When Does an Attorney Need a Forensic Economic Earning Capacity Assessment?

Economic Loss: Establishing an Earnings Claim

When a party has been injured in a tort, the U.S. legal system allows for the recovery of special and general damages. Special damages are those that can be quantified and estimated with reasonable certainty. These may include lost earnings or earning capacity, fringe benefit losses, loss of financial support in wrongful-death matters, household service losses, or employment-related categories such as front pay and back pay in wrongful termination. General damages, those that cannot be quantified easily, cover non-economic harms, including pain and suffering or disfigurement. This article is specific to an earnings claim.

The claimant bears the burden of proving their economic losses. Establishing these losses typically requires a detailed review of the individual’s earnings history as well as other financial and employment documents to determine a reliable pre-injury earning capacity. A vocational expert often contributes by assessing the claimant’s occupational abilities, job prospects, and residual employability and earning capacity after the injury.

A vocational analysis identifies what the claimant could have earned before the injury and what they can earn post-injury. For example, if an individual could have earned $50,000 per year prior to the injury but, due to permanent or partial disability, is now capable of earning $25,000, a vocational expert may identify this annual differential. The economist then evaluates how that difference evolves over time, accounting for expected career progression, work-life expectancy, and economic assumptions.

The economist’s role is to take these vocational findings and determine the present value of the loss over the claimant’s expected work life. This requires applying growth assumptions, discount rates, work-life expectancy, fringe benefits, and other components to translate a year-by-year loss into an estimated economic damages figure that can be presented to the court.

Economic Loss: Disputing An Earnings Claim

Just as the opinions of a vocational expert and economist are complimentary when establishing an economic loss, they can be just as complimentary when disputing one.

Oftentimes there are competing vocational opinions regarding what a claimant may be able to earn post injury. The best an economist can do is assume based upon a hypothetical regarding earning capacity, as they have no expertise in evaluating the knowledge, skills and ability of a worker in a work capacity framework.

Once a differing vocational opinion establishes a post injury earning capacity, the economist's role remains the same: to estimate potential economic losses over the injured party's worklife expectancy.