What is the Difference Between Lost Wages and Loss of Earning Capacity

It can all happen in the blink of an eye. An accident occurs out of nowhere, flashing lights appear on the scene, and you’re being wheeled into an ambulance. Chaos ensues in the accident’s aftermath, leaving you confused, scared, and concerned about your physical injuries.

Your accident injuries may require extensive medical treatment with a recovery period that means you will miss work. You may be entitled to compensation for lost wages and loss of earning capacity. So what is the difference between these terms?

While they sound quite similar, there is a significant difference between lost wages and loss of earning capacity.

Lost Wages Due To an Accident Injury

When an accident injury sends you heading to the hospital instead of heading to work, you may file a personal injury claim to recover compensatory damages. In addition to losses such as medical expenses and emotional pain and suffering, you may recover awards for “lost wages”.

Your lost wages may consist of several types of income, including the following:

  • Salary
  • Hourly pay
  • Overtime pay
  • Income from a business
  • Commissions
  • Bonuses
  • Benefits
  • Vacation time
  • Sick time

By totaling all forms of income, your attorney learns how much you earn.

This is important: damages for lost wages can include past, present, and future loss of income. Therefore, your lawyer will calculate total lost wages by:

  • Determining how much professional income you have already lost
  • Calculating the future income you are likely to lose due to injury

Let’s say you’ve already missed one year of work because of injury. Your lawyer determines that you’ve lost $45,000 in wages during that period. You’re entitled to that sum.

Let’s also say that medical professionals project that you’ll be unable to work for two more years. You may then be entitled to two more years’ worth of lost income ($45,000 x 2). For the three total years that you miss work, you may deserve $135,000. This is the pared down explanation of how lawyers calculate damages for lost wages.

Projecting future lost wages is not always straightforward. You may have earned more money year-over-year before your accident. This and other considerations could impact the value of future lost wages.

These complexities are reason to hire a lawyer for your case. Our team relies on the following documents when calculating lost wages:

  • Professional contracts
  • Income-related statements
  • Records of bonuses and other forms of income
  • Any document that shows your progression of earnings over a relevant period of time

Determining lost wages without attorney assistance can be difficult. A lawyer can also explain the key differences between lost wages and loss of earning capacity. 

Proving Loss of Income Due To Accident Injury

To prove loss of income, a medical expert will typically provide testimony or documentation showing that you were injured in an accident. They will attest that injuries you sustained in the accident caused you to miss work. The expert may also testify that your injuries are likely to prevent you from working in the future.

Your employer then provides evidence that you were absent from work for some period of time. They generally provide documentation – such as a W-2 statement or a 1099 form – that shows how much money you would have earned if you could report to work during that time.

Your lawyer will present their calculation of future lost wages. They can cite the expert’s testimony and proof of your earning power to support their projection of lost income. 

Loss of Earning Capacity Due To an Accident Injury

Loss of earning capacity is distinct from lost wages and is classified as a general damage rather than a special damage like lost income. Unlike lost wages, which are economic damages with a clear monetary value, loss of earning capacity is a non-economic damage that reflects the emotional and psychological impact of no longer being able to work in your chosen profession due to injuries sustained in an accident.

Since general damages do not have a precise monetary value, their worth is more subjective. This means a jury may award any amount they deem appropriate, within legal limits, based on the circumstances of the case.

Loss of earning capacity can account for:

  • The emotional loss of future professional opportunities: This includes the inability to pursue career goals or advancements due to injury.
  • A reduction in workable hours: The emotional and physical toll of having to limit your work hours or change your work habits.
  • Limitations on your ability to earn: Any other emotional or psychological limitations on your ability to engage in meaningful work.
  • Pain and suffering related to professional harm: The broader emotional impact of being unable to work in your chosen field.

It is important to note that you may receive compensation for loss of earning capacity in addition to your lost wages, as these represent two distinct types of damages. While lost wages compensate for actual income lost, loss of earning capacity compensates for the emotional and psychological harm caused by the inability to work as you once did. 

Proving Loss of Future Earning Capacity Due To an Accident Injury

Proving loss of earning capacity is more complex than demonstrating lost wages because it involves assessing the emotional and psychological impact of no longer being able to work in your chosen profession. This type of damage is subjective and does not have a clear monetary value. However, your lawyer will take into account several key factors when presenting a case for loss of earning capacity:

  • Work experience: The depth and breadth of your professional experience and how your injury limits your ability to continue in that field.
  • Skills: The specific skills you have honed in your profession and how they may no longer be fully utilized due to your injury.
  • Abilities: Your physical and cognitive abilities, which may be diminished or impaired, affecting your capacity to work in your chosen profession.
  • Talents: Unique talents or expertise that have been affected by the injury, limiting your potential to excel in your career.
  • Career trajectory: The path you were on before the injury, including potential promotions, advancements, and future earnings that are now unattainable.

A medical expert is often essential in proving loss of earning capacity. They can explain the extent of your injury and how it impacts your ability to work in the future. For instance, if you are expected to gradually recover from your injuries, this recovery process must be considered when evaluating your loss of earning capacity. However, if your injuries are severe and you are unable to return to work at all, you may be entitled to compensation for both lost wages and the emotional and psychological toll of losing your ability to work in your chosen field.

When considering what damages to pursue in your personal injury claim, it is best to consult with a Georgia Personal Injury Attorney at Scholle Law. We will evaluate your accident claim and serve as your counsel. An attorney can calculate and seek awards for lost wages and loss of earning capacity. 

Don’t Settle For Less Than You Deserve

When you’ve been hurt in an accident, it can be very tempting to grab the first settlement offer that is thrown on the table. Resist the temptation.

Initial settlement offers rarely provide adequate compensation for your losses. Quick offers are merely the insurance company’s attempt to lure you into a lowball settlement.

Physical and psychological accident injuries can cause great long-term expense. Lost income and permanent loss of earning power are examples of these expenses. Any settlement you accept mustn’t only account for your current losses. You must consider your future damages as well.

The team at Scholle Law accounts for all of your losses—past, present, and future. We know that your lawsuit is your best shot at receiving all of the compensation you deserve. We will negotiate for maximum compensation.

Consult the legal team at Scholle Law to learn what compensation you may receive for your accident injuries. Our team is available around the clock to answer your questions. We provide a free, no-obligation case evaluation.

Our experienced accident attorneys work on a contingency basis. You pay nothing upfront or out-of-pocket. You pay us no fee unless we win your case. Schedule your confidential consultation with a member of our legal team today. Do not wait to call, as time could be a factor in the eligibility of your case. 

FAQs

What are lost wages, and how do they differ from loss of earning capacity?

Lost wages refer to the income you lose during the period you are unable to work due to an accident injury. This includes your salary, hourly wages, commissions, bonuses, and other forms of income you would have earned during your recovery period.

Loss of earning capacity, on the other hand, refers to the emotional and psychological impact of no longer being able to work in your chosen profession due to long-term or permanent injury-related limitations. Unlike lost wages, which are economic damages with a clear monetary value, loss of earning capacity is a non-economic damage that compensates for the professional harm and emotional distress caused by the inability to pursue your career as you once did. 

Yes, it is possible to recover both lost wages and loss of earning capacity in a personal injury claim. Lost wages compensate for the income you lost while recovering, while loss of earning capacity compensates for the long-term impact of your injuries on your ability to earn in the future.

Lost wages are calculated by determining the total income you would have earned if you had been able to work. This includes your salary, hourly pay, overtime, commissions, bonuses, and benefits. Your attorney will add up these amounts to calculate the total lost wages, which may include past, present, and future income losses.

To prove lost wages, you will need documentation such as pay stubs, W-2 forms, 1099 forms, professional contracts, and income statements. Testimony from your employer confirming your absence from work and the income you would have earned is also essential.

Loss of earning capacity is determined by evaluating the emotional and psychological impact of your injuries on your ability to work in your chosen profession. Factors considered include your work experience, skills, abilities, career trajectory, and how your injuries have affected these aspects of your professional life. Medical experts often play a key role in explaining how your injuries limit your ability to pursue your career as you once did. Since loss of earning capacity is a non-economic damage, its value is more subjective and may be determined by a jury based on the emotional and professional harm you have experienced.

Calculating lost wages and loss of earning capacity can be complex and requires a thorough understanding of legal and financial matters. An experienced attorney can ensure that all potential losses are considered and accurately calculated, helping you seek maximum compensation for your injuries. They can also navigate the legal process and negotiate with insurance companies on your behalf.