CERB Deductible for Wrongful Dismissal Damages Says BC SC:

In Yates v. Langley Motor Sport Centre Ltd ( 2021 BCSC 2175) Justice Mayer determined that the reasonable notice period for a 30 year old Marketing Manager and Events Co-ordinator making $60,000 with only 8.5 months service was 5 months.

However he deducted $10,000 of CERB payment from the award for the following reasons:

Deduction of CERB Benefits

[35] The evidence establishes that after her temporary layoff commenced, Ms. Yates obtained CERB from the Government of Canada in the amount of $12,000. Langley Hyundai submits that the portion of these benefits paid during the reasonable notice period determined by this Court should be deducted. It is my understanding that the maximum CERB payable to Ms. Yates per month was $2,000. Accordingly, in my view the amount at issue is $10,000 which is the amount. I conclude Ms. Yates obtained in CERB payments during the five-month notice period I have found she was entitled to

[36] My understanding of the basis of Langley Hyundai’s submission is that it is appropriate to deduct CERB payments as there is no requirement for Ms. Yates to return such benefits and therefore an award against it for payment in lieu of benefits, for the same period that she received CERB benefits, without deduction, would constitute impermissible double recovery.

[37] Langley Hyundai refers to the Government of Canada website which indicates that “[a] severance payment does not impact an individual’s eligibility for the CanadaEmergency Response Benefit”: https://www.canada/ca/en/services/benefits/ei/cerbapplications/ questions.html, at page 3/7. Further, Langley Hyundai submits that under the common law severance pay constitutes damages arising from wrongful dismissal and not employment income. For these reasons they submit that severance pay does not disqualify an individual from receiving, or in this case retaining, CERB payments pursuant to the Canada Emergency Response BenefitAct, S.C. 2020, c. 5, s. 8. That is, in Langley Hyundai’s submission, payment in lieuof notice to Ms. Yates will not result in her having to repay CERB benefits.

[38] Langley Hyundai relies upon the decision of the Supreme Court of Canada inIBM Canada Limited v. Waterman, 2013 SCC 70 [IBM], as binding authority on how courts are to approach the question of whether a collateral benefit should bededuced from payment in lieu of notice.

[39] In IBM the Supreme Court considered whether pension benefits received by a dismissed employee should be deducted from damages for wrongful dismissal. The Supreme Court concluded that pension benefits were a type of deferred compensation for the employee’s service and constitute a type of retirement savings and were not intended to be an indemnity for wage loss resulting from unemployment. For these reasons the Supreme Court agreed with the decisions of the courts below that pension benefits were not deductible from an award for wrongful dismissal: IBM, at para. 4.

[40] The Supreme Court stated that a collateral benefit (being a benefit flowing to a plaintiff and connected to the defendant’s breach), would be considered compensating advantage justifying a deduction from a damages award for wrongful dismissal when the advantage is one that (a) would not have accrued to the plaintiff if the breach had not occurred, or (b) was intended to indemnify the plaintiff for the sort of loss resulting from the breach: IBM, at paras. 27-2

[42] I agree with the finding of Justice Gerow in a recent decision of this Court,Hogan v. 1187938 B.C. Ltd., 2021 BCSC 1021 [Hogan], in which Gerow J. stated as follows:

[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 that 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.

[43] In this case I find that CERB payments would not have been payable to Ms. Yates if she had not been terminated from her employment with Langley Hyundai – which termination constitutes a breach of her employment contract justifying payment in lieu of notice. Further, I find that CERB payments are a benefit intended by the Government of Canada to be an indemnity for the loss of regular salary arising from Langley Hyundai’s breach of Ms. Yates’ employment contract. Unlike an employee funded pension or a private disability insurance policy Ms. Yates did not contribute to the benefit.

[45] Ms. Yates relies upon Jack Cewe Ltd. v. Jorgensen, [1980] 1 S.C.R. 812, inwhich the Supreme Court of Canada found that damages for wrongful dismissal are earnings for unemployment insurance purposes, on the basis that such earnings arise out of employment. In that case the Supreme Court found “… the payment of unemployment insurance contributions by the employer was an obligation incurred by reason of respondent’s employment. Therefore, to the extent that the payment of those contributions resulted in the provision of unemployment benefits, these are a consequence of the contract of employment and, consequently, cannot be deducted from damages for wrongful dismissal.” (at p. 813). The same cannot be said with respect to CERB benefits in that the source of these benefits does not originate from contributions made by either Ms. Yates or Langley Hyundai as a result of her employment. Rather, the government funds used to pay CERB are likely from all sources of government revenue

[47] I do not find, on the available evidence, that Ms. Yates’ will be required to repay CERB benefits if she obtains an award of damages for wrongful dismissal. I conclude that CERB benefits of $10,000 which were received by Ms. Yates should be deducted from the award of damages.

My Comments :

This issue keeps on coming up in various trial  decisions in different provinces  with different outcomes but has not yet been ruled upon by any Court of Appeal .

Following September 2020 and until September 2021 , EI is also no longer repayable from wrongful dismissal damages according to Order 8.

Will the same result flow as with CERB ?

However there is one very important difference between non repayable CERB and non repayable EI. The employee, or that matter the employer, did not contribute to CERB but both parties contribute to EI, therefore the SCC comments in Jack Cewe Ltd. v. Jorgensen will probably result in that the Plaintiff will not have to repay EI but the Defendant will not get credit for these payments in calculating wrongful dismissal damages.

Whoever thinks that employment law is easy is very ill informed.

If you want a copy of this case, email me at barry@barryfisher.ca