Lost earning capacity is the damages that you can claim if an injury makes you unable to return to work for a significant period. If you have been injured in an accident, it’s common to miss work for a short period while you recover. A central basis of a personal injury claim is calculating all losses to recover financial compensation for the full consequences of your injuries. This includes damages for medical treatment, pain and suffering, and lost income.
While most damages affect your past expenses or short-term expenses, lost earning capacity affects you long-term as you recover from your accident. If another person has caused you injuries to an extent that it impacts your ability to work, he or she may be liable to compensate you for the amount that your earnings will diminish.
Lost Earning Capacity VS. Lost Wages
If you are injured in an accident in Nevada, you have a right to seek compensation for all of your economic losses. This compensation is for monetary losses that you incur as a result of the accident and is referred to in law as damages. There are various types of economic damages that you can recover for personal injuries, including past and future medical bills, property damage, and rehabilitation.
An injury can influence your ability to work and earn money, either while you initially recover or in the future. This can cause you to face financial hardship due to your inability to receive your regular wages or income. There are two distinct types of economic damages for lost income caused by an injury:
- Lost wages. This type of damages refers to actual wages or income that you lost between the time of the accident and when you were able to fully return to work. It cannot be attributed to a pre-existing medical condition, but must be a result of the injury caused by the at-fault person’s actions. It is calculated by considering income that has already been lost. This includes wages from work, commissions from sales, bonuses, and other benefits. Lost wages look backward and can be calculated with reasonable certainty.
- Lost Earning Capacity. Lost earning capacity looks to the future. It refers to the decrease in your ability to earn your typical income going forward. It seeks to compensate you for future missed income that you will not yet have earned.
For example, you may be in a car accident caused by another person’s negligent driving, resulting in a shoulder injury. If you have a job that involves heavy lifting, this will impact your work and cause you to lose income. If the shoulder heals, and you are able to return to work, then you will only have a claim for lost wages, which will compensate you for the wages that you were not able to earn while your shoulder healed.
On the other hand, if your shoulder never fully recovers, you might not be able to return to the same job at all. In this case, you might never be able to do the same work and earn the same amount. You will then have a claim for lost earning capacity, where you will recover all the future income that you would have been able to earn in the job, but are now prevented from earning by your injury.
The first identifiable difference between these types of damages is that lost wages look to the past, for income that has already been lost, while lost earnings capacity considers the future and wages that will be lost going forward. The second is the amount of damages claimed. Lost wages are easy to prove since it is income you have already lost. It is a relatively straightforward process, as the court can just consider your employment records. It can be a little more difficult if you are self-employed, or your work is irregular. Evidence for it could include bills, invoices, or documentation of missed meetings, conferences, or other potential income that you missed out on.
Lost earning capacity, on the other hand, is speculative in nature, as it looks to wages that you have not yet earned. Lost earning capacity cannot be calculated with absolute certainty, and there are many factors that have to be considered when making a determination.
How Is Loss of Earning Capacity Calculated?
To determine how much you can claim for lost earning capacity, the loss of earning capacity formula is used to determine what your income would have been had you not suffered any injuries. Next, you will calculate what you will likely be able to earn in the future considering your ongoing disabilities, injuries, or impairments. The difference between these two amounts is your claim for lost earnings capacity.
Due to the speculative nature of calculating future earnings, it is not possible to measure it in exact figures. You will have to prove the reasonable value of your lost earning capacity by providing evidence. This can be done by having an economic expert calculate your work-life expectancy, projected earnings, and cost of living. A vocational expert can provide professional opinions on your ability to continue your career or another type of work that you may be able to perform.
There are many factors that must be included when calculating loss of earning capacity.
Type of Profession
Your profession or career have an impact on these calculations. Every profession has its own unique projected compensation levels and growth curve. You could be in a high-paying profession, such as a professional athlete. If you are unable to return to the profession, will lose out on far more future earnings than if you were in a lower-paying job.
There are statistics for certain professions that tell you the median pay, projected growth, job outlook, and average year-on-year wage increases. These can be used to create a model of your earnings trajectory, based on your work-life expectancy and the average earnings for the industry.
Work History and Career Performance
Your work history and career performance can significantly impact your future earnings. High career performance usually correlates with higher earnings potential. If you worked well in your previous career, you would be more likely to receive raises, bonuses, and promotions, with possible higher wages in the future. If you had been in your position for a long period, had gaps between jobs, or had many past jobs, then you would likely have had a lower forecast for future earnings or be on a plateau with your income.
Education, Skills, Licenses, Certifications
Education, certifications, and licenses all play a role in both the type of career that you are in and your growth potential in that career. Your skills and abilities also play a major role. The more skilled and able you are in your role, the more likely you are to have a successful career and higher growth opportunities.
If you are young and at the beginning of a career, your earnings may have been relatively lower, but the growth opportunities would be greater. If you were nearing the end of a career, then many of the growth opportunities would likely have already taken place, and so your current earnings are more likely to remain steady. These would have to be factored into any calculations for lost earning potential.
How to Recover Lost Earning Capacity
Having a personal injury lawyer is essential for a loss of earning capacity claim. To recover lost earning capacity, you will need to make a claim, either by bringing a lawsuit or by negotiating a settlement with the person who caused your injuries. Your lawyer can represent you in court or negotiate a settlement for a car accident, or any other type of accident caused by another person.
Your lawyer will also help you gather evidence to prove your case. To have a successful claim, you will have to prove that:
- You have an injury, disability, or impairment that is long-term and will last well beyond the time of settlement or trial.
- This injury, disability, or impairment was caused by another party who was at fault.
- The injury, disability, or impairment will reduce the amount of money that you are able to earn going forward.
To prove this, you can call a number of experts to give evidence. An economist can provide information on the typical career, salary trends, and lifetime earnings of someone in your situation. A vocational expert can explain your physical condition and the limitations that this places on your career. He or she can explain what treatment you will need to re-enter the workforce, and what careers you are likely to be able to have considering your limitations. Medical professionals can testify on the impact of your injuries and how they affect your functioning and long-term prognosis. Your employer can testify about your job performance, wages, raises, and promotions that you would likely have received.