Lost Wages and Lost Earning Capacity: Documenting the Full Economic Loss

Published June 3, 2013 · Injury Law Basics

A union electrician from Miamisburg is rear-ended by a delivery truck on I-75 and tears the rotator cuff in his dominant shoulder. He is off work for four months, has surgery, and goes back on light duty. A year later he still cannot work overhead for more than twenty minutes, and the contractor quietly stops calling him for the big jobs. His missed paychecks are easy to add up. The second loss, the one that will follow him for twenty more working years, is the one the insurance company will never mention.

Ohio law recognizes both. Proving both is where much of the value in a serious-injury case lives.

Two different losses

Lost wages are the income you did not earn because you were hurt: the days, weeks, or months you could not work while you were treating and recovering. It includes overtime you would have worked, bonuses and commissions you missed, and sick or vacation time you had to burn, because that time had value and the injury consumed it.

Lost earning capacity is different. It is the reduction in what you are able to earn in the future because the injury is permanent or long-lasting. It applies when you can go back to work but not to the same job, when you can do the same job but not the overtime or the physical tasks that paid the most, or when you can no longer work at all. It is a claim about the years ahead, not the months behind.

Ohio's damages statute treats both as economic loss. R.C. 2315.18(A)(2)(a) defines economic loss to include "all wages, salaries, or other compensation lost as a result of an injury." And R.C. 2315.18(B)(1) provides that there is no limit on compensatory damages for economic loss. That matters. As I explained in Ohio's Caps on Pain-and-Suffering Damages, noneconomic damages in most injury cases are capped. Economic damages are not. A fully documented wage and earning-capacity claim is therefore not just one part of the case; in a permanent-injury case it is often the largest uncapped component.

Proving lost wages

Adjusters accept lost-wage claims that are documented and dispute the ones that are not. The documentation is not complicated, but it has to be complete:

• A letter from your employer on letterhead stating your position, rate of pay, normal hours, the dates you missed, and whether you used paid leave.
• Pay stubs from before and after the injury, and W-2s or tax returns for the prior two or three years to establish your usual earnings, including overtime patterns.
• Physician work restrictions. Every day off work needs to be tied to a doctor's order. A note that says "off work until re-evaluated on June 20" is proof. "I didn't feel up to it" is not.
• Records of lost opportunities: a shift schedule you were taken off of, a seasonal job you could not take, a promotion that went to someone else.

Hourly, commissioned, and self-employed workers need extra care. A self-employed contractor or a small-business owner proves lost income through tax returns, profit-and-loss statements, invoices, and sometimes the cost of hiring someone to do the work. The claim is often larger than the worker realizes, because the business kept running on borrowed time.

Proving lost earning capacity

This is the harder claim, and the one that separates a routine settlement from a full recovery. The insurance company will argue that you are back at work, so there is no future loss. The answer is evidence of what the injury has taken from your working life, which usually comes from three sources.

Medical evidence of permanence. Your treating physicians or an independent examiner must say that the injury is permanent or will last a defined period, and must describe your functional restrictions in concrete terms: no lifting over 25 pounds, no repetitive overhead work, no prolonged standing, no commercial driving.

Vocational evidence. A vocational expert takes those restrictions and compares them to the demands of your actual occupation and the jobs available to someone with your education, training, and age. The expert can testify that an electrician who cannot work overhead has lost access to most of his trade, or that a truck driver with a seizure risk cannot hold a commercial license, and can quantify what the remaining jobs pay.

Economic evidence. An economist takes the difference between what you would have earned over your expected working life and what you can now earn, accounts for raises, benefits, and retirement contributions, and reduces it to present value. For a 35-year-old skilled tradesman, that number is routinely in the hundreds of thousands of dollars.

Not every case needs all three experts. But in a permanent-injury case, the cost of hiring them is small compared with what they add, and an insurance company knows the difference between a claim with a vocational report and a claim with a guess.

The mistakes that shrink the claim

Returning to work too soon against medical advice, then struggling, gives the adjuster an argument that you were able to work all along. Failing to tell your doctor about work problems means the chart never records them. Settling early, before anyone knows whether the injury is permanent, forfeits the earning-capacity claim entirely, which is the point I made in the post on quick, low settlement offers. And if you had a prior injury, expect the insurer to argue the earning loss was already there; Ohio's eggshell-plaintiff rule, which I discussed here, is the answer, but only if the prior and current conditions are documented.

What this means for you

If your injury has kept you off work or changed what work you can do, your claim is worth more than your medical bills, and the difference is in the paper. Keep every pay stub and every work note. Tell your doctors about the tasks you can no longer do. Do not let anyone put a value on your case until the permanence question has an answer.

Our personal injury practice builds the economic-loss claim from the first meeting, and in serious car and truck crash cases we involve vocational and economic experts early so the insurance company is negotiating against a real number, not a hope.