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Calculating loss of earnings in a time of furlough, redundancy and Covid-19

Calculting loss of earnings due to covid-19

Minster Law Associate Solicitor Chris Bowman shares his insight into how Coronavirus and the Government’s lockdown could impact a client’s loss of earnings claim.

I sat down, looking through various cases where clients have been laid off or furloughed due to Covid-19 and knew this was going to present an opportunity for defendants to attack loss of earnings claims.

Minster has a regular internal forum for the exchange of ideas and information about any issues that could be coming up on the horizon, so I brought it to them. There had already been a case where a defendant declined an interim payment on the grounds our client may have been furloughed. I realised then, the way we can proactively work through this is by taking action to safeguard our client’s claims as best we can, to overcome these attacks.

What is a loss of earnings claim?

If you look at the headlines in any newspaper you will eventually find a report with a headline “Claimant wins payout of £500k!” or something similar.

What the headline doesn’t tell you is the damages are paid out to put you in the position you would have been had the accident not happened – you don’t win anything. The injured person who got the £500k will have received something for their pain and suffering, but it’s more than likely a large portion of their damages will be for earnings they will lose, care they may need and other expenses they have suffered.

In a serious injury claim, it is very common for our clients to face long absences off work, if they ever return to work. Although they may qualify for sick leave or statutory sick pay, they can face prolonged periods without an income or see a decrease in their earnings. Covid-19 throws up an issue, which is beginning to be identified by the defendants – if the accident hadn’t happened, would the injured person have still been working anyway or would their income have been reduced?

Between March 23, when the United Kingdom went into lockdown and April 5 78% of the workforce in businesses which had temporary closed or had to suspend trading had been furloughed. The hardest-hit industries were accommodation and food service activities sector which had 40% of people furloughed and construction which had 32%. There are more than 5,000,000 self-employed people in the UK and a large portion of those have also been adversely affected. The Coronavirus job retention scheme ensures furloughed workers get a percentage of their usual wage up to £2,500 a month, despite not being at work. Self-employed people can’t be furloughed however, they’re reliant on government assistance and might be able to make a claim through the coronavirus Self-employment Income Support Scheme.

So, in an entirely unprecedented situation, it is now being called into question what position our clients would have been in if they had not been involved in the accident.

Our clients may have found themselves in the situation where it’s arguable they weren’t able to earn anyway. The first thing they need to be doing, particularly if they’re self-employed, is applying for the assistance. This will help ease their financial burden. Also, if they are eligible for assistance but haven’t applied, the defendants might argue they have not done all they could to keep their losses to a minimum and that they should only top them up the difference between the scheme and their earnings.

With pressure on the public finances, it remains to be seen whether a court will accept this but it’s an argument you don’t have to have if your client has applied for the help. For our clients, it is important to assess whether they would have continued working, been furloughed, taken up temporary employment or have even faced redundancy. Fortunately, only a small proportion of people have been made redundant during the lockdown, but as furlough law changes there is a chance this will increase.

Gathering evidence

We are currently in lockdown with even the most optimistic plans not showing life beginning to return to normal for the foreseeable future, that’s a potentially large hole in a loss of earnings claim. As a lawyer, you’ll be confident in pursuing that claim if you lay the groundwork early – which means working with our client to start gathering evidence now. We need to think like the defendants and start identifying their potential arguments. The aim is to provide ourselves with strong arguments about what our client’s circumstances would have been.

The first question would be to ask your client ‘what are your co-workers doing?’. If they’re still working full time then that’s perfect, we can get confirmation from their employer which provides us with a solid argument that their earnings would not have changed. However, if their co-workers have been furloughed or made redundant there are more roads to go down.

People who were furloughed or made redundant are often able to seek alternative employment during this period and certain industries have been crying out for people to fill roles. Tesco’s alone took on 35,000 new members of staff in the early days of lockdown to deal with the increased demand on stores and online shopping. There is a high chance a client who was furloughed or made redundant would have taken up one of these roles.

Encouraging our client to look through job websites and take screenshots of job adverts they would have been suitable for is a good way to show the availability in the local area. They can also provide details for any co-workers who found alternative work and can provide a witness statement to show they were able to find an alternate source of income. Friends taking up roles our client would have done are perfect witnesses because they are able to be comparators. All of these things can be persuasive to a defendant, and if they won’t accept it, it will build a convincing case to the court.

The evidence needs to be obtained now. As time passes memories fade, contacts with witnesses at work are lost and the evidence of plentiful job opportunities becomes harder to get. So, we need to be gathering any information we can now to get ahead of the game, anticipate the objections and build cases accordingly.

Will it impact interim payments?

There are already defendants recognising this is an issue and declining interim payments on this basis. As lawyers, we need to get the evidence that had it not been for the accident our client would have been working. If the evidence is convincing, then an application can be made to the court if the defendant will not make an interim payment.

What does this mean for clients?

Clients who assist their solicitors will get the best outcome – after all they are best placed to know their local job market. They are in a good position, likely stuck at home, to jump into Google and start looking at jobs available in their area for which they could have applied for. If they are able to reach out to their co-workers it may only take them 15-minutes, then if they can pass on the contact details, we can do the rest.

Some clients may find they become fit for work during the lockdown period. They will strengthen their claim greatly by going back to work in some way – even if it’s not in their usual industry. A client who becomes fit and returns to work has a strong case that but for the accident they would have been able to find work throughout this period, regardless of any furlough or redundancy. If they stay off work, they will face a convincing argument from the defendant that they wouldn’t have worked anyway, and their compensation will be reduced. At the bare minimum, they need to be documenting job opportunities or if they are able applying for them. They are under an obligation to keep their loss of earnings to a minimum.