An injury can affect more than the income you lose while recovering. If lasting physical or cognitive limitations interfere with your ability to work, the financial effects may continue for years. A personal injury claim may account for both earnings already lost and reductions in your ability to earn income in the future.
Loss of earnings and diminished earning capacity are related but distinct types of damages. The amount claimed must be supported by evidence connecting the injury to the financial loss.
What Is Loss of Earnings in a Personal Injury Case?
Loss of earnings, also referred to as lost earnings or lost income, refers to income you would have received if an injury had not prevented or limited you from working. This typically covers the period between the injury and the resolution of the claim or your return to your previous earning level.
For example, an employee who misses six weeks of work while recovering from an injury may seek the wages they would have earned during that period. Lost earnings may also arise when someone returns to work with reduced hours or temporarily moves into a lower-paying position because of medical restrictions.
What Is Diminished Earning Capacity?
Diminished earning capacity concerns an injury’s effect on your ability to earn income in the future. Rather than focusing solely on wages you have already missed, it considers whether lasting limitations have reduced your ability to earn what you could have earned before the injury.
A person does not necessarily have to be completely unable to work to experience diminished earning capacity. Someone may be able to remain employed but no longer perform the same job, work the same number of hours, pursue certain positions, or perform work that previously provided greater earning potential.
What Types of Lost Income May Be Recoverable?
Lost income is not necessarily limited to a regular salary or hourly wage. Compensation may account for several forms of earnings when they can be established with appropriate evidence.
Lost income may include:
- Hourly wages or salary
- Overtime pay
- Bonuses
- Commissions
- Tips
- Self-employment income
- Other employment-related earnings
The types of income involved will vary according to the person’s employment and compensation structure. Records showing a consistent history of receiving overtime, commissions, or other variable income may be relevant when calculating the loss.
How Is Lost Income Calculated?
Past lost earnings are often calculated by comparing what a person would have earned during the period affected by the injury with what they actually earned. For an employee with a fixed salary or regular schedule, payroll records may make this calculation relatively straightforward.
The calculation can become more complex when earnings fluctuate. Overtime, commissions, bonuses, seasonal employment, or irregular work schedules may require examination of earnings over a longer period to establish the amount of income that was likely lost.
How Is Diminished Earning Capacity Calculated?
Calculating diminished earning capacity requires looking at the injured person’s ability to earn money before and after the injury. Because the calculation concerns future earning potential, it may involve more than simply extending the person’s current wages over a set number of years.
Relevant considerations may include:
- Age and work history
- Education and professional training
- Skills and qualifications
- Pre-injury occupation and earnings
- Medical restrictions
- Ability to perform previous job duties
- Availability of other suitable work
- Expected duration of the limitations
Vocational and economic experts may be involved in evaluating employment opportunities and estimating the financial effect of reduced earning capacity over time.
What Evidence Can Establish Lost Earnings and Diminished Earning Capacity?
Claims for lost income need evidence showing both the earnings involved and how the injury affected the person’s ability to work. Different records may be necessary for past losses and projected future losses.
Relevant evidence may include:
- Pay stubs and W-2 forms
- Tax returns
- Employment and attendance records
- Documentation of bonuses or commissions
- Medical records and work restrictions
- Statements from employers
- Vocational evaluations
- Economic expert testimony
Medical evidence can be particularly important when a claim involves diminished earning capacity because it can establish restrictions that prevent the injured person from performing certain work.
How Are Lost Earnings Calculated for Self-Employed Individuals?
Calculating lost earnings can be more complicated for business owners, independent contractors, and other self-employed individuals because their income may vary from month to month or year to year. Business revenue is also not necessarily the same as the individual’s personal earnings.
Tax returns, profit-and-loss statements, invoices, contracts, bank records, and prior business records may help establish historical income and changes following an injury. The calculation may also need to account for business expenses and other factors that affect how much of the company’s revenue represents the injured person’s earnings.
A consistent record of income before the injury can provide useful evidence when establishing the financial effect of time away from the business.
Can You Recover Future Lost Earnings if You Can Still Work?
Returning to work does not necessarily eliminate a claim involving diminished earning capacity. An injury may leave someone capable of working while still reducing the amount they can earn over the course of their career.
For example, permanent restrictions may require a worker to move to a lower-paying occupation, reduce their hours, or give up work that requires certain physical abilities. An injury may also limit the range of positions the person is medically capable of performing.
The key issue is not simply whether the person remains employed. The question is whether the injury has reduced their ability to earn income compared with the earning capacity they had before they were hurt.
Contact Jamie Casino Injury Attorneys To Schedule a Free Consultation With a Personal Injury Attorney
Lost earnings may extend well beyond the paychecks missed immediately after an injury. When lasting limitations affect employment, a claim may also involve the income the injured person is expected to lose in the years ahead.
For more information, contact Jamie Casino Injury Attorneys, or call us at (912) 809-5335 today to schedule a free consultation with an experienced personal injury lawyer.
