In Hogan v 1187938 B.C. Ltd ( 2021 BCSC 1021 Justice Gerow held that the damages for wrongful dismissal damages should be reduced by the amount of CERB payments received by the Plaintiff for the time that these two periods overlapped.
This is what the Judge said on this issue:
[99] The EI benefits should not be deducted. Section 45 of the Employment Insurance Act, S.C. 1996, c. 23, requires a claimant to repay any unemployment benefits if an employer becomes liable to pay their earnings.
[100] The plaintiff received $14,000 in CERB payments in 2020. 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.
[101] 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.
[102] In my view, this case is distinguishable from Iriotakis where the CERB payments were not deducted. In Iriotakis, the plaintiff was terminated after 28 months. The court determined the reasonable notice period was three months, and determined that on the specific facts of the case, particularly the disparity between the payments and the employee’s loss of salary and significant loss of commission, it would not be equitable to reduce his entitlement to damages by the CERB payments. In Iriotakis, the employment contract provided the plaintiff was not entitled to commission income upon termination. The evidence in Iriotakis was that the plaintiff’s salary on which his past wage loss was based amounted to less than half of his actual income.
[103] In this case, the plaintiff’s damages per month are based on the income he would have earned if he had continued to work during the reasonable notice period. In other words, the plaintiff will be compensated for the income he would have lost. He did not suffer additional losses due a loss in commission income. As a result, there is not a large disparity between the plaintiff’s actual loss and the amount of damages he will receive.
[104] In Iriortakis the award for the lost wages was reduced by more than half as a result of the plaintiff’s employment contract, and retaining the CERB payments would not have put the plaintiff in a better economic position than he would have been but for the breach. In this case, if the CERB payments are not deducted the plaintiff will be in a better economic condition than he would otherwise be.
[105] The CERB payments are not private insurance, and neither the employer nor the employee contributed to them. As a result, they are not delayed compensation or part of the plaintiff’s earnings. There is no evidence that the plaintiff will have to repay the CERB.
[106] The CERB payments were intended to be an indemnity for the type of loss resulting from the employer’s breach but the employee had not contributed in order to obtain the entitlement. In my view, this is similar to the situation in Sylvester and Ratych, where the benefits were deducted as the employee had not contributed in order to be entitled to the benefit.
[107] As a result, I see 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.
[108] Having considered the case law and the evidence, I have concluded the CERB benefits of $14,000 should be deducted from the award of damages.
My Comments :
This case will undoubtably create a lot of controversy in the employment law field as the general practice up to this point is that the employer did not get to take into account CERB payments when calculating wrongful dismissal damages.
One of the main reasons that this judge ruled in this way was that EI is repayable and this avoids the overcompensation argument. However for EI benefit periods that started after September 27, 2020 and until September 25, 2021, this is no longer the case as a result of amendments to the EI regs, which are explained below :
Interim Order 8 under the EI Act reads as follows :
153.193 The following are to be excluded from the earnings referred to in section 35 of the Employment Insurance Regulations:
(a) any pay or earnings referred to in subsection36(8), (9) or (19) of those Regulations if
(i) the claimant’s benefit period begins on or after September 27, 2020, or
(ii) the pay or earnings are declared to the Commission on or after September 27, 2020 and would otherwise have been allocated under section 36 of those Regulations to a week beginning on or after September 27, 2020;
Here is the link to the Interim Order: https://lnkd.in/gfZCfni
What this would seem to mean is that if a person were terminated on or after September 27, 2020 then any termination pay, severance pay or wrongful dismissal damages they receive does not affect their EI entitlement.
Thus you can now get EI and termination pay etc for the same period.
AND
You presumably do not have to repay EI for wrongful dismissal damages received if the termination took place on or after September 27, 2020.
This provision expires on September 25, 2021.
Therefore for terminations that take place between September 27, 2020 and September 25, 2021 you need not even check with EI regarding any overpayment owing.
The question then becomes, since EI is not repayable now in certain cases, should the employer also get to claim that as a damage reduction? Personally I think not because the employee pays into EI and thus is dramatically different than CERB. In that case there is a tradeoff between two legal principles, the principle to avoid overcompensation vs the collateral benefit rule which says that the wrongdoer should not benefit from the innocent party purchasing insurance against a loss.
But who knows what will happen next in these weird times. Stay tuned.