Get Help Recovering Lost Wages in a California Personal Injury Case

At DK Law, we frequently handle cases of clients injured in car accidents and missing significant time at work. Under California law, plaintiffs can seek compensation for lost wages in personal injury claims, provided they can adequately prove those wages. 

In simple terms, lost wages represent the income an injured person would have earned had the accident not occurred due to the defendant’s negligence. This process can be complex, so having an experienced attorney is crucial. Additionally, California law allows plaintiffs to seek compensation for future lost income. We’ve prepared this detailed article to help you better understand these intricate legal matters. 

Dealing With the Insurance Companies

We’d love to tell you that insurance companies are eager to do the right thing and support accident victims, but unfortunately, that’s not the reality. Insurance companies are large corporations focused on protecting their bottom line, not paying fair compensation for injury claims and lost wages.

They often use tactics like denying or minimizing claims and shifting blame onto the victim to avoid paying what’s deserved. Additionally, they may delay the settlement process, hoping you’ll give up. 

We will fight for you to the end. 

What Are Lost Wages or Lost Income? 

In California, lost wages refer to any income you would have earned at your job if you hadn’t been injured in a car accident. This compensation is designed to help accident victims recover the earnings they missed out on due to their inability to work.

Given California’s large population, lost wages are a crucial component in personal injury settlements, and we will fight to ensure you receive the full compensation you deserve.

A claim for lost wages can include:

• Regular pay (salary or hourly)
• Overtime wages
• Commissions
• Income from self-employment
• Bonuses
• Personal, vacation, or sick days
• Other lost benefits, such as free meals or car allowances

Contact us today for a FREE consultation to learn how we can help with your lost wages claim.

Are Lost Wages Taxable in California?

This is another question that our clients ask us all the time. In theory, damages for lost wages in a California personal injury case are taxable.

The Internal Revenue Code section 104 states that gross income for all tax purposes does not include “the amount of any damages received (other than punitive damages) on account of personal physical injuries or sickness.”

In the past, the courts have generally held this to exclude any compensation for lost wages. Lost income would have been taxable if earned, so it is taxable when recovered in a California injury lawsuit.

The problem is that in California, personal injury settlements are typically one big “lump sum” that isn’t neatly broken up into compensation for accident injuries and lost wages.

This can make it difficult for anybody to determine how much, if any, taxes are owed. 

Your best bet is to consult with a tax professional to decisively determine the amount of money you might owe for taxes. Do not overlook this step. You don’t want the IRS to contact you five years later and say you owe them money.

How to Calculate Lost Wages

In California, the law requires that any personal injury plaintiff (typically the accident victim) must prove their lost earnings.

If you were injured for just a short period of time, then the calculation is pretty straightforward, but it gets complicated if the plaintiff is due for a raise. Then, it might be necessary to get testimony from a forensic accountant or an occupational expert to help the courts make a final decision.

Lost Wages Vs. Earning Capacity

We frequently receive this question from our clients, and we’d like to explain the difference briefly.

Lost wages refer to the lost income you could not earn in the past due to a personal injury. This covers out-of-pocket losses from the time of the injury until the settlement or trial date.

On the other hand, lost earning capacity relates to future income you won’t be able to earn due to the injury. California law allows plaintiffs to seek compensation for this potential loss.

However, proving lost earning capacity is more complex and often requires expert testimony from medical or occupational professionals. Factors like potential raises, bonuses, and career advancements must be considered. 

Proving Lost Wages in California

When it comes to actually calculating lost wages in California, the path is not simple or clear. But we have done our best to break down the most common methods below: 

Getting a Lost Wages Letter from Your Employer

When the plaintiff has regular (stable) employment, the easiest way to claim lost wages is to combine past pay stubs and a letter from the plaintiff’s employer.

Any lost wages letter from a California employer should include:

• Employee’s job title
• The date on which the employee was hired
• Number of hours the employee normally works per week
• Confirmation that the employee is (or was) employed as of the date of the accident
• The employee’s regular pay rate and frequency of pay ($20 per hour, paid bi-monthly)
• Any sick and vacation days the employee had to use due to the injury
• The overtime rate (if applicable) to which the employee is entitled, and the number of hours for overtime that are usually worked in a week
• How many days or hours of work the employee missed, which would include missing work because of doctor appointments and medical treatment
• Any amount of overtime pay (within reason) that the employee could have expected to receive during this period

Past Pay Stubs and Tax Returns

Quite often, it can be very hard for an employee to get a letter from their employer, or the plaintiff might be self-employed, etc.

In this situation, the plaintiff can prove lost wages using another method, such as past pay stubs or income tax returns. If needed, the plaintiff can request a copy of their past tax return using IRS Form 4506.

In addition, you can use California Form FTB 3516 to find copies of past California tax filings from the California Tax Board.

Proving Lost Self-Employment Income

To try to recover any lost self-employed income here in California, you (the plaintiff) will need to prove what you would have earned during the period in question (when you could not work).

There are a number of documents that can help prove any lost self-employment:

1. Tax returns from previous years
2. Any billing statements for the months leading up to the accident itself
3. When income is seasonal, then billing statements for the same period during the preceding years

When the plaintiff has a high income (or is just complicated with bonuses, etc.), it can be ideal to have a forensic accounting witness testify to prove the income in question.

As you can tell, this whole process is very complicated, and it’s a bad idea to try to do this against an insurance company without a lawyer.

Lost Overtime, Commissions, or Bonus

Commissions, bonuses, overtime pay, and other perks can be claimed as lost wages in California.

There are some common methods used to prove this speculative income (not limited to) –

1. A written employment contract
2. Past pay stubs showing a pattern of bonuses or overtime
3. Proof of the employer’s policies for that income
4. Some proof that any conditions for getting extra income were (or could have been) completed

Lost Personal Days, Sick Days, and Vacation Time

If a plaintiff was forced to use personal days, vacation days, or sick days to cover missed work days, they can claim lost wages.

If the defendant hadn’t acted negligently, the plaintiff would have had those sick and vacation days available to them to use whenever they needed them.

In some instances, the plaintiff might have been able to even cash them out if the employer allowed this process.

Like all lost wages, you must prove that the time was lost due to the accident (or injury) if you want to recover those damages.

How Can I Prove Income From Tips in California? 

This is the most difficult type of “lost wage” to prove, but it’s possible.

There are some popular ways to prove that you lost tips due to an injury and missed work.

Below is a partial list of ways to help prove you lost tips –

1. The best is an employer’s letter verifying the amount that the plaintiff could have earned
2. Any proof of income from prior pay periods, such as past bank deposits, etc.
3. Also, previous tax returns work well.

One common issue that can arise is that a plaintiff tries to claim they missed out on tip money, but in the past, they didn’t report all the tips they earned.

This can set off a Red Flag with the IRS or California Franchise Tax Board because there is a discrepancy between your reported income and your reported earnings to the IRS.

Recovering Unemployment Insurance Benefits

This is a complex issue, and you’ll want to consult with a lawyer about it. 

To be eligible for unemployment benefits in California, an employee needs to:

• Be available and actively looking for employment
• Be physically able to work

The tricky part is that someone claiming lost wages means they were not able to work in the past.

In this situation, the plaintiff would usually have been expected to file for disability benefits in California instead of unemployment.

Of course, there are exceptions to this rule, so contact our law firm today about your injury case and see if we can help.  

Why Contact DK Law

After an accident, dealing with insurance companies can be overwhelming. Their primary goal is to minimize or deny your claim, often causing unnecessary stress and delays. Once you file an injury claim, the insurance company may try to shift the blame onto you or reduce its liability by arguing that you were partially at fault.

At DK Law, our experienced legal team specializes in protecting car accident victims. We fight tirelessly to ensure our clients receive the maximum compensation they deserve for their serious injuries. Whether it’s recovering medical costs, lost wages from missed work, or other damages, we stand by your side to hold the insurance companies accountable.