Virginia Lawyers Weekly VA Lawyers Weekly
What is earning capacity? According to Black’s Law Dictionary, earning capacity refers to the monies that a person is able to earn that result from skills and training. Earning capacity is used in a variety of litigated matters to establish the earnings power of an individual based on their education, work experience, skills and qualifications within their labor market.
Once the individual’s unique set of qualifications are identified, a review of labor market data is necessary to identify potential occupations and their salaries in the individual’s labor market. Are they qualified to work as a teacher? If so, what do teachers with their unique set of qualifications, for instance a bachelor’s degree and 10 years of experience, earn? By reviewing the salary data for potential occupations that match with the individual’s skills and experience, earning capacity can be established.
In some cases, an individual may be able to maximize their earning capacity with a brief training course or by obtaining a license or certificate. For example, the community college system in Virginia offers the “FastForward” program. These are short-term training programs for high-demand industries, aimed at helping individuals to quickly increase their skills and qualifications to obtain jobs. Examples of these programs are Phlebotomy Technician and Pharmacy Technician. Tuition is generally under $800 and the program can be completed in a few weeks in most cases.
There is a sound methodological basis for calculating an individual’s loss of earning capacity. Collecting information regarding the individual’s skills, education, experience, vocational strengths and qualifications is the first step to evaluating loss of earning capacity.
In some legal matters, a loss of earning capacity or loss of future earnings is at issue. Particularly in injury cases where the individual is facing acquired work limitations, they may be unable to return to the occupation they previously performed. It is also important to differentiate the terms lost wages and loss of earning capacity. The former applies to actual lost wages when a person is unable to work following an accident and it is retrospective. Loss of earning capacity applies to the prospective wages lost due to permanent impairments limiting the individual’s ability to work in the future. There is a sound methodological basis for calculating an individual’s loss of earning capacity.
Collecting information regarding the individual’s skills, education, experience, vocational strengths and qualifications is the first step to evaluating loss of earning capacity. Once the information is gathered and evaluated, the next step involves reviewing the individual’s work restrictions or limitations to make a determination about their ability to perform their prior work, or any work in their labor market. Do they have transferable skills that would allow them to enter another career if they are unable to return to their prior occupation?
The next step is to evaluate their ability to successfully be placed in a job. If a determination is made that there are other jobs the individual could perform, the final step is to evaluate what they are capable of earning and if there is any reduction in their work life expectancy due to their physical and/or mental disability. A qualified vocational rehabilitation counselor is trained to evaluate the physical and mental demands of work and to provide opinions regarding employability and vocational options.
Ashley Johnson, MS, CRC, CLCP is a vocational consultant and life care planner. She owns Johnson Consulting and has been a certified rehabilitation counselor since 2003.
