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Wage Loss and Earning Capacity Loss in Bodily Injury Claims

Wage LossWhat are Wage Loss and Loss of Earning Capacity Damages?

Frequently a personal injury victim may lose time from work following their injury incident.  Even for relatively minor injuries, a doctor may often recommend taking a few days off work to rest and let the healing process begin.  For more significant injuries, personal injury victims may need to take an extended leave of absence from work while they heal and receive medical treatment, or it may become apparent over time that the physical requirements of working are interfering with their healing, and their doctors advise them to take time off.  And unfortunately, some injury victims may sustain permanent injuries that are severe enough that they may be compelled to seek new careers that are more compatible with their degree of disability, or they may be forced to restrict the amount of time they spend working.  Some victims of severe injuries may be completely and permanently disabled from work of any kind.

In these instances, a personal injury victim will have claims for wage/income loss and/or loss of earning capacity.  Wage or income loss refers to losses from a current source of income – if an injury victim misses a week from work at their regular job due to their injuries, the injury victim is entitled to be compensated for the value of that week of work.  This is true for hourly workers, salaried workers, and self-employed workers.  Actual past wage/income losses are typically for some period of weeks or months lost from work at doctor’s recommendation while treatment and recuperation continue.  They may start and stop and start again.  For example, an injured person may lose some time from work during their initial recovery, attempt to go back to work at some point, but then require further treatment – such as a surgical procedure – that may have its own period of off-work recuperation that adds a new amount of time lost from work.

Typically, in a case with a severe, disabling injury where it is clear that the victim will never return to their current work, we begin to talk about “loss of earning capacity” -- the actual loss of the ability to perform their usual work or even any work at all.  This may also be the case with a somewhat less severe injury – a spinal disc injury, for example -- where it only becomes clear some months or a year or more later that the victim will be unable in the long-term to return to their usual employment.

Can I Recover for Wage Loss if I used Sick Leave or Received Disability Funds?

Yes.  Making use of available “sick pay,” “vacation pay,” “personal time off,” or other such benefits provided by an employer does not prevent an injury victim from recovering for their lost wages from the bodily injury liability insurer for the negligent person who injured them.  These are benefits that we work to acquire. If we have to use them either at our employer’s requirement for missed work or because we need for economic reasons to keep our income flowing, we are still entitled to be compensated for their expenditure.  Even if we go on temporary state disability or use private disability insurance that our employers or we may have secured for our use, we are still entitled to be compensated by the negligent person (or his/her insurance company) for our missed work and income.  (Be aware, however, that some private disability insurances – especially ones provided by our employers – may need to be reimbursed to some degree out of any settlement funds received in a personal injury claim.)

How are Wage Loss and Loss of Earning Capacity Damages Proven?

Anytime a personal injury victim takes more than a very brief time – a couple days or so – off work due to their injuries, they should request a note from their doctor.  Often, some employers will want to have this documentation from their injured employees. Still, it’s always useful to have this documented in the injury victim’s medical records when it comes time to request compensation for their wage or income loss.  For injury victims who are employees, proving their past losses is usually just a matter of providing paystubs or other documentation showing that they missed time from work during the period of their recuperation that matches up with doctors’ advice in their medical records about taking time off.  If this isn’t shown clearly on the employee’s payroll documentation, it may be necessary to request further explanation and details directly from the employer.  Or if the employee has irregular wages due to varying schedules, overtime, periodic bonuses, or other non-regular payments, details will be needed from the employer to identify accurately just how much was lost in wages during the time missed from work.

For self-employed individuals, proving income loss is usually somewhat more complicated, with the actual proof depending upon what types of records the injury victim may have available.  If they have regular self-employment income and deposit all their revenues into a particular business bank account, then that account’s record that shows reduced income during the time lost from work may be sufficient proof.  Or if they were working as an independent contractor on a particular project, then project records of their time lost or missed payments due to lost time may act as proof.  Tax records can also be used to establish reductions in declared income over time. However, tax records are usually not the preferred choice – since these records are generally privileged and private matters between the individual and the tax agencies, revealing them in an insurance claim or personal injury litigation is usually not the first option chosen.

Proving a long-term or permanent loss of earning capacity requires both medical proof – usually in the form of medical reports and/or doctors’ testimony – that the injury victim is disabled to some degree from their usual work (or any work at all). It should describe the severity of the disability, project how long it is likely to last (or if it is permanent), and describe their remaining capacity for performing their usual occupation or for changing to a different profession.  Non-medical experts in this area may further evaluate the injury victim to determine which requirements of his/her current employment are beyond their capacity, and these experts may also make recommendations as to what types of alternate employment the victim may be suited as an alternative in the future.  All of this evidence of loss of earning capacity is then translated into actual anticipated dollar losses over some future period of time.

How are Wage Loss and Loss of Earning Capacity Damages Calculated?

For wage loss claims by hourly workers, calculation of their wage loss may simply be a matter of 8 hours lost at a pay rate of $20 per hour equals a $160 wage loss claim.  Very often, this can be done just based on paystubs showing the lost hours and hourly rate along with notes in the medical records advising the injury victim to take time off work.   For salaried workers, their payroll records may show the actual time and monetary loss (or use of benefits) during the period off work, or it may be necessary to compare a pre-injury payroll stub or payroll record with post-injury stub or record showing a lesser amount of pay and calculating the difference.  For employees with more irregular or complicated patterns of pay, it may be necessary to look at records over a longer-term, calculate averages over time, and use these figures.  Or it may be necessary to request the calculation directly from the employer or employer’s bookkeeper or payroll company.

The calculation of income losses for self-employed injury victims is again more complicated.  As described above in the discussion of proof of self-employed losses, calculating the amounts lost is largely dependent upon the types of records the self-employed victim may have and what patterns of payment he or she typically has in his business.  This may be a straightforward calculation – if the self-employed victim lost out on a particular project due to their injury and that project had a value of $2,000, then that’s the figure for their loss.  But if they have income from multiple sources or that varies over time, it may be necessary to look at their financial records to come up with an average income per week or month that can then be multiplied by the number of weeks or months lost from work to arrive at a specific figure.

For loss of earning capacity claims, the records discussed above may help establish the injury victim’s baseline income pre-injury. Still, much more medical and expert witness reporting and testimony are often needed to project the loss forward in time either for a permanent and complete disability or where the victim is compelled to seek out new career opportunities that may better fit his or her specific injury-related disabilities.

In all these cases, but especially in this case of long-term earning capacity losses, an experienced personal injury attorney can add significant value to a client’s claim by thoroughly and completely evaluating their wage and/or earning capacity losses and by effectively communicating these losses to a bodily liability insurance adjuster, defense attorney, and/or a jury.

For other elements of damages in personal injury claims, see:

For information on insurance companies and their claim tactics, see:

Photo by Sharon McCutcheon on Unsplash:GM cha [cs 1627]
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