Loss of Earnings/Diminished Earning Capacity

Medical bills are likely to come to mind whenever you think about compensation for a personal injury. If you are employed full-time and you spend three weeks in the hospital, your total losses are probably far more than your medical bills. 

Losing income is a frightening prospect. An even more frightening prospect is that if your injuries are serious enough, you might find yourself unable to return to your old job or even unable to work ever again.  

The Full Spectrum: What Types of Compensation Are Available?

Personal injury compensation breaks down into the following elements:

  • Current medical bills;
  • Estimated future medical expenses;
  • Lost earnings;
  • Diminished future income capacity;
  • Pain and suffering;
  • Other non-economic damages such as disfigurement; and
  • Punitive damages (in rare cases).

If someone dies in the accident, their personal injury claim becomes a wrongful death claim. Damages for wrongful death claims are quite different from personal injury claims.

Special Case: Workers’ Compensation Claims

Keep in mind that workers’ comp claims work very differently and that they are resolved by administrative tribunals, not courts. The amount of damages you are likely to win in a workers’ compensation case is lower than in a successful personal injury claim. Non-economic damages, such as pain and suffering damages, are unavailable. Under certain circumstances, however, you might be able to find a loophole that will allow you to file a personal injury lawsuit. 

The Difference Between Lost Earnings and Diminished Earning Capacity

The difference between lost earnings and diminished earning capacity is that:

  • Lost earnings refer to the past to calculate how much in earnings you have already lost due to your injuries; and
  • Diminished earning capacity looks to the future to determine how much in earnings you are likely to lose during the remainder of your working life due to your injuries.

  You can claim both of these components at the same time.

How Do You Calculate Lost Income?

The calculation method depends on how you receive your pay:

  • If you are paid by the hour: Calculate the average number of hours you missed; In two weeks, for example, you might have missed 80 hours. Multiply that by your hourly wage to arrive at your lost income.
  • If you are paid a salary: Take your annual salary as a starting point. Divide this number by 2080 (40 hours per week times 52 weeks a year). Doing this will yield the equivalent of a per-hour wage. Take this number and multiply it by the number of work hours that you missed to arrive at your lost income.
  • If you are self-employed: If you are self-employed, you should claim lost income instead of lost wages, and you should provide documentation to prove it. 

Vacation Time and Sick Leave

When you claim damages for loss of earnings, don’t deduct your own vacation time and sick leave from your claim if you used them because of your injuries. Vacation and sick leave are financial benefits you wouldn’t have sacrificed except for the defendant’s misconduct. As a consequence, you deserve reimbursement.

How Do You Calculate Diminished Earning Capacity?

You suffer diminished earning capacity when your injuries leave you in a position where you can no longer earn as much money as you otherwise would have been able to. Some examples follow:

  • Your job requires heavy lifting, but you injured your shoulder so badly that you can no longer lift heavy objects. Your employer re-assigns you to a lower-paid desk job.
  • Your job requires long periods of intense concentration, but you suffered brain damage due to a motorcycle accident. Your resulting “brain fog” prevents you from returning to your old job, and now you are unemployed.

Normally, you will need the testimony of an expert witness to calculate the exact value of your diminished earning capacity. It is typically a lot more difficult to prove diminished earning capacity than to prove lost income. Calculating diminished earning capacity involves an attempt to estimate losses that have not occurred yet, and may not occur for years or even decades. Important factors include your:

  • Profession or occupation before the accident;
  • Work location;
  • Education;
  • Work history, including raises, awards, or disciplinary measures;
  • Talents, skills, expertise; and
  • Current labor market conditions.

All other factors being equal, young victims receive more in diminished earning capacity because they have more remaining possible working years than older workers. 

Consider Hiring a Personal Injury Lawyer

Consider Hiring a Personal Injury Lawyer

Hiring a personal injury lawyer will probably make a substantial difference in the amount of money that goes into your pocket, even after you pay your legal fees. When a speculative claim like diminished earning capacity is involved, the importance of hiring an experienced personal injury lawyer is hard to overestimate.