Wrongful Termination, Personal Injury, and Wrongful Death
Litigation is often brought to court over a monetary loss, whether it is a loss of income or another form of economic loss, due to termination, injury, or death. Retirement age, past salary, current salary, and future salary expectations must be factored into calculating lost wages. Therefore, it is critical for attorneys and their clients to enlist the expertise of a certified forensic accountant in order to receive the most objective and reliable estimation.
When beginning to calculate losses, a worklife expectancy must first be determined. The expected worklife of a person varies according to age, ethnicity, gender, and education level. Once a worklife expectancy has been determined, potential lost earnings can be calculated. There are two types of earnings which can be calculated:
Unimpaired earnings: These are estimated earnings an individual would receive if the incident never happened.
Impaired Earnings: These are any potential actual earnings an individual will receive if able to work in a limited capacity.
If an individual is deceased, or wholly unable to work, only unimpaired earnings will be calculated. This is done by looking at such measures as historical earnings, likelihood of future advancement, and comparable earnings of peers in the same industry, among other criteria.
While an individual is employed there are some other assets besides wages. These fringe benefits are sometimes employer contributions to social security, retirement plans, paid time off, and insurance premiums. These too need to be added to the economic losses of the individual.
After the total monetary amount is estimated, any potential inflation or growth must be projected so that an individual’s future losses correctly reflect their potential future income.
However, it is important to remember that the individual has the “duty to mitigate.” The duty to mitigate damages is the duty, or obligation, on the part of a person who has suffered physical injury or financial loss, to take action to minimize further damage, injury or loss. Therefore, an injured person or a terminated employee must make a reasonable effort or expend reasonable costs to prevent the amount of loss or harm from increasing. For example, to minimize further damage, a wrongfully terminated employee should try and obtain new employment.
The final economic loss amount—taking gross economic loss and subtracting mitigating wages—is the net economic loss of the individual.
In a recent case, Cogence Group was engaged by the defendants to dispute a nurse’s claim of wrongful termination and had suffered economic loss of $2 million as a result. We reviewed the claimant’s past earnings history and fringe benefits, current salary, and determined worklife expectancy. We observed that the nurse had failed to obtain new employment, and therefore, did not perform the duty to mitigate losses. As a result of our own analysis, Cogence Group disproved the claimant’s damages claim and significantly reduced the damages amount.
Overall, determining these types of economic losses can be a complex process. Cogence Group works closely with attorneys and their clients to identify the unique issues in each case.
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