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How are Lost Wages and Lost Earnings Calculated after a Car Accident

Major car truck accident in cartoon form with cars from the accident scattered like popcorn out of a bag

Car Accident !!!! - Crash !!!! - Serious Injuries - How are Lost Earnings Calculated?

Car Accident Attorney Daniel Horowitz Explains

You've had a car accident and your injuries are serious.  Everyone knows that you get compensated for your "pain and suffering".  But sometimes, lost earnings, lost wages, lost future income is a larger number than your pain and suffering.  Here's how it works.

You are Not Alone

The National Safety Council tracks accidents and they have some interesting statistics on their website.  Did you know that cars are much safer now.  Okay, you knew that but did you know just how much safer they are?  

 The NSC says that "Between 1913 and 2022 motor-vehicle deaths per 10,000 registered vehicles decreased 95%, from 33 to 1.50, respectively. In 1913, only 1.3 million vehicles were registered, and 4,200 people died on the road. In 2022, 283 million vehicles were registered, and 46,027 people died on the road."  So you are less likely to die but keep in mind that the high speed impacts of modern cars still tear muscles and tendons even without a single broken bone.  We also see doctors more than ever after a car accident.  The NSC says "Medically consulted injuries in motor-vehicle incidents totaled 5.2 million in 2022, and total motor-vehicle injury costs were estimated at $481.2 billion. Costs include wage and productivity lossesmedical expensesadministrative expensesmotor-vehicle property damage, and employer costs."   The wage and productivity costs are the most difficult to calculate but a top lawyer for an accident case focuses in on those damages.

The Most Basic Method of Calculating Lost Wages after a Car Accident

To calculate lost earnings after a car accident many people just figure their losses this way

    • Multiply your hourly wage by the number of hours you missed due to the accident.
    • Example: If your hourly wage is $20 and you missed 3 days (8 hours per day), your calculation would be:

      $20×(8 hours × 3 days)=$480

This is a trap and the insurance company that negotiates with you hopes you see things just this way.  Losses are always more than dollars earned per hour times hours lost.  People overlook this because the standard phrase for car accidents is "pain and suffering".  "Ohhhhhh my neck hurts."   "Ohhhhhhhh, I have disc problem."   Never stop here and remember that it is child's play to imagine arguing for pain and suffering from an accident. It is simply expressing human emotion, pain, loss of dreams .... well maybe it's not child's play after all.  The best personal injury trial lawyer can express those losses poetically and powerfully.   

Still, the hard dollars and cents financial losses can be the backbone of an injury case.  High financial losses can support high pain and suffering awards.

But wage loss and future earnings are more technical.  This means the best accident lawyers put a lot time and energy into documenting these losses.

Wage Loss & Lost Earnings after a Car Accident are Complicated

Lost earnings are often overlooked in car accident cases.

This is especially true in law firms that “paint by numbers” and handle a mass number of cases. In many instances the work losses are much larger than the personal injury losses. A student who had a rugby scholarship could lose that scholarship because of a broken rib. The rib might heal the but scholarship might be gone. That can be “wage loss” of $ 200,000.

But wage loss can be complicated than that. If Mark Cuban were put out of action before he became a success, who could foresee that he would later be a billionaire. As an up and coming potential super success, how do you calculate the loss of what might never be?

Remember there is wage loss and earnings capacity (future growth in earnings)

Here are some of the rules governing wage loss in a car accident.

Loss of Earning Capacity - Economic Damages Determination

The rules for determining loss of earning capacity as a form of economic damages generally focus on assessing the difference between an individual's potential earning capacity before and after an injury. See: Lewis v. Ukran, 36 Cal.App.5th 886 (2019) This can be tricky. If you are an entrepreneur or a Formula 1 or NASCAR driver (no Brandon jokes please!) you may make a ton of money - or not, so how does your potential for being a big winner play in to a settlement if you are out of action for a year or more? Remember this is not a simple “lost wages” calculation, it is a future earnings prediction.

This calculation is not strictly based on past earnings but rather on the potential to earn, taking into account various factors such as the individual's skills, age, health, and the nature of the injury. Put more simply, loss of earning capacity is defined as the difference between what an injured person's earning capacity was before the injury and what it is after the injury. See: Lewis v. Ukran, 36 Cal.App.5th 886 (2019)

What is the Legal Standard for Awarding Damages

A plaintiff (that's you, the injured person) is eligible to recover damages for loss of earning capacity only if it is "reasonably certain" they will suffer future earnings loss. See: Andler v. Clear Channel Broadcasting, Inc., 670 F.3d 717 (2012) Sometimes the loss is easy. According to Zip Recruiter an employee at Home Depot in California makes about $20.31 an hour. Walmart averages about $ 19.00 an hour.

You can get information showing how those wages rise over time but what about future dreams. The $ 20.00 an hour worker may wish to progress to management. The Walmart employee of today may move into logistics, take a college course and earn $ 100 an hour. If the person is out of work for a year or longer, how do you factor in the future dreams?

What About Athletes?

The average NFL salary is about $ 2.8 million. So if there is a car accident and the injured person is out for one year their job can be the biggest factor in the auto settlement. In many ways this is not fair. A human life, personal suffering is the same regardless of how you are employed. An athlete is an athlete in terms of the pure joy they bring to us but a WNBA player makes $ 100,000 a year on average so again, the income greatly affects the recovery.

Once a player is in the pro sports world there are statistics that show pension accruals, duration of employment and growth of wages but there are intangibles. A certain number of players would stay and become coaches. If their career is ended how do you calculate damages for that possibility?

Landmines to Accident Earnings Recovery

There are lots of landmines as well. If wage loss is large the other side will consider your lifespan and consistency in terms of remaining on a job. How old were your parents when they died (or grandparents if your parents are still with us). What health problems do you have? Do you drink? How much? Drink and drive. The list of ways your wage claim can be undercut are endless.

IRS (Yes, You Pay Taxes)

Remember that with lost wages there are taxes. These damages are treated like wages. You pay state and federal income tax. Sometimes these awards are deferred so a million dollars does not go in your pocket all at once. You are paid two million dollars but this payment is made in pieces over time (say 15 years). You only pay tax when you get the money.

Daniel Horowitz is million dollar personal injury trial lawyer.  He settles the vast majority of his cases but he will always back his clients so that you get full and fair compensation for all of your injuries.  His top team of lawyers, paralegals and MBA ensure that your lost earnings are compensated properly.  There is never a fee until you recovery so call us for help.