In a California personal injury lawsuit, lost wages refers to income you would have earned had the defendant not injured you through their wrongful act. Lost wages are generally easily to calculate since they are based on what you were earning at the time of the accident.
Here are five key things to know:
- Your recent pay stubs, employment contract, and/or tax returns are used to determine what your lost wages amount to.
- California law allows you to recover lost wages in not only personal injury cases but also wrongful termination cases.
- In labor law cases, this is sometimes referred to as back pay or back wages.
- After an accident, you can also seek anticipated future losses of income – referred to as lost earning capacity.
- Lost wages and lost earning capacity are “compensatory damages” you can recover for a defendant’s negligence, gross negligence, recklessness, intentional wrongful acts, or strict liability.
To help you better understand how to recover lost wages in a personal injury case, our California personal injury lawyers discuss the faqs below:
- 1. What are “lost wages”?
- 2. What’s the difference between lost wages and lost earning capacity?
- 3. How long do I have to file a claim for lost wages in California?
- 4. How are lost wages calculated?
- 5. Are lost wages taxable?
- 6. How do I prove the amount of my wages?
- 6.1. A “lost wages letter” from a California employer
- 6.2. Past pay stubs and tax returns
- 6.3. Proving lost self-employment income
- 6.4 Lost personal days, sick days and vacation time
- 6.5. Lost overtime, commissions, or bonuses
- 6.6. How can I prove income from tips in California?
- 6.7. Can I recover unemployment insurance benefits?
- 6.8. Special rules in employment-related cases
You may also wish to read our article on Recovering Damages for Wrongful Termination in California.
Lost wages in California include all amounts you would have earned from work had you not been injured.
“Lost wages” can include (without limitation):
- Regular pay (hourly or salary),
- Overtime pay,
- Self-employment income,
- Vacation, personal or sick days, and
- Any other lost perks or benefits (such as a car allowance or free meals).
“Lost wages” usually refers to past income lost as the result of a personal injury. It is your out-of-pocket losses up until the date of
- settlement or
California law also allows you to sue for the income you will be unable to earn in the future due to an accident or injury. This amount is usually referred to as “lost earning capacity” in California.
Proving lost earning capacity can be more complicated than proving lost wages. It often requires testimony from a medical and/or occupational expert in order to account for
- bonuses and
- career development.
California’s statute of limitations in personal injury cases is generally two years.1
Some types of injuries have statutes of limitations that are longer or shorter, however. Medical malpractice claims, for instance, have a statute of limitations that can be as short as one year.2
An experienced injury lawyer can help you determine how long you have eligibility to sue for lost earnings in California.
California law requires you to prove the amount of the earnings you claim to have lost.3
When the injury is for a relatively short, fixed period of time, the calculation is fairly straightforward.
Though if you were due for a raise or paid based on performance, it may require the testimony of a
- forensic accounting or
- occupational expert.
A jury may also award prejudgment interest on lost wages of any kind, though it is not required to do so.4
Damages for lost wages are taxable in a California personal injury case – at least in theory.
Internal Revenue Code section 104 provides that gross income for tax purposes does not include
“the amount of any damages (other than punitive damages) received… on account of personal physical injuries or physical sickness.”5
Courts have generally held this to exclude compensation for lost wages. The lost income would have been taxable if earned and is, therefore, taxable when recovered in a California personal injury lawsuit.6
In practice, however, California personal injury settlements are often a lump sum that is not allocated between
- physical injuries and
- lost wages.
This can make it difficult to determine whether, or how much, taxes are owed.
Consultation with a tax professional is recommended to determine what, if any, portion of a California personal injury settlement is taxable.
There is no one way to prove lost wages in California. Some of the most common are:
If you have regular employment, the easiest way to prove lost wages is with a combination of
- past pay stubs and
- a letter from your employer.
A “lost wages” letter from a California employer should set forth:
- Your job title,
- The date on which you were hired,
- Confirmation that you are or were an employee as of the date of the injury or accident,
- The number of hours you normally work (or worked) per week,
- Your regular rate and frequency of pay (for instance, $25/hour),
- The overtime rate, if any, to which you are entitled and the number of overtime hours normally worked per week,
- The number of days or hours of work you missed (including time missed because of doctor appointments, physical therapy, etc.),
- Sick and vacation days you had to use for the injury,
- Any amounts you could reasonably have expected to receive in overtime pay, commissions or bonuses during that period, and
- Any other perks you would have been entitled to but did not receive (such as a car allowance).
Sometimes it is difficult to get a letter from your employer. Or you may
- be self-employed or
- have irregular income.
In such cases, you can establish lost wages by other means, such as
- past pay stubs and
- income tax returns.
They can use California Form FTB 3516 to get copies of past California tax returns from the California Franchise Tax Board.
If you have not kept copies of pay stubs, your California personal injury attorney can obtain copies during the California discovery process.
To recover lost self-employment income in California, you will need to prove what you would have made during the period in which you were unable to work.
Documents that can help establish lost self-employment income include:
- Tax return statements for prior years,
- Billing statements for the months preceding the accident or injury, or,
- If income is seasonal, billing statements for the same period during preceding years.
If your income is very high or complicated, a forensic accounting expert witness will often need to testify.
Our California injury lawyers work with a number of experienced forensic accounting experts qualified in various fields.
If you used personal days, sick days or vacation time to cover missed days and/or doctor/therapist appointments, you can claim them as lost wages.
If not for the defendant’s wrongful act, you would have had those days to use whenever you liked. You may even have been able to cash them out, depending on the employer’s policy.
As with other forms of lost wages, you will need to prove the time was lost due to the accident or injury in order to recover damages.
Overtime pay, commissions, bonuses and other perks can be claimed as lost wages in California.
Common methods of proving this more speculative income include (but are not limited to):
- Past pay stubs showing a pattern of overtime pay or bonuses;
- A written employment contract;
- Proof of an employer’s policies for such income;
- An employer letter specifying the amount you would have been expected to receive; and
- Proof that any conditions for earning the extra income were (or would have been) satisfied.
Example: After a slip-and-fall accident resulting in a head injury, Meg, an executive assistant, misses three months of work. Meg’s employer writes a letter saying that Meg averages 15 hours of overtime per month. Meg also produces copies of her year-to-day pay stubs and her prior years’ tax returns. As a result, Meg receives both her regular salary and 45 hours of overtime as the lost wages part of her California personal injury settlement.
Proving lost tips is more difficult than proving lost salary and overtime, but it can be done.
Common ways of proving lost tips in California personal injury cases include (but are not limited to):
- An employer’s letter setting forth the amount you could have expected to earn;
- Proof of income from prior pay periods (for instance, by showing regular bank deposits on the day after payday);
- Prior tax returns; or
- Reports from a private investigator’s visits to your workplace.
Note that proving income that was never reported on a tax return could, in theory, expose you to a claim for back taxes by the
- IRS or
- California Franchise Tax Board.
If you are in this situation, you are advised to consult with a certified public accountant or other tax professional.
In order to be eligible for unemployment benefits in California, you must, among other requirements:
- Be physically able to work, and
- Be available and actively looking for work.
By definition, someone claiming lost wages was not able to work in the past. In such a case, therefore, you would usually be expected to file for California disability benefits rather than unemployment.
In some cases, however – such as being unable to work affecting your ability to earn enough base wages for future unemployment benefits – you may be able to claim lost unemployment benefits in a California injury case.
If you were injured on the job in California, you may be limited to recovery under California’s worker’s compensation laws.
Our office offers free consultations to help you determine whether you can sue for lost wages under another legal theory.
For additional help…
We represent Californians in Los Angeles, San Francisco, San Diego, Sacramento, and throughout the state of California.
Call us or complete the form on this page to discuss your case with a California injury lawyer today. We can meet in person or virtually during the coronavirus pandemic.
We can also help you if you need to recover lost wages in Nevada.
- Employment Development Department (EDD.ca.gov) – news releases, job openings, and filing unemployment claims / UI online
- Pandemic Unemployment Assistance (PUA)
- The Lost Wages Assistance Program – The Lost Wages Assistance (LWA) Program expired in 2020. It provided eligible claimants with a supplemental payment of $300 per week. And claimants could receive LWA payments for up to six weeks.
- California Policy Lab
- Social Security Administration (SSA)
- See California Code of Civil Procedure 335-349.4.
- California Code of Civil Procedure 340.5.
- See, for example, California Civil Jury Instructions (CACI) 3903C.
- California Civil Code 3288. See also Chan v. Curran (CA Courts of Appeal, First Appellate District, Division One, 2015) 237 Cal. App. 4th 601.
- 26 USC 104 (a)(2).
- See, for example, C.I.R. v. Schleier, 515 U.S. 323 (1995) (“Recovery for back wages does not satisfy the critical requirement of being “on account of” any personal injury, and no personal injury affected the amount of back wages recovered.”)