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Self-Employment Can Affect Compensation Under the Defense Base Act

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What is Your DBA Earning Capacity as A Self-Employee

In DBA cases, “wage earning capacity” is defined as the employee’s ability to earn regular income. Many insurers rely on a basic formula involving the employee’s gross earnings minus income tax deductions to calculate earning capacity.

But this formula can be pretty inaccurate especially if a contractor covered by the DBA is self-employed. When you are owning your own business there are factors that affect your earned wages. So they affect your wage earning capacity and should be a part of the DBA formula. 

These factors can include:

  • Earnings: Wage earning capacity should only be based on income derived from labor after the injury occurred. In cases where workers own and manage a sole proprietorship, money earned may be considered a salary.


  • Profits: Profit from business ownership should not be included in determining earning capacity, since ownership interests and dividends aren't earned through “personal labor.” And the DBA formula should subtract business expenses like office/store rent, employee salaries, office/business supplies, etc. from overall earnings.


  • Value of work: Some courts have found, that instead of relying on a self-employee's earnings, estimating the cost of hiring another person with similar skills and experience to perform the work produces a more useful result of the DBA formula


If there is a dispute about what constitutes wages and income under the DBA, claimants should know that the purpose of the calculation under the maritime law is to estimate an injured worker’s potential wages on the open labor market. There are many different ways to compare self-employment to earnings on the open market, and each one can affect the amount of the benefits you receive. 

If you want to learn more about how being self-employed can affect your DBA benefits get your FREE copy of Win Your Defense Base Act. Or check out our DBA article library on The Turley Law Firm website. 

William Turley
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