Courts differ on whether to deduct CERB benefits from wrongful dismissal damages
By Raven Law
[The firm gratefully recognizes the contribution of this post by articling student
Anna Rotman]
[The firm gratefully recognizes the contribution of this post by articling student
Anna Rotman]
The Canada Emergency Response Benefit (CERB) was introduced in part to support
individuals who lost their jobs due to the pandemic. Millions of workers across
Canada who were out of work at some point during the pandemic have received
CERB payments. Some of those workers may have made claims of wrongful
dismissal against their employers and are seeking damages either through a
settlement or a court action. The question for those employees is: Will the CERB
payments be deducted from their damages for wrongful dismissal?
It was unclear when the CERB was introduced whether it would be treated like
income received during an employee’s notice period, and therefore deducted from a
damages award, or if it would be treated like Employment Insurance (EI) benefits,
which are not considered mitigation income.
There are now a handful of court judgments across Canada considering this
question, and, unfortunately, they have not all come to the same conclusion.
Judgments refusing to deduct CERB payments from damages awards
The Ontario Superior Court rendered one decision refusing to deduct CERB
payments from a damages award, but the reasoning in that judgment was very
fact–specific. In Iriotakis v Peninsula Employment Services Limited, Mr. Iriotakis
had been working as a salesperson and received most of his income through
commission. Due to a clause in the employment contract, the employer was not
obligated to pay him his commission during the reasonable notice period, leaving
him entitled only to his base salary. The judge stated that, based on these facts, it
would be inequitable to deduct the benefits he earned through CERB from his
damages. The Court was careful to note that this decision was based on the specific
facts of Mr. Iriotakis’s termination.
The Supreme Court of Nova Scotia has also refused to deduct CERB payments from
a damages award, on the basis that doing so would only benefit the employer and
could potentially harm the employee. By that time, the federal government had
made it clear that certain people would have to pay CERB back. In Slater v Halifax
Herald Limited, the Court was strongly influenced by the possibility that the
employee would be asked to pay the CERB back and would be put in a difficult
position. Furthermore, given the fact that CERB payments were meant to be income
replacement and could be subject to repayment, the Court found them to be
“analogous to EI benefits” and as such should not be considered in the calculation
of damages.
Judgments deducting CERB payments from damages awards
The British Columbia Supreme Court deducted CERB payments from damages for
wrongful dismissal in Hogan v 1187938 B.C. Ltd. Mr. Hogan had received $14,000
in CERB benefits in 2020 and the Court found that, if they were not deducted from
his wrongful damages, then he would be in a better financial position than he would
have been had the employer not fired him. The Court considered Iriotakis and
found that, unlike Mr. Iriotakis, Mr. Hogan’s employment contract did not limit his
damages and there was no equitable reason not to deduct CERB.
wrongful dismissal in Hogan v 1187938 B.C. Ltd. Mr. Hogan had received $14,000
in CERB benefits in 2020 and the Court found that, if they were not deducted from
his wrongful damages, then he would be in a better financial position than he would
have been had the employer not fired him. The Court considered Iriotakis and
found that, unlike Mr. Iriotakis, Mr. Hogan’s employment contract did not limit his
damages and there was no equitable reason not to deduct CERB.
Furthermore, the Court distinguished CERB from employment insurance (EI) and
private insurance, neither of which are usually deducted from damages. First, the
employer and employee had not contributed to CERB and it was therefore not an
earned benefit. Second, the Court wrote, unlike EI, there was no obligation to pay
CERB back (this judgment was rendered before it became clear that CERB may
need to be repaid in some cases). It is thus unclear how the Court may have
decided had it been aware of the possibility that employees must repay CERB
benefits.
The Provincial Court of Saskatchewan also deducted CERB from wrongful dismissal
damages in Abdon v Brandt Industries Canada Ltd. Interestingly, it held that it
could not follow Iriotakis because the Ontario Superior Court seemed to have
reached its decision on an equitable basis and the Provincial Court of
Saskatchewan, being a statutory court, did not have equitable jurisdiction. This
decision potentially leaves it open for the Saskatchewan Court of Queen’s Bench to
follow Iriotakis since it does have jurisdiction to base decisions on equitable
principles.
Conclusion
The judgments so far considering whether to deduct CERB benefits from wrongful
dismissal damages have left a great deal of uncertainty for individuals. The unique
nature of these benefits seems to have left courts ill–equipped to account for those
benefits when determining an award of damages for wrongful dismissal.
We will be following closely as courts continue to grapple with this question. Consult
one of our experienced employment lawyers at Raven, Cameron, Ballantyne and
Yazbeck LLP if you collected CERB after termination and are concerned about the
damages you are owed for wrongful dismissal.
[This article is for informational purposes only and does not constitute legal advice,
which cannot be given without consideration of your individual circumstances.]
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