Also known as: avg. annual earning capacity · average annual earnings capacity · earning capacity · lost earning capacity
Written by attorneys — see sources 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.
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.
Thomas, a resident of the District of Columbia, was hired by respondent Washington Gas Light Co. in the District. During the year of his employment he worked primarily in the District but also worked in Virginia and Maryland. On January 22, 1971, he sustained a back injury while at work in Arlington, Virginia. Two weeks later Thomas entered into an Industrial Commission of Virginia Memorandum of Agreement as to Payment of Compensation providing for benefits of $62 per week. Several weeks after that the Virginia Industrial Commission approved the agreement and issued its award directing that payments continue during incapacity, subject to contingencies and changes set forth in the Virginia statute. In 1974 Thomas notified the Department of Labor of his intention to seek compensation under the District of Columbia Act. Respondent opposed the claim on the ground that the Virginia award precluded any further recovery. The Administrative Law Judge held a hearing, took medical evidence, and awarded permanent total disability benefits payable from the date of injury with credit for amounts previously paid under the Virginia award. The Benefits Review Board upheld the award. The United States Court of Appeals for the Fourth Circuit reversed. It held that a second and separate proceeding in another jurisdiction upon the same injury after a prior recovery in another state is precluded by the Full Faith and Credit Clause. The Supreme Court granted certiorari.
View caseAisha 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.
In 1973, a fireman employed by Norfolk & Western Railway Co. suffered fatal injuries in a collision caused by the railway's negligence. Respondent, as administratrix of the fireman's estate, brought suit under the FELA in the Circuit Court of Cook County to recover the damages that his survivors suffered as a result of his death. In 1976, after a full trial, the jury awarded respondent $775,000. The decedent was a 37-year-old man living with his second wife and two young children and contributing to the support of two older children by his first marriage. His gross earnings in the 11 months prior to his death on November 22, 1973, amounted to $11,988. Assuming continued employment, those earnings would have amounted to $16,828.26 in 1977. An expert estimated that the decedent’s earnings would have increased at a rate of approximately five percent per year, amounting to $51,600 in the year 2000. Respondent's expert calculated the present value of the pecuniary loss at $302,000 based on gross earnings. Petitioner offered to prove through an actuary that the decedent’s federal income taxes from 1973 through 2000 would have amounted to about $57,000, and under its assumptions computed the net pecuniary loss at $138,327. Petitioner requested that the jury be instructed that the award would not be subject to income taxes. The Appellate Court of Illinois affirmed the exclusion of the tax evidence and the refusal of the instruction. The Illinois Supreme Court denied leave to appeal.
View caseThe 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.
Supporting sources
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).
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.
Supporting sources
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.
Supporting sources
…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. . .…