How to Recover for “Lost Earning Capacity” in California

California law allows a plaintiff to recover damages for “lost earning capacity” in a personal injury case. Lost earning capacity compensates the plaintiff for work-related income that is reasonably certain to be lost in the future as the result of an accident or other wrongful act.

To help you better understand how to recover for lost earning capacity in California, our California personal injury lawyers discuss, below:

• 1. The difference between “lost wages” and “lost earning capacity”
• 2. Does the injury need to be permanent?
• 3. How long do I have to sue for lost earnings in California?
• 4. What types of income are included in “lost earning capacity”?
• 5. Factors that can affect the calculation of damages
• 6. What if I am inexperienced or still in school?
• 7. How to prove lost earning capacity in California

1. The difference between “lost wages” and “lost earning capacity”

California law allows for the recovery of both past and future lost earnings and income.¹

Income and earnings lost prior to the commencement of a lawsuit or the effective date of a settlement agreement are typically referred to as “lost wages” in California.

“Lost earning capacity,” on the other hand, refers to the loss of the plaintiff’s ability to earn money in the future. It is the amount the plaintiff would have been reasonably certain to earn if the injury had not occurred.²

Unlike lost wages, lost future earnings can be difficult to prove because the losses have not yet happened.

2. Does the injury need to be permanent?

Not necessarily. Lost earning capacity can be awarded whenever a plaintiff’s injury has not fully resolved by the date of a settlement or trial.

Typically, this will occur with serious or permanent injuries, such as traumatic brain injury, that are projected to continue for some time.

But it could simply be that a settlement agreement has been concluded fairly quickly in a case with an uncertain outcome.

3. How long do I have to sue for lost earnings in California?

Most personal injury cases have a two-year statute of limitations in California. But some causes of action have a longer or shorter limitations period. For instance, medical malpractice cases in California must usually be filed within one year.

The statute of limitations “accrues” – that is, the clock begins ticking – when the plaintiff discovers, or should have discovered, an injury.

If a plaintiff does not file a suit within the applicable statute of limitations he or she loses the right to sue for injuries.

In the case of a serious injury, however, the plaintiff may not have been able to return to work before the limitations period is up.

Lost earning capacity damages thus allow the plaintiff to recover for losses that extend beyond the end of limitations period.

4. What types of income are included in “lost earning capacity”?

Under California law, “lost earning capacity” is the difference between:

• What the plaintiff would have earned had he/she not been injured, and
• What the plaintiff will earn given his or her injuries.

Lost earning capacity can include (but is not limited to):

• Salary,
• Overtime pay,
• Commissions,
• Bonuses,
• Self-employment income,
• Raises,
• Vacation, personal or sick days,
• 401k or profit-sharing contributions, and
• Any other lost perks or benefits (such as a car allowance or free meals).

5. Factors that can affect the calculation of damages

Factors that go into determining lost earning capacity in California can include (but are not limited to):

• How long the injuries or incapacity is likely to last,
• When, if ever, the plaintiff can expect to return to his/her regular job,
• The plaintiff’s age,
• The plaintiff’s life expectancy (before the injury),³
• The number of working years before the plaintiff is likely to retire,
• The plaintiff’s health before the accident or injury,
• What the plaintiff earned in the past,
• Whether income was fixed or performance-based,
• The terms of the plaintiff’s employment contract, if any,
• Company policies regarding promotions, raises, cost-of-living increases, and other benefits,
• Opportunities for promotion in the plaintiff’s field,
• The plaintiff’s long-term employment goals and interests,
• The plaintiff’s performance reviews and talents, and
• Anything else that might be relevant.

6. What if I am inexperienced or still in school?

It is not necessary for the plaintiff to have a history of earnings in order to recover damages for lost earning capacity in California.⁴

Example: Kate, a 19-year old special education major, suffers a serious knee injury as the result of a skiing accident. She testifies that she intended to go to graduate school and then work with mentally retarded or physically challenged preschool children.

Kate’s doctor explains that Kate will need total knee replacement or fusion and must avoid activity that stresses her knees. Because working with disabled children necessarily requires physical dexterity and mobility, a can reasonably conclude that Kate’s future earning capacity will be impaired.⁵

7. How to prove lost earning capacity in California

Future lost earnings must be reasonably certain in order to be recoverable in a California personal injury case.

Although not necessary, proof of past income can be helpful. Useful documents include past years’ tax returns, pay stubs and employer’s letters.

But the proof of future lost wages can also include testimony from various people, including (without limitation):

• The plaintiff’s employer. An employer can testify about the plaintiff’s past history, work performance, and promotional opportunities.
• The plaintiff’s doctor. Doctors and therapists can explain the plaintiff’s before and after health and how the plaintiff’s injuries have affected his or her ability to work.
• A vocational rehabilitation expert. Expert witnesses are not always necessary in order to claim lost earning capacity.⁶ But, in appropriate cases, a vocational rehabilitation expert can testify regarding treatment the plaintiff will need and whether and when the plaintiff will be able to return to work.
• An expert economist. An economist can establish salary trends in the plaintiff’s field of work or study and what the plaintiff could have expected to earn.
• Friends, family and co-workers. People who know the plaintiff personally can talk about what the plaintiff was like before the injury — including life goal, interests and activities.

Injured in California? Call us for help…

If you have suffered a serious injury in California from an accident, product defect, or someone else’s wrongful act, you may be entitled to compensation for lost earnings.

Call us to schedule a free consultation with one of our lawyers.

Or complete the form on this page and an experienced California injury lawyer in your area will call you back at a mutually convenient time.

We can also help you if you need to recover damages for lost earning capacity in Nevada and recover damages for lost earning capacity in Colorado.

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