What Is an Earning Capacity Evaluation?

An earning capacity evaluation is a structured vocational assessment designed to determine what a person is capable of earning in the competitive labor market, given their education, work history, functional limitations, and the available jobs in the relevant economy. It is a distinct concept from actual earnings - what a person happens to be earning at any given time - and from disability status as determined by a government agency or insurance carrier.

The distinction between earning capacity and actual earnings is a central issue in litigation. A person who was unemployed at the time of their injury still had an earning capacity grounded in their skills, credentials, and the labor market. A person who took a lower-paying job after an injury may have diminished earning capacity for reasons unrelated to their vocational choices. Courts have consistently held that plaintiffs are entitled to recover for losses to their capacity to earn, not merely for the specific wages reflected on their most recent pay stub. Restatement (Second) of Torts sec. 924 (Am. L. Inst. 1979).

Conducting an earning capacity evaluation involves multiple steps. The evaluator reviews all available medical records and any functional capacity evaluation (FCE) results that document physical or cognitive restrictions. A clinical interview explores the individual's work history, job duties, educational background, and current functional status. Vocational testing may be used to assess cognitive aptitude and academic skill levels. The evaluator then analyzes the Dictionary of Occupational Titles (U.S. Department of Labor, Employment and Training Administration, 1991), O*NET occupational database (National Center for O*NET Development, n.d.), and Bureau of Labor Statistics wage data (U.S. Bureau of Labor Statistics, n.d.) to identify occupations the individual can perform within their limitations, and establishes the wage range for those occupations.

In matrimonial proceedings, earning capacity analysis takes on a specific character. When a party is voluntarily unemployed or underemployed, the court may impute income based on what that person could earn if making full use of their education and vocational assets. The vocational evaluator is called upon to assess what the party could realistically earn in the current labor market. This requires the evaluator to identify not just theoretical occupational options, but to address whether actual job openings exist, whether the party's skills require retraining, and what a realistic timeline to employment might look like.

Earning capacity opinions are subject to challenge on multiple grounds. Defense experts in plaintiff cases may argue that the plaintiff's restrictions are overstated or that their identified occupations pay more than the plaintiff's analysis acknowledges. Plaintiff experts in defense-initiated evaluations may identify that the available occupational options are more limited or lower-paying than the defense analysis suggests. The quality of the final opinion depends heavily on the rigor of the underlying records review, the extent of testing performed, and the expert's familiarity with the relevant labor market data.