Calculating Lost Wage Claims
Whether you are in a car wreck, slip and fall, or an on-the-job accident, knowing how to document evidence of your lost wages in order to prove your wage loss claim to an insurance adjuster or ultimately prove your lost wage claim to a jury can be the difference in whether you truly receive just compensation for all of your injuries and damages caused by another’s negligence. However, not all claims for loss of earnings are the same. Some are simple to document and prove while others are dependent upon variable factors like total commissions generated or percentage of sales closed in a period. If you are not working and generating the income upon which the sales calculations or commissions are calculated, how do you prove your lost income? This article will talk about proving simple lost wage claims first, then explore tricks that personal injury lawyers use to prove your lost wages when your wages are not so cut and dry as a simple paycheck.
Understanding What You Are Entitled To Claim in the Calculation
In order to understand the calculations, first you need to know exactly what you are entitled to claim. In Texas, you are entitled to be reimbursed the amount you more likely than not would have received in earnings minus what you would have paid out in taxes on that money. Not all states require that you claim the after-tax loss, so this is important to determine for your state. You can claim time off for medical visits, doctor’s appointments, time at home recovering, and time you had to leave early. Always get a doctor’s note when possible for time taken off. Insurance companies are less likely to fight you when the time is independently verified as needed by a doctor. You may also claim lost profits and lost commissions, but proving these falls under proving complex lost wage claims.
How do You Calculate a Lost Wage Claim?
In most cases, your lost wage claim can be calculated by multiplying your average hourly rate times the number of hours you missed. If you are paid hourly, you will know the hourly rate. If you are paid a salary, you will need to divide a normal paycheck (from before your injury) by the number of hours worked to determine your average hourly rate. Then multiply that by the number of hours you missed. It is important to note this is not the same thing as a wage theft claim–where your employer does not pay you what you are owed. Damages are calculated entirely differently.
What Evidence Will I Need to Support a Basic Lost Wage Calculation?
The evidence you will need to gather is the paycheck for a few of the prior pay periods (to show what you were earning regularly) and the paychecks after the pay period showing what time you missed. A letter from your supervisor detailing days missed can also be used if the paycheck does not accurately portray time off. It is wise to keep a log of the time you take off and where you are so you can compare it to your employer’s records if need be. Employers do not always keep good records of what you are doing on your time off so they may reflect it as “vacation time” in their records. An insurance company may fight the claim based on this sort of documentation without independent verification from your employer. The negligent party is not entitled to a deduction for sick leave or vacation time you used. Suffering at home is not a vacation and they are likewise not entitled to benefit from the sick leave insurance you worked to earn.
Your paycheck will typically reflect withholdings. So if you take the after-tax earnings and divide it by the total number of hours worked in the pay period as reflected by the check, this will give you your average hourly earnings. If you commonly worked overtime and you missed this too, you are entitled to claim it. However, you will likely need to submit several paychecks showing that you regularly worked overtime.
Can I claim my lost wages if I used my sick leave or PTO while I was off work?
Yes. PTO is something you worked to earn to use at your choice, not some negligent actor’s choice. It is supposed to be there for taking off when you are ill. Some employers even allow you to get paid for it if you don’t use it because it is yours. The defendant is not entitled to benefit from something you earned that they took away from you.
How Do You Calculate a Lost Wage Claim When You are not Paid a Salary or Hourly Rate?
If you own your own business, are paid on a commission basis, or otherwise do not draw a simple set salary or hourly rate, calculating and proving your lost income after an accident can sometimes be very challenging to pinpoint. Sometimes you must use multiple forms of documentation and even bring in expert testimony depending upon the nature of the business and the nature of your earnings. If you were only out for a short time, then calculating a loss based on your base salary or paycheck as was done in the simple lost wage claim calculations may be your best option. However, for longer loss periods this will not work.
How do I Calculate Lost Commissions and Lost Profits?
There are two commission models to consider. When you work on a base salary plus commissions you will be able to calculate part of your losses in the same manner as in the simple lost wage claims. You simply use your base salary to determine the average base income, multiply it times the hours missed that you can document, and there you have it. For the commission’s side whether you have a base or not, these calculations can be very tricky. The Texas Supreme Court has been kind enough to strike down lost wage and lost earning calculations they deemed too speculative, but they have not given a lot of guidance on what is not too speculative. As a result, there are several methods that have been used, however, when it comes time for court you will likely need a qualified expert witness. If you are claiming a future or ongoing loss, this can get even trickier.
Can I Use Past Commissions to Project Present and Future Losses?
In a very straightforward commission-based in-person sales job, you can obtain records of your past commissions and use those to calculate an average. The problem here is that a number of factors such as a business’ growth and market forces can affect what commissions you earn at any particular time. For example, some sales jobs produce better in the summer than in winter. Another struggle with many sales and commission-based pay models is that sales do not always happen immediately. The key is that you need to come up with a logical way to project what you would have earned as accurately as possible based on your past years. This may require analyzing several years of earnings for consistency and/or ruling out other things going on in the world that might also be affecting your earnings such as a COVID shut-in or a bubble burst in the real estate market causing sales to cool off.
In these types of cases, we have used year-over-year comparisons in some, and month-over-month comparisons in others. In some situations, you have no earnings history so neither work. This is a big problem.
How Do I Project Lost Profits and Future Lost Earning Capacity?
Loss of earning capacity is the loss that may occur to you or your business due to an accident. Being a business owner can add even more challenges than the above two situations. You may have some of both of the above types of earnings plus bonuses at year-end. Here is the most important thing to remember, if you are in a car accident, your business does not have a cause of action for lost profits. You have an earnings loss claim. As a business owner who can no longer work, you need to take all steps to keep the business going. That may mean hiring someone to replace you while you cannot work. The salary you pay that additional person is likely the salary you would have gotten had you been able to do your job. You may be able to claim this as a reduction in your anticipated profit draw from the business.
In some situations, the employee is the business. An independent real estate agent may have lost commissions because they had to turn down clients. Those clients won’t always go to someone else you hire or recommend. In these situations, calculating your losses becomes very complex and beyond the layperson’s understanding. You will need an expert witness to satisfy the Court that there is a reliable basis for your claims and calculations.
The Economist Expert Witness to Calculate Loss of Earning Capacity
The role of an economist as an expert witness is to explain to the jury using accepted methods a rational way to project the losses with some degree of accuracy. If the expert does not use generally accepted principles of accounting or his methodology is deemed too speculative by the Court, his testimony is subject to being challenged and stricken. Thus you must pick a well-qualified economist to perform your calculations. Untrained individuals are prohibited from giving expert opinions on these sorts of matters.
Your economist will want to review all the company books, tax records and documentation, ledgers, calendars, contracts, letters(emails) of inquiry for turned-down jobs, and any other evidence you have that might tend to support your claim. Once he has reviewed all of the records, he may be able to give you an accepted way to calculate your loss.
Additionally, you need to be aware that you may only claim the after-tax loss even on future loss claims. AN expert economist can help you do this.
Hiring expert witnesses to prove your case is never cheap but it is critical to many of these types of claims. Furthermore, you will need a skilled and reliable attorney who understands the evidentiary requirements to make sure the testimony is likely to meet the court’s minimum evidentiary standards to go to a jury. That is where our Christian trial lawyers can help.
How a Lawyer Can Help if Your Loss Is Due to an Injury
Attorneys who handle personal injury claims in Texas will often have access to expert economists whom they rely upon to perform lost wage and lost wage earning capacity calculations in complex cases. We can help you accurately calculate these amounts and present a claim for them to the appropriate insurance company. Additionally, if you suffered a loss of income due to an accident caused by someone else’s negligence, you may have the right to seek compensation from the negligent party for more than just the lost income. Talk to a Texas personal injury lawyer to determine your rights with a free case review. Our attorneys charge no attorney fee and no attorney expenses to you unless a recovery is made. Call 800-298-0111 today.