Loss of Earnings/Diminished Earning Capacity

“Loss of earnings” and “diminished earning capacity” are two important elements of economic damages. Economic damages are, in turn, a major component of personal injury damages. Most adult personal injury victims experience some form of lost income as a consequence of a major personal injury. 

Ultimately what distinguishes loss of earnings from diminished earning capacity is the time frame. You calculate loss of earnings based on the past and the present, and you calculate diminished earnings based on future estimates.  

Loss of Earnings

You suffer lost earnings when you miss work because of your injuries. The amount of your lost earnings depends on how much work you missed, how much money you were earning, and how you were earning your money.

Wage Earners

If your employer paid you by the hour, it should be relatively easy to calculate your lost earnings as long as you worked about the same number of hours every day. Suppose you worked the standard 9 to 5 shift. If you lost two work days at $30 per hour, your lost earnings would be (16 hours x $30/hour =) $480. 

Salaried Employees

It can get trickier to calculate your lost earnings if you are a salaried employee. Suppose your salary was $6,600 per month, and you lost three days of work. If you averaged 22 days of work per month, you averaged $300 in salary per workday. If you lost three workdays, your lost earnings would be $900. The calculation could become more complex, however, if your working hours were not limited to the standard 9 to 5.

Commission Earners, Freelancers, and Entrepreneurs

The situation becomes even more complex if you earn your money in commission or if your income is otherwise unstable. In that case, you might need to calculate your earnings over time and then break it down into a daily work weekly average. This could require a lot of documentation.

Holiday and Sick Pay

It might surprise you to learn that you are entitled to full pay for all of your holiday and sick leave days, even if you took them and your employer has already paid you for them. The reason is that holiday and sick leave days are valuable economic resources. If you have 15 yearly sick days and you used 10 of them, you only have five left for any future illnesses.


If you normally work overtime, or if you can prove that you would have worked overtime had you not suffered your injury, you can claim compensation for lost overtime pay. Maybe you usually work overtime during the run-up to the Christmas holidays, for example. If you missed work during that time and your colleagues all logged overtime, you likely would have too–and you likely missed out on the resulting overtime pay.  

Lost Benefits

Perhaps your employer matches your IRA contributions or provides you with health insurance benefits. If your absence from work resulted in a loss of any of these benefits, you deserve compensation for the economic value of whatever you lost.

Lost Business Opportunities

What if you are an entrepreneur and you missed a trade show or a meeting with a client? It is extremely difficult to calculate the value of these losses, but there are sometimes effective ways of doing it.

Workers Compensation Claims

If your injury was work-related, you might have to make a workers’ compensation claim. If so, you probably won’t be able to file a personal injury lawsuit. Workers’ compensation cases are easier to win than personal injury lawsuits, but they offer far less potential compensation.

Diminished Earning Capacity

You suffer from diminished earning capacity if a long-term injury prevents you from returning to your old job. You might have to work fewer hours, or you might have to switch to a less demanding position. You might even have to accept early retirement. All of this can add up to a lot of money, depending on how old you are and how much money you were making.

Maximum Medical Improvement (MMI)

Maximum medical improvement (MMI) is the point where your doctor declares that your medical condition isn’t going to improve any more than it already has. Typically, you wait until you reach MMI to file a lawsuit because it’s easier to calculate medical expenses and lost earnings once you reach MMI.

Most people who reach MMI enjoy a full recovery. Those who don’t suffer permanent disability. If you are among the second group, you might need to estimate your future lost earnings.

Calculating Your Compensation

Calculating your compensation for lost earning capacity can be challenging if for no other reason than the fact that future events are speculative. Your best bet is to hire an expert to help you calculate your damages and support your claim at trial if need be. In all likelihood, you will end up negotiating a settlement to your claim.

You mustn’t underestimate the amount of compensation you will need for diminished earning capacity. Imagine running out of money 15 years from now. By then, it will be too late to reopen your claim. 

Contact an Experienced Florida Personal Injury Lawyer to Help You Establish Your Losses

An experienced Florida personal injury lawyer can help you gather evidence to calculate your losses. They can also help you find an expert witness if you need one. You could end up taking home far more compensation with a lawyer than without one, even after paying legal fees. Contact our personal injury lawyers at Payer Law Personal Injury Lawyers at (407) 648-1510.