Bonuses not received
Benefits affected (lost vacation accrual, lost retirement contributions, lost employer-paid health coverage) Self-employment income reduced Side income not earned The calculation is relatively concrete: actual income missed from injury date to present. Loss of earning capacity (future) Compensation for your reduced ability to earn money going forward due to your injury. This isn't about lost income — it's about lost ability to earn income. A 30-year-old construction worker whose back injury prevents physically demanding work has a major loss of earning capacity claim, even if they get a desk job that pays the same wage. They've lost access to higher-paying physically demanding jobs they could have pursued. A high-paid surgeon whose hand injury ends their surgical career has a massive earning capacity loss, even if they can practice as a non-surgical physician at lower pay. The calculation is more complex: projecting the difference between potential career earnings and reduced potential earnings. Calculating past lost wages For employees, past lost wages are relatively straightforward. Hourly employees The basic calculation: Lost wages = Hourly rate × Hours missed Documentation: - Pre-injury hourly rate (typical pay stubs) - Hours scheduled but missed (employer verification) - Holiday/overtime that would have been worked - Regular shift premiums For most hourly workers, calculating past lost wages requires: - Employer verification letter - Pay stubs from 3-6 months before injury - Employment time sheets showing pre-injury hours - Documentation of work missed Salaried employees Slightly more complex because salary continues: - - - - ## Lost wages = Salary × (Days missed / Working days per year)
Or, if employer paid sick leave during recovery: Lost wages = Sick leave used (value) The argument here is that sick leave is a financial benefit you earned and "spent" on this injury. You should be compensated for the use of that earned benefit. Tipped employees Servers, bartenders, and other tipped workers require additional calculation: Base wage component (typically lower than minimum wage) Tips averaged over recent period (typically 3-6 months pre-injury) Combined daily/weekly earning estimate Tax returns help establish actual tip income. Without tax documentation, claims become harder. Commission-based employees Sales workers and others on variable compensation require: Historical commission data (typically 12+ months) Pipeline analysis (deals that would have closed but for injury) Industry standards for commission rates Account-by-account analysis if appropriate Self-employed individuals The hardest calculation. Documentation typically includes: Tax returns from prior years (3-5 years preferred) Profit and loss statements Bank deposit records Client lists and lost engagement documentation Industry comparison data Self-employed plaintiffs often face skepticism about claimed losses. Strong documentation is essential. Multiple income sources Many people have: - Primary job (W-2 wages) - Side business or 1099 income - Investment income - Other sources - - - - - - - - - - - - Each requires separate documentation. Generally, only income you would have actively earned through work is recoverable. Investment income isn't typically affected by physical injury. Calculating loss of earning capacity This is where the heavy expert work happens. The basic framework Loss of earning capacity = (Earnings you would have had over working life) − (Earnings you'll actually be able to have) The challenge is projecting both numbers. What you would have earned This requires: Your education and training Your work history and trajectory Your age and projected working years remaining Industry growth or decline in your field Promotion paths and pay progression typical in your career Geographic factors affecting compensation What you'll actually earn This requires: Medical opinions about functional limitations Vocational assessment of work you can still do Labor market analysis for jobs you can fill Education or retraining needed Wage potential in available alternative jobs Vocational rehabilitation experts These specialists assess: Your current functional capacity (what you can physically/cognitively do) The labor market in your area Specific jobs you can perform with your limitations - - - - - - - - - - - - - - ## Realistic wage potential in those jobs
Whether retraining could expand your options Vocational reports typically run 30-50 pages and form the basis for earning capacity calculations. Economists Once vocational experts establish wage differentials, economists project: Annual earnings under both scenarios Career length and retirement timing Inflation and wage growth Present value calculations Tax considerations The economic report converts vocational findings into specific dollar amounts. Example: How loss of earning capacity calculations work Let's run through a concrete example. Plaintiff: 35-year-old construction supervisor Pre-injury earnings: $85,000/year Pre-injury career trajectory: Could have advanced to senior project manager ($120,000-$140,000/year) by age 45 Working years remaining: 30 (to age 65) Injury: Severe back injury preventing physically demanding work Vocational analysis: - Plaintiff cannot return to construction supervision (requires standing, walking, occasional lifting) - Could work in office-based scheduling or estimating roles - Realistic wage in alternative work: $45,000-$55,000/year - Limited career advancement potential in new field - Cannot pursue the project management track he was on Projection: Pre-injury career path: - Years 1-5: Continue current job at $85K → projected $95K (modest raises) - Years 5-10: Promotion to senior supervisor at $105K → $115K - Years 10-30: Senior project manager at $125K-$145K with progression - Total nominal projected earnings: approximately $3,800,000 Post-injury earning path: - Year 1-3: Retraining period at reduced earnings ($35K average) → $105K total - Years 4-30: Office-based work at $50K average → $1,350,000 - Total nominal projected earnings: approximately $1,455,000 Loss of earning capacity: - Nominal: $3,800,000 - $1,455,000 = $2,345,000 - Present value (4% discount rate): approximately $1,400,000 - - - - - - - This $1.4M loss of earning capacity claim — separate from past lost wages, medical expenses, and pain and suffering — represents the majority of the case value. What insurance companies argue Defense strategies typically include: "The plaintiff can work in their previous job" Defense vocational experts may opine that: - The plaintiff's limitations aren't as severe as claimed - Workplace accommodations would allow continued work - The plaintiff hasn't sufficiently tried to return to their previous occupation "The wage differential is overstated" Defense may argue: - Pre-injury career projection is too optimistic - Post-injury earning potential is higher than claimed - The plaintiff could pursue better-paying alternative work - The plaintiff is choosing not to maximize earnings "Pre-existing conditions affect career trajectory" If the plaintiff had: - Health issues that would have ended their career anyway - Job performance problems - Pattern of voluntary unemployment Defense argues these factors reduce earning capacity damages. "The plaintiff hasn't mitigated damages" Plaintiffs have a duty to "mitigate" damages — meaning to reasonably attempt to reduce their losses. Defenses argue: - The plaintiff should have looked harder for work - The plaintiff should have pursued retraining sooner - The plaintiff should have accepted available accommodations "Life expectancy or work-life expectancy is shorter" Defenses sometimes argue that: - The plaintiff wouldn't have worked until typical retirement age - Health conditions, lifestyle factors, or family history reduce expected working years - Therefore lost earning capacity should be calculated over fewer years Documentation needed To support both lost wages and loss of earning capacity claims, gather:
Employment records
Pay stubs (current and historical) W-2 forms for past 3-5 years Tax returns Employer verification of wage rates and hours Performance reviews showing trajectory Promotion/raise history Career trajectory evidence Education and certifications Industry licenses Training records LinkedIn or similar professional profile Resume showing career progression Medical evidence Treating physician opinions about work capacity Functional capacity evaluations Specialist opinions about specific limitations Permanent impairment ratings Vocational evidence Vocational rehabilitation expert report Labor market analysis for your area Specific job analyses for available positions Economic evidence Economist report with detailed calculations Industry wage data Inflation and wage growth projections Present value calculations - - - - - - - - - - - - - - - - - - - - - - ## Special situations
Recently graduated plaintiffs Plaintiffs early in careers face challenges: - Limited earnings history - Career trajectory must be projected from education and intentions - Industry data must substitute for personal history Strong documentation of educational achievements, internships, and stated career plans help. Stay-at-home parents Stay-at-home parents face unique challenges: - No current earned income - "Replacement value" of home services can be claimed - Return-to-work plans (if any) factor in - Often undercompensated by insurance companies Skilled attorneys document the actual economic value of home services and any intended career resumption. Retired plaintiffs For retired plaintiffs: - Earning capacity claims are limited - Some part-time work plans may be compensable if documented - Volunteer activities affecting future earnings are limited High earners Very high earners face their own challenges: - More skepticism about projections - Greater scrutiny of pre-injury performance - Defense argues maximum earning years were behind plaintiff - Career trajectory must be carefully documented Frequently asked questions Can I recover lost wages even if I have sick leave? Yes. Sick leave is a benefit you earned. Using it for an accident-caused injury is a real loss — that sick leave is no longer available for future use. Arizona generally allows recovery of sick leave used. What if my employer kept paying me while I was injured? Some employers continue paying employees during injury recovery. You can typically still recover the value of work missed, though this depends on specific employment arrangements. Discuss with your attorney. What if I lost a job because of my injury? Loss of the job itself can support both lost wages (the income you stopped receiving) and earning capacity claims (the reduced future earnings from being out of work). The circumstances matter for both calculations.
How long does it take to develop earning capacity projections? Expect 2-4 months for vocational evaluation, economic analysis, and report preparation in most cases. Catastrophic cases can take longer. Can I recover both lost wages and loss of earning capacity? Yes. They cover different time periods. Lost wages covers past income missed. Loss of earning capacity covers future earning ability. They're additive, not alternative. Are these damages taxable? Lost wages for physical injuries are generally tax-exempt under IRC Section 104(a)(2). However, loss of earning capacity damages may have more complex tax implications. Consult a tax professional for your specific situation. What if I'm fired after my injury? If you're fired in retaliation for an injury claim or because the injury prevents work, you may have additional employment-related claims separate from your personal injury case. Discuss with your attorney. This article is for general informational purposes only and does not constitute legal advice. To discuss your specific situation, contact Saguaro Injury Law at (623) 887-2002 for a free consultation or take our free case review. Hablamos español. Past results do not guarantee future outcomes.
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*Disclaimer: This article is for general informational purposes only and is not legal advice. Reading it does not create an attorney-client relationship. For advice on your specific situation, please contact a licensed Arizona attorney. Past results do not guarantee future outcomes.*