British Columbia, Canada Court Deducts CERB From Employee’s Damages for Wrongful Dismissal

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To date, few decisions in Canada have considered whether the amount of the Canadian Emergency Response Benefit (CERB) employees receive after their job termination should be deducted from their damages in lieu of common law reasonable notice.  CERB was a program, now closed, the federal government set up to provide financial support to employed and self-employed Canadians who were directly affected by COVID-19. 

As previously discussed, in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998 (Iriotakis) the Ontario Superior Court declined to reduce the employee’s entitlement to damages in lieu of reasonable notice by the amount of CERB he received.  In Hogan v. 1187938 B.C. Ltd., 2021 BCSC 1021 (Hogan), the Supreme Court of British Columbia (BC) recently distinguished Iriotakis when it deducted the employee’s CERB payments from his damages for wrongful dismissal. 

Background

The employee was temporarily laid off from his position as assistant manager of an automotive dealership in March 2020 not long after BC declared COVID-19 a public health emergency.  As a result of the economic impact of the pandemic, the employee’s job was permanently terminated in August 2020 after he had worked at the dealership for 22 years.  During the notice period, the employee received Employment Insurance (EI) and $14,000 in CERB.    

Decision

The court determined that the appropriate reasonable notice period was 22 months.  It concluded that the EI benefits should not be deducted because s. 45 of the Employment Insurance Act requires a claimant to repay any unemployment benefits if an employer becomes liable to pay their earnings.  The court determined, however, that the CERB payments should be deducted from the damage award for the following reasons:

…The CERB payments raise a compensating advantage issue. If the CERB payments are not deducted the plaintiff would be in a better position than he would have been if there had been no breach of the employment contract.

But for his dismissal, the plaintiff would not have received the benefit. The nature of the benefit is an indemnity for the wage loss caused by the employer’s breach of contract. There is no evidence that the plaintiff contributed to obtain the benefit by paying for it directly or indirectly. (paras. 100 and 101)

The court distinguished Iriotakis in which, as noted above, the Ontario court did not reduce the employee’s entitlement to damages in lieu of reasonable notice by the amount of CERB he received.  It noted that in Iriotakis the employee was not going to be compensated for all of the income he lost as he was going to suffer a significant loss of commission, which his employment contract provided he was not entitled to upon termination; his salary was only half of his income.  Accordingly, the Iriotakis court decided that it would not be equitable to reduce the employee’s damage entitlement by the CERB payment because there was a disparity between the CERB payments and the employee’s loss of salary and significant loss of commission.

In contrast, the BC court noted in Hogan that the employee was going to be compensated for all of his lost income.  Unlike the employee in Iriotakis, he would not suffer additional losses due to a loss in commission income.  Therefore, there would not be a large disparity between his actual loss and the amount of damages he would receive. 

The court reasoned that there was “no basis to depart from the general rule that contract damages should place the plaintiff in the economic position he would have been in had the defendant performed the contract” (para. 107).  It decided to deduct the CERB benefits from the damage award noting that:

  • If the CERB payments were not deducted the employee would be in a better economic condition than he would otherwise be.
  • The CERB payments were not private insurance, and neither the employer nor the employee contributed to them.
  • There was no evidence that the employee would have to repay the CERB.

Bottom Line for Employers

Hogan and Iriotakis are important decisions for employers to be aware of when determining whether CERB payments received by an employee after an employee’s job termination without cause should be deducted from their damages in lieu of reasonable notice.  Based on the reasoning of the Ontario and BC courts in these cases, it appears that the decision whether to deduct CERB payments may depend on whether they will put the employee in a better position economically than they would otherwise be.     

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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