It has been estimated that more than 20 billion hours are spent on unpaid household work in Canada. Household work includes, for example, meal preparation, grocery, shopping, general cleaning, laundry, and indoor and outdoor maintenance. In the last few years, there has been increasing efforts to quantify household services in personal injury and fatal accident proceedings. A surviving family member is entitled to claim for a loss of household services that would have been derived from the deceased. Although the concept appears straightforward, considerable complexities face practitioners with the calculation. The valuation of household damages is particularly cumbersome due to the fact that household work is a non-market activity, the benefits of which cannot be measured by observation and it is perplexing to verify the time spent by family members involved in household work prior to the accident. The courts have tried to neutralize some of these issues by providing minimum requirements for household claims. In Simmie v. Parker and Unger (1994), 164 A.R. 178, Rawlins J., at 182, a judgement provided minimum requirements for household services claims, that include: statistical data on time spent on household services by the average individual with characteristics similar to the plaintiff; specific information regarding tasks previously undertaken by the plaintiff and her/his ability to complete those task, post-accident, in the time available for those tasks; and time spent by paid help or family members in replacement of the plaintiff’s duties. The purpose of this article is to provide practical information that practitioners may utilize and also discuss some of the problematic issues with current approaches when valuing household work.

Where there is information available dealing with a family member’s contribution to household work, such as a diary, the loss is more identifiable. When determining the amount of time spent by family members on household tasks, when individual information is less than perfect, the most useful information can be found in Statistics Canada’s General Social Survey (GSS), it records non-market activity information by taking into account distinguishing characteristics of sex, family structure, age, living arrangements and employment status. This information provides practitioners an estimated value for the time spent by family members on household work. Utilizing average statistics can support the information provided by family members and increases the validity of a case. This was presented in a recent case in Brouwer v. Grewal, (1995) 168 A.R. 1 (Q.B.), at 354, where the contribution to household work was less than the average statistics for a woman with her socioeconomic statistics. In other notable cases the use of average statistics have been the basis of the evidence to household work. In the case of O’ Hara et al. v. Belanger (1989) 98 A.R. 86, at 87, it was found that average statistics were the most appropriate basis for the estimation of the loss of household services. Table 1 shows the average time spent on unpaid work in Canada.

Totals may not add because of rounding.
Statistics Canada’s publication entitled As time goes by…Time Use of Canadians, catalogue #89-544E, Table 2.5

In general, the statistics indicate that individuals employed in full-time jobs do considerably less unpaid household work activities. It is likely that these individuals look to the marketplace to fill their requirements for some household work. Also, lone parents do less housework each day than married mothers. Further, even though more men spend time on household work, women still dominate unpaid household work. In addition, results indicate that women spend more time in preparing meals, doing indoor cleaning, and laundry. While men manage more time doing outdoor cleaning and home repairs.

The second component is attributing an appropriate rate to be employed in quantifying losses of household work for litigation. Particularly, a rate payable is needed for the services that are needed by the plaintiff or plaintiff’s family. Attributing an appropriate rate to this component is difficult because the lack of any market to purchase this function. The courts have compensated individuals for their efforts in household service activities. A number of recent court judgments have provided specific hourly rates for loss of household services. In Terracciano v. Etheridge (1997) (British Columbia), an hourly rate of $16.00 had been applied to the pre-accident loss. In Bannon et. al v. McNeely et al (1998) (Ontario), a ruling of $11.24 per hour was the generalist rate at which household services could be fulfilled. These rulings have been consistently undervalued in comparison to the rates charged out by service providers. The discrepancies in these rates suggest that the claimants are not compensated at rates that would allow them to hire outside replacement services. Damages have been determined through statistical methodologies. The valuation methods used in quantifying a rate can be summarized as:

1. Opportunity Cost Method

The main idea underlying this approach is that earnings are forgone when time is spent doing household work instead of participating in the paid labor market. The underlying assumption is that paid work is given up and only monetary benefits are forgone. Thus, the wages sacrificed are said to be representative of the economic value that is placed on time in household activities.

Summary statistics pertaining to the opportunity cost method is shown in Table 3.

As Table 2 indicates, there are significant differences between male and female opportunity costs. The reason for disparity may be attributed to the share of time spent on household work and the share of its value. There are a number of difficulties with the opportunity cost approach. First, the opportunity cost approach does not account for significant differences that arise for the same amount of work performed by different people due to disparities in education attainment. Second, there is a lack of wage information regarding persons who have not participated in the labor market for some time. Perplexing problems arise when trying to identify wage rates for persons who have been absent from the labor market. The opportunity cost approach assumes that individuals can allocate their time between market and non-market work, in reality there are constraints on the amount of time spent on market work and when such work is required.

2. Replacement Cost Method (specialist)

The main idea underlying this approach is that the time devoted to specific activities of household work can be valued by taking hourly wage rates of various service providers doing similar activities in their paid jobs. The main assumption is that household services can be replaced by hiring individuals with expertise in various occupational fields. These people are assumed to be doing similar work in the marketplace and are as productive as family members doing household work. We have relied on rates quoted by Brown Assessment Center. The table below summarizes the results of this study. These rates show the costs per hour to hire the various and assorted service providers.

3. Replacement Cost Method (generalist)

The main idea underlying this approach is that the time devoted to household work can be valued based on hiring a general domestic worker.

In Canadian courts the most accepted methodology has been the generalist replacement cost method. This methodology has been endorsed in personal injury cases in Canada because it provides compensation to replace the services lost. The replacement cost methodology has been favored because it is computationally simple, it recognizes the inherent value of household work and it comes closest to achieving the goal of returning the surviving family member to his/her pre-accident position. Practitioners believe that this approach most accurately values what the deceased did directly for the benefit of the surviving family members. However, there are some stifling difficulties to the replacement cost approach. First, the replacement cost methodology utilizes market alternatives that may perform household tasks more efficiently than would individuals working in their own homes. Second, it does not account for quality differentials that exist for household work produced by family members. Third, it understates many of the managerial tasks involved in household work.

Another important aspect to remember when calculating household work claims is to make adjustments on the basis of the division of household labor, economies of scale, and the necessary additions or reductions to household work that will be required in the absence of the deceased. Practitioners should analyze how much household work was derived from the deceased for surviving family members and now need to be replaced. Furthermore, some families experience economies of scale when they do housework. Due to the fact that family members often share in household duties, especially in the case of meal preparation, clean-up and indoor cleaning, it may now take surviving family members more time to fulfill these types of household chores because the absence of the deceased’s contribution. On the other hand, there may be instances where surviving family members will have less household work, such areas include laundry and shopping. Thus, practitioners should interview the surviving family members concerning the type and amount of household services performed by the deceased, it is possible to confirm the appropriate use of statistical averages or adjust the value of services. A major problem that still exists is the value of afectual bonds. Having a parent that cooks the evening meal may mean something different than if an outside cook were to do the same. These types of problems are difficult to quantify, since afectual bonds can be more important than monetary values for household services.

The responsibility of deducing an appropriate value for the loss of household services has a large impact on an award. Putting dollar values on unpaid household work has been problematic, mainly because of the lack of any market exchanges for these services and the inability to verify time spent on these services. This conundrum was stated best by the Court of Appeal in Mason v. Peters (1982), 139 D.L.R. (3d) 104 at 110, “Precise proof is manifestly impossible, but if a basis for reasonable ascertainment of the amount of damages has been established, the court will make the assessment as best it can with what it has.” Due to this fact, careful analysis of household services through documentation and statistical support is needed. The issues mentioned in this article hopefully help to better understand the problems practitioners’ face when analyzing household work claims.

Gordon Krofchick is a chartered accountant and chartered business valuator who specializes in forensic accounting issues and quantification of economic damages.

Saqib Durrani is a business consultant and holds a Masters in Business Administration.

Bob Roth

Student at work, Krofchick, Gordon et. al., July 23 2002

Valuations for the house hold services, Krofchick, Gordon et. al., Nov 27 2000

Non-pecuniary Damages, Krofchick, Gordon et. al. , Jan 31 2000