Also known as: avg. annual earning capacity · average annual earnings capacity · earning capacity · lost earning capacity
Written by attorneys · grounded in primary & secondary sources — see below
A measure of an injured worker's typical yearly earnings before the injury. It is used to compute compensation for loss or impairment of earning capacity when actual wages in the year before injury do not fairly reflect capacity.
Ava Adebayo operated a small retail shop when a supplier's negligence destroyed her inventory and fixtures. She proved the value of the lost goods with invoices and showed that the closure during peak season reduced her ability to generate sales at her prior level. The court required her to establish the amount of pecuniary loss from harm to property and from impairment of earning capacity before awarding compensatory damages.
Alfred Ashford suffered a crushed hand on an assembly line. Before the injury he regularly worked overtime and earned production bonuses. After the injury he could no longer perform the physical tasks required for overtime. The court permitted recovery for the loss or impairment of earning capacity once he presented evidence of his pre-injury work history and the permanent physical limitation.
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Anita Ali was injured in a workplace accident that reduced her ability to work full shifts. She died from unrelated causes before trial. Her estate recovered damages only for the impairment of earning capacity she actually experienced between the accident and her death.
Austin Abbott received a compensation award based on his pre-injury wages. After acquiring new skills he returned to work at higher pay. The employer sought modification of the award on the ground that Abbott's wage-earning capacity had increased even though his physical condition remained unchanged.
Aisha Ahmed was killed in a rail accident. Her survivors presented expert testimony on what her average annual earning capacity would have been over the remainder of her work life. The defendant sought to introduce evidence of income taxes she would have paid on those earnings.
The plaintiff must prove actual pecuniary loss with reasonable certainty. Evidence such as work history, wage records, and medical testimony showing the extent of the impairment supplies the required foundation.
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Section 10 provides three methods. When the employee worked substantially the whole year before injury, actual daily wages are used. When that method is unrepresentative, the fact-finder may resort to other evidence of earning capacity under subsection (c).
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Yes. Recovery is limited to harms suffered before death. Post-death loss of earning capacity is not recoverable in a survival action under the Restatement rule.
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They may be recovered if the plaintiff proves the loss with as much certainty as the circumstances permit. Work history, employer practices, and expert testimony can supply the necessary evidence even though exact amounts cannot be known.
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…needing public relief are thereby diminished, this concern would be greater, not less, in the case of death, where the loss of earning capacity is total. This court therefore concludes that Congress, as with all exemptions under Section 104, ‘. . . intended to relieve a taxpayer who has the misfortune to become ill or injured. . .…