Self-employed Workers and Wage Losses

One of the possible ways to recover money in a personal injury lawsuit is to argue that you lost wages as a result of the incident because your injuries prevented you from working, or reduced your responsibilities at your job.

However, proving wage loss to an insurance adjuster, or if necessary, a judge and jury, can be difficult. We typically need signed statements with hours missed, salary verification and other documentation from an employer. Proving wage loss is difficult in these cases because employers may not fully cooperate or keep accurate time records of hours worked.

That’s why one of the first things we tell a new client is that they should go to their employer right away and make sure records are being kept so that we can confirm lost wages due to the injury.

But what about self-employed people?

According to Economic Modeling Specialists, International, a leading provider of employment data, about 10 million people in the United States are self-employed.

These workers own their own businesses with multiple clients, or are hired as independent contractors for one employer. They do not get standard benefits and work under a variety of tax categories, from sole proprietorships to LLCs.

Self-employed workers do not receive the same documentation that other workers can rely upon to prove wage losses. Instead, they must provide evidence of past income and testify to what income they lost because of their injuries.

Some examples of documentation we have used in the past include:

Tax Records

Tax returns and other tax records, properly filled out, dated, and filed with the government, can help demonstrate a record of consistent income in the past. They also are hard for defense counsel to question. After all, why would someone report and therefore pay taxes on income they did not earn. However, these records must be coupled with additional proof that suggests missed income to strengthen a case.

Bank Records

Records of deposits made into business accounts demonstrate that the worker was indeed paid for his or her work, and help to substantiate tax documents.

Checks from Customers/Clients

Checks from paying clients further substantiate the source of income, and provide witnesses who can testify if necessary that they did pay the self-employed worker the amounts claimed.

Medical Records

Medical records and notes from doctors are crucial in establishing both the proper diagnosis of injuries and the fact that the worker was unable to perform his or her job because of those injuries.

Customer Bids and Requests for Proposals

To show future lost income, the worker can provide documentation of customers who asked for services after the injury but were rejected.

But how do courts determine whether enough evidence exists to award lost wages? There is no easy answer, but we can look at what the courts have done in the past to determine the precedent.

One of the most important cases that established the precedent for damages is Sherrell v. Selfors (871 P. 2d 168). In that case, the court ruled that damages must be proven with reasonable certainty or be supported by competent evidence in the record. However, the court also said that recovery should not be denied because the extent or amount of damages cannot be ascertained with mathematical precision.

In other words, to win a wage loss claim, we need to prove with reasonable certainty that the self-employed worker missed out on income due to their injuries. But we do not need to prove with exact precision how much they lost and the specific payments they might have received if not for the injury.

In addition, the Washington State Supreme Court noted in Lewis River Golf v. OM Scott & Sons (845 P. 2d 987) that “the doctrine respecting the matter of certainty, properly applied, is concerned more with the fact of damage than with the extent or amount of damage.” This means that we must establish with reasonable certainty that some wage loss occurred, but once we have done that, the claim cannot be dismissed because of a disagreement about the amount of wages lost.

Therefore, the relative strength of the case will depend on the extent to which we can establish that wages were in fact lost, and the evidence we can provide to estimate the amount.

If we can’t prove convincingly that wage loss occurred at all, a judge may dismiss the case long before the trial. However, once we have proven that wage loss occurred, it is up to the jury to determine the exact amount to be awarded.

Slam-dunk cases, with perfect evidence on both questions, are very rare. At the same time, even the weakest cases have some kind of documentation we can use to argue when negotiating a settlement.

Most cases fall somewhere in between, and the stronger the case, the more likely we will be able to negotiate a large settlement.

So what makes a case stronger?

First, simply having tax returns is usually not enough for a strong case. While tax returns can help demonstrate some proof of income in the past, it does not necessarily suggest what income might have been lost in the future.

Second, medical records and notes from a doctor are absolutely necessary for any wage loss claim. We have to be able to demonstrate that the worker’s injuries made them unable to do their job, or significantly reduced their earning opportunities.

Finally – every little bit of documentation can help to strengthen a case. Invoices and checks from paying customers, business profit and loss ledgers, requests for proposals from potential clients, and other paperwork can substantially improve the value of the case.

Ultimately – we hope to receive a sufficient settlement offer before the trial. A good settlement will recognize the strength of the evidence available, and compensate our client for his or her lost wages.

If you suffered an injury due to a car accident, medical malpractice, dog bite or other incident, please call us or contact us via our website! We can help guide you in seeking damages, including lost wages.