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EARNING CAPACITY

"Earning capacity is composed of three factors: (1) ability to work; (2) willingness to work; and (3) opportunity to work." West v. IAC (1947) 79 Cal. App. 2d 711

The term "earning capacity" can mean "average weekly earning capacity" under Labor Code §4453,  or  "diminished future
earning capacity" under Labor Code §4660. Earning capacity, for purposes of temporary award, may differ from earning capacity for purposes of permanent award. In Argonaut Ins. Co. v. IAC (Montana) (1962) 57 Cal. 2d 589, the Supreme Court noted:

An estimate of earning capacity is a prediction of what an employee's earnings would have been had he not been injured. Earning capacity, for the purposes of a temporary award, however, may differ from earning capacity for the purposes of a permanent award. In the former case the prediction of earnings need only be made for the duration of the temporary disability. In the latter the prediction is more complex because the compensation is for loss of earning power over a long span of time. Thus an applicant's earning capacity could be maximum for a temporary award and minimum for a permanent award or the reverse. Evidence sufficient to sustain a maximum temporary award might not sustain a maximum permanent award. In making an award for temporary disability, the commission will ordinarily be concerned with whether an applicant would have continued working at a given wage for the duration of the disability. In making a permanent award, long-term earning history is a reliable guide in predicting earning capacity, although in a variety of fact situations earning history alone may be misleading. With regard to both awards all facts relevant and helpful to making the estimate must be considered. The applicant's ability to work, his age and health, his willingness and opportunities to work, his skill and education, the general condition of the labor market, and employment opportunities for persons similarly situated are all relevant. (Citations omitted)

The "Montana factors" of ability to work, age and health, willingness and opportunities to work, skill and education, the general condition of the labor market, and employment opportunities for persons similarly situated are all relevant to determining diminished future earning capacity for injuries that fall within Labor Code §4660.

"Earning capacity is not locked into a straitjacket of the actual earnings of the worker at the date of injury; the term contemplates his general over-all capability and productivity; the term envisages a dynamic, not a static, test and cannot be compressed  into earnings at a given moment of time. The term does not cut "capacity" to the procrustean bed of the earnings at the date of injury." Goytia v. WCAB (1970) 1 Cal. 3d 889  

"[W]hen the evidence discloses periods of unemployment, the employee has the burden of explaining them." West v. IAC (1947) 79 Cal. App. 2d 711

See, too, Average Weekly Earnings

Label Item Links Comments
Labor Code Computing average weekly earnings for TD and PD, PTD LC §4453   
  "In determining the percentages of permanent disability, account shall be taken of the nature of the physical injury or disfigurement, the occupation of the injured employee, and his or her age at the time of the injury, consideration being given to an employee's diminished future earning capacity."
LC §4660  
Regulations/Rules  
Cases In Argonaut Ins. Co. v. IAC (Montana) (1962) 57 Cal. 2d 589, the Supreme Court set forth what became known as "Montana factors" (see above)

Goytia v. WCAB (1970) 1 Cal. 3d 889: "Earning capacity is not locked into a straitjacket of the actual earnings of the worker at the date of injury; the term contemplates his general over-all capability and productivity; the term envisages a dynamic, not a static, test...."

In Grossmont Hosp. v. WCAB (1997) 59 Cal. App. 4th 1348 the Court of Appeal concluded "wage increases that were scheduled or reasonably anticipated at the time of injury and that would occur during the  anticipated duration of the disability may be considered in determining the injured worker's "earning capacity" and ultimately the benefits due."
Argonaut Ins. Co. v. IAC (Montana)


Goytia v. WCAB






Grossmont Hosp. v. WCAB
 
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