An injury can affect more than your health. If you cannot work while you recover, you may lose weeks or months of income. A serious injury can also limit how much you are able to earn in the future. Loss of earnings and diminished earning capacity are two types of economic damages that address these financial losses.
Although the terms are related, they cover different losses. Loss of earnings generally looks at the income you have already missed. Diminished earning capacity looks at how an injury may reduce your ability to earn money in the future.
What Is Loss of Earnings?
Loss of earnings refers to income you could not earn because of an injury. It often applies when someone has to miss work for medical treatment or recovery.
Loss of earnings may include:
- Regular wages or salary
- Overtime that you normally would have worked
- Tips, commissions, or bonuses
- Paid time off used because of the injury
- Income from contract or freelance work
The goal is to determine how much income you would have received if the injury had not happened.
What Is Diminished Earning Capacity?
Diminished earning capacity is the loss of your ability to earn money in the future. It may apply when an injury creates lasting limits that affect your work.
For example, a construction worker may return to work but no longer be able to lift heavy materials. The worker might need to take a different job that pays less. In that situation, the loss is not limited to wages missed during recovery.
Diminished earning capacity can address the difference between what the person could likely have earned before the injury and what they can reasonably earn afterward.
Loss of Earnings vs. Diminished Earning Capacity
The main difference is the period of time each type of damage covers.
Loss of earnings usually focuses on past income. It can cover the period between the injury and the person’s return to work or resolution of the case. In contrast, diminished earning capacity generally focuses on future losses. It considers whether the injury has changed the person’s long-term ability to earn a living.
A serious injury may result in both types of damages.
How Are Lost Earnings Calculated and Proven?
Lost earnings are generally based on the income a person would have earned if the injury had not kept them from working. For an hourly or salaried employee, the calculation may involve comparing the time missed with the person’s normal wages. Under West Virginia law, damages for lost earnings are based on gross earnings rather than take-home pay after taxes and other paycheck deductions.
Proving lost earnings can be more complicated for people whose income varies. Workers who regularly earn overtime, commissions, tips, or bonuses may use their earnings history to establish their losses. Self-employed workers, freelancers, and business owners may rely on tax returns, invoices, contracts, bank records, or profit and loss statements.
Pay stubs, employer records, work schedules, and records of missed days or reduced hours can also help connect the injury to the income lost.
How Is Diminished Earning Capacity Calculated and Proven?
Diminished earning capacity focuses on how an injury affects a person’s ability to earn money in the future. The calculation may consider the person’s age, expected working years, education, job training, work history, prior earnings, medical restrictions, and ability to perform the same or other work.
Because these damages involve future losses, evidence must establish more than a temporary inability to work. West Virginia courts require evidence of a permanent injury and reasonable certainty about future damages before a jury may award damages for impaired earning capacity.
Medical records and work restrictions can establish lasting limitations, while employment and earnings records can show the person’s work and income before the injury. In serious cases, vocational experts may evaluate the work a person can still perform, and financial experts may help estimate the resulting long-term loss of earning capacity.
How West Virginia Fault Rules Can Affect Recovery
West Virginia uses a modified comparative fault system. This means an injured person’s share of responsibility can affect the damages they recover.
If the injured person is partly responsible, but their fault does not reach the level that bars recovery (more than 50%), compensation can be reduced by their percentage of fault. That reduction can apply to economic losses such as lost earnings.
For this reason, proving both the amount of income lost and the other party’s responsibility can be important.
Contact Farmer, Cline & Campbell Personal Injury Lawyers To Schedule a Free Consultation With a Charleston Personal Injury Attorney
Loss of earnings and diminished earning capacity address two different ways an injury can affect income. Lost earnings cover money already missed, while diminished earning capacity focuses on the ability to earn money in the future.
Both require evidence showing how the injury affected work and income. When an accident causes lasting work limits, considering both past and future losses can provide a more complete picture of the financial harm caused by the injury.
If you need help in West Virginia, contact Farmer, Cline & Campbell Personal Injury Lawyers today to schedule a free consultation at (304) 346-5990 with a Charleston personal injury lawyer.