If you are injured to an extent that it prevents you from being able to keep working, what are your economic damages? As part of any personal injury claim, you are entitled to recover lost wages. If you are employed by another entity, the calculation to figure out your lost wages are easy; you simply use the salary or hourly rate and calculate what was lost over the time you were unable to work in the past and/or into the future. However, how do you calculate the lost earnings for a self-employed individual when your earnings are not specifically comparable to an employed individual? What are your rights if you have not returned to work and will be unable to work for a period time into the future? It is not uncommon for the self-employed to have unique accounting records, so how do you calculate your wage losses if you are self-employed?
The case Serhan v. Besteder, 500 A.2d 130 (Superior Crt.1985) holds that income tax records for a sole proprietor can be introduced as evidence to show lost past earnings, though for a sole proprietor courts in Pennsylvania treat them as lost profits of a business, and look to the decline in earnings of the business the plaintiff owned as a result of the injury. Serhanmay also allow the use of comparing the plaintiff’s sole proprietorship to doing identical work at a larger company, in order to show prior lost earnings. In the event that it does not, suggested jury instructions and King v. Pulaskioffer means of proving both prior lost wages as a measure of damages and also suggest how to prove and introduce evidence of impaired future income.
In Serhan v. Besteder, the Superior Court held that using federal income tax records, and especially Schedule C, could be introduced by a sole proprietor or small business owner whose income was primarily produced by the “personal services and attention of the owner,” and that a sole proprietor plaintiff could therefor use “the net profits of the business” because they “afford a reliable measure of the owner’s earnings.” Id.at 133. The Superior Court noted that sole proprietors whose business essentially rely and profit from their work provide an acknowledged exception to the general rule against using business earnings to provide evidence of a plaintiff’s earnings power. Id.(citing Bell v. Yellow Cab Co., 160A.2d 437, 441 (1960)).
The Superior Court noted that “Virtually the entire business was based on her labors,” Id.at 134. As a result, the Superior Court held that the tax records for her business were admissible and that the net profits of the business could be used to show prior lost earnings. Id. at 135. Additionally, the Superior Court allowed the use of Ms. Serhan’s tax returns for the years prior to the accident before she had her own business and worked as an interior decorator for a department store as evidence of earning capacity. Id. The Superior Court’s holding that evidence of future earnings capacity can be introduced through tax records or other documentation may allow you to make reference to the income of someone doing your job if you were employed by a larger corporation.
A more recent case, King v. Pulaski, in reviewing methods of proving future lost earnings potential, pointed out that proving lost earnings potential does not need to be exact, noting an expert’s broad ability to testify as to the lost potential for the plaintiff’s earnings and that evidence of significant impairment or permanent injury was sufficient to show loss of earning power. 700 A.2d 1200, 1205 (1998). In Serhanthe Superior Court noted that “with respect to impairment of earning capacity, the law requires only proof that the injured person’s economic horizons have been shortened as a result of the tortfeasor’s negligence.” 500 A.2d at 134 (citing Holton v. Gibson, 166 A.2d 4 (1960), Lewis v. Pruitt, 487 A.2d 16 (1985), and Janson v. Hughes, 455 A.2d 670 (1982)).
Finally, comments to the suggested standard civil jury instructions for Pennsylvania provide that for proving past loss of wages or income, “testimony by the plaintiff of his loss of wages has been held sufficient proof to permit a judge to instruct on past lost earnings” (interpreted as lost profits for a sole proprietor). PA-JICV 7.110, Pa. SSJI (Civ), § 7.110 (2013). The suggested jury instruction also indicates that for computing lost wages, income, or profits, a plaintiff’s “opportunities for employment are relevant in determining the amount [he] . . . could have earned.” Id. Additionally, for reduction of future earnings capacity, the suggested jury instructions charge that “the plaintiff is entitled to be compensated for any loss or reduction of future earning capacity that [he] . . . will suffer as a result of a decrease in or loss of future productivity.” PA-JICIV 7.120, Pa. SSJI (Civ), § 7.120 (2013).