Loss of Income After an Injury in California

December 21, 2022 | Article by Chain | Cohn | Clark staff | Tips & Information

Loss of Income After an Injury in California

Personal injury accidents can happen anywhere at any time. While there are certain precautions you can take to protect yourself, there are some events you cannot prevent. 

If you are the primary source of income for yourself or your family, it’s important that you continue to work and earn money. If you sustain an injury and can no longer work, your family may be in serious financial trouble. 

Depending on the nature of your accident, you may be entitled to recover lost income damages from the liable party. Chain | Cohn | Clark is here to help you determine if you have a case and walk you through the steps of a lawsuit to procure compensation. 

What Are Lost Wages?

In California, lost wages are defined as any income that would normally be gained from work, but cannot be due to the injured party’s current injuries. Any form of payment that an employee is unable to receive should be compensated. Also referred to as “out-of-pocket” losses, lost wages usually represent past income that has already been lost at the time of the lawsuit.

Below are some examples that qualify as lost wages in California: 

  • Income from self-employment or contract work
  • Hourly wages or salary payments from an employer
  • Overtime wages that would have been earned
  • The value of sick days, personal days, paid vacation days, etc. 
  • Any bonuses, commissions, or tips that would have been earned
  • Equal value of additional job-related benefits, such as per diem expenses, car allowances, etc. 

The loss of wages is much easier to quantify if the injured employee has already returned to work by the time benefits are awarded. If there is a set period of time to work with, it comes down to simple multiplication. If the individual is still unable to return to full-time employment at the time benefits are awarded, the situation may get more complicated. 

Another part of calculating loss of earnings is suing for the loss of potential income. This is money that may be missed out on in the future if the injury continues to prevent the employee from returning to work. 

What Is Loss of Earning Capacity?

This more abstract value is referred to as “lost earning capacity,” as it represents the money an injured employee will not be able to earn in the future. Some disabilities require mild treatment and heal over short periods of time. Others may take years to heal, or in some cases, not heal at all. 

When determining the future loss of wages, the parties involved must consider a variety of factors, mainly how long the disability will last and how much it impedes—and will continue to impede—the individual’s ability to work. 

Without too much speculation, lost earning capacity is meant to cover the money you would have been reasonably certain to earn if not for your injury. This benefit is meant to supplement your income for the remainder of your recovery. More severe and permanent injuries will typically result in higher personal injury settlements. 

It is also important to note that loss of potential earnings covers you in altered employment situations. Suppose you were previously making $120,000 per year as a hands-on engineer. Then you got into a car accident which caused partial paralysis of your lower extremities, and as a result, you cannot walk or stand for extended periods of time. While your legs prevent you from doing your former job, your brain is still fully functional. Your boss moves you to a consulting position for the engineering firm, which pays $80,000 per year. Lost earning capacity damages will provide you with an additional $40,000 per year to account for the difference. 

Similar to lost wages, lost earning capacity also takes into consideration bonuses, raises, profit-sharing contributions, and other benefits you would have received in your former position. Your financial standing prior to your injuries will be an important factor in determining your loss of income damages. 

How to Prove Loss of Income

The most important piece of recovering money for your lost income is proving to the insurance company of the liable party that you deserve it. This means building a strong connection between the liable party’s actions and your inability to work regularly. 

Numbers and figures from previous work efforts typically speak for themselves. You will not have to argue that you should get $1,000 for the week you missed if you have pay stubs showing you earned $1,000 a week for the last two years. The challenge is proving that you were unable to earn that $1,000 because of an injury which you were not at fault for. 

Proving Lost Wages

Proving that you deserve lost wages is similar to pursuing money for any other compensatory damages. You (the plaintiff) must prove that the negligence of another party (the defendant) led to injuries that prevented you from earning your regular income. It is your responsibility to show that, if the injury had never happened, you would have received the money in question. 

This argument must be backed by documentation clearly showing how much you missed out on. Any of the following documents may serve as evidence for lost wages:

  • Employment contracts
  • Pay stubs from employers
  • Expert testimony explaining that you could not work
  • IRS and California Franchise Tax Board income tax returns

Once you have proven that you missed out on a specific amount of money due to the defendant’s negligence, you can move on to determining your loss of future wages. 

Proving Lost Earning Capacity

Lost earning capacity can be difficult to prove because it is a speculative value. Especially if you were on track to advance your career or make more money, it will take more than proof of former wages to receive the proper benefits.

In some cases, your employer may need to provide testimony outlining the quality of your work and any pending promotions. You may need to bring on an expert economist who can portray your position relative to the industry trends. A medical professional is necessary to describe what your health was like prior to the accident, and how the accident affected your ability to work. You may also need to bring in a rehabilitation expert that can explain your anticipated recovery.

It takes a cohesive team to secure adequate damages for lost earning potential. The lawyers at Chain | Cohn | Clark have deep connections throughout California, meaning our attorneys can leverage the necessary experts for your case. 

Self-Employed Loss of Income

Individuals who work as their own boss and track their own earnings must submit a proof of loss of income letter to receive benefits in California. As there may not be an official record of their wages or salary, it will be the responsibility of the independent worker to prove how much they were making prior to the injury. This can be done with tax documents, invoices, and any other documents that indicate consistent earnings.

In a loss of wages lawsuit, you are typically fighting for compensation from an employer or another person’s insurance company. In these situations, you will need to negotiate other terms of a settlement in addition to the loss of income.

When submitting a loss of income claim for your own business, you will do so separately from pursuing compensation for medical expenses and other damages.

Does Workers’ Comp Pay for Lost Wages in California?

If your injury occurs at work or while performing work duties, the amount of lost wages you can recover in California will change. In a personal injury case, you can retrieve the full value of money you lost while injured, as well as the full value of potential earnings you may lose in the future. 

In a workers’ compensation case, however, the maximum value of lost wages you can recover from your employer is two-thirds of your wages. Your disability compensation will be determined based on your average gross wages and the length of time your injury is set to last. 

The silver lining in workers’ compensation cases is that workmans’ comp insurance is purchased to cover workplace injuries. This means you can recover lost wages simply by proving you were not responsible for the accident.

If neither you nor your company was at fault for the accident, you may be able to pursue a personal injury case against the liable party. For example, if you were driving a company delivery vehicle and a drunk driver hit you. You were hurt while performing work duties, and are therefore covered by workers’ compensation. However, you may also be entitled to pursue damages from the drunk driver. 

Although the workers’ compensation lawsuit in this case may be easier, it will not yield the same benefits as a personal injury case. In situations like this, you should consult an experienced lawyer for more information on how to proceed. 

Chain | Cohn | Clark Can Help You Recover Lost Income

If you sustain an injury in California that prevents you from earning the same income in the future, contact one of our Bakersfield personal injury lawyers. We have the knowledge, experience, and resources to help you get your life back on track. 

Sometimes there is no treatment for an injury. You may be facing a lifelong disability caused by another party’s negligence. Your earning capacity will be permanently affected and there’s nothing you can do to increase it. This is an example of when you should contact Chain | Cohn | Clark for legal assistance. While money may not repair everything, it can grant you peace of mind that you and your family will be taken care of financially.

We’re not just here to win a case, we’re here because we want you to have the necessary resources to continue your life.