce Financial Analysts (CDFA®) can help employees manage financial complexities and prevent costly mistakes. These resources can be integrated into existing EAPs or aligned with respected professionals, ensuring comprehensive support for employees navigating divorce. Businesses should not rely solely on attorneys to provide these referrals, as not all may offer these services.
In conclusion, businesses must acknowledge and address the hidden costs of divorce to protect their bottom lines and support employees during challenging times. By implementing proactive strategies and leveraging specialized resources, businesses can effectively mitigate the impact of divorce and foster a supportive workplace environment.
