The assessment of loss of earnings claims, whether the “but for the accident” position or residual earning capacity, now need to be assessed in the context of the economic conditions unfolding as a result of the Coronavirus pandemic. As always a forensic approach to the evidence within a particular case is needed, but overlaying that must be a wider understanding of the changing economic conditions within which a claimant is, and/or would have been, making their living.
Risks of unemployment: Reduction factors
The risks to future employment are usually taken into account using the reduction factors set out in the Ogden tables. These factors are generic and they are subject to the limited parameters used against which to assess employment risk – current employment status, age, disability and level of education. The factors in the anticipated 8th edition of the Ogden tables have not been recalculated to reflect more recent data on changes in employment status. This raises questions as to whether the methodology applied based on these factors alone will continue to provide a reliable basis for assessing employment risk, particularly in the exceptional economic conditions we are now entering.
It is likely to be some years before we see reduction factors that reflect the impact of the virus on the risks of unemployment during working lives. This may open the door to challenge the applicability of those adjustments and to argue for an alternative approach in the highest value cases where this might make a tangible difference, almost certainly requiring expert evidence to do so.
The nature of the award
Adverse economic conditions, and some employment sectors harder hit than others, may need other approaches to fairly compensating for future loss of earnings. There will be cases where the multiplier and multiplicand approach no longer reflects the uncertainties the claimant would have faced. A Blamire award may better reflect all the increased uncertainties. Conversely, a Smith v Manchester award for ‘handicap on the labour market’, may need to reflect increased periods of unemployment in a hard and competitive employment market.
Assessing the ‘residual’ earning capacity
Assessing a claimant’s residual earning capacity will continue to be dependent on medical evidence as to the injury effects on employment potential. It will now be necessary to consider how the business or industry in which an injured claimant is able to work has been, or will be, impacted by the economic impact of the virus, and if that is adequately reflected in the manner in which residual earning capacity is assessed. The economic impact on the employment sectors open to the claimant after the injury may be very different to those affecting the “but for” employment.
Assessing the claim ‘but for’ the accident
General points to consider include:
- The likelihood that any pre-accident employment/earnings would have continued;
- The potential for promotion and increased earnings; and
- The risks to future employment.
Each of these issues will now need to be considered with reference to the statistical evidence and any comparator evidence, in the context that many occupations may prove to be less likely to continue as they otherwise would have done. There may be less likelihood of increased earnings in the “but for” scenario than might previously have been thought, and possibly increased likelihood of reduced earnings or more periods of unemployment.
The risks to many workers of losing employment will be far higher than previously. Indeed, the argument will likely arise that even if the accident had not occurred the claimant would not, now or in the future, either at all or for significant periods, have been in employment.
Government support schemes
There is a wealth of material available about the intricacies of the Coronavirus Job Retention Scheme (CJRS) for employed workers and the Self-Employment Income Support Scheme (SEISS). Those dealing with large loss and catastrophic injury claims require a working knowledge of the schemes and how they affect earnings, but it should now be within common knowledge that the income recovery under those schemes is essentially 80% of income and subject to a cap of £2,500.
In terms of the relevance to high value injury claims, the support schemes should be fairly short lived and, certainly in the higher value claims, the financial impact on the claimant’s loss of earnings claim should be minimal. The claimant’s inability to work arises from the accident, usually a road or workplace accident, not from Coronavirus. If they are self-employed but not working following the accident then there is no payment under SEISS since the impact on trading was not coronavirus related. If they were employed but off sick due to injuries sustained in an accident, then the employer can decide to do nothing (i.e. carry on paying SSP/contractual pay) or furlough or try to dismiss them. If an individual is furloughed (or it is likely they would have been when assessing ‘but for’ earnings) then this should only see a reduction in income of 20% (unless the earnings are significantly above the cap figure) and only for a few months whilst the scheme is running, and it would still have to be established that any loss resulting from that furlough was in some way accident related.
Watch this space
The statistical data will continue to evolve and reveal more about the true economic impact of Coronavirus in the coming months and years. Those dealing with catastrophic injury claims will need to keep abreast of those evolving statistics and how they might be applied to the analysis of loss of earnings claims given any one claimant’s employment history and future prospects in the light of the impact of the virus on the relevant employment sector.
For a more detailed analysis on the issues raised within this article, please click here.