Court Rules That Employee’s CERB Payments Be Deducted from Wrongful Dismissal Award

Written on behalf of Peter McSherry

We had previously written about Iriotakis v. Peninsula Employment Services Limited (“Iriotakis”), which was an Ontario court decision that took into consideration arguments relating to both the COVID-19 pandemic and related government emergency benefits in a wrongful dismissal case.

In Iriotakis, the employee had been terminated during the COVID-19 pandemic and it had taken him approximately seven months to secure new employment, during which time he received Canada Emergency Response Benefit (“CERB”) payments. In the decision, the court awarded the employee payment for three months’ notice, without offset or deduction for CERB payments received, despite the employer’s argument to the contrary, stating:

“I agree with the [employer] that CERB cannot be considered in precisely the same light as Employment Insurance benefits when it comes to calculating damages for wrongful dismissal. CERB was an ad hoc programme and neither employer nor employee can be said to have paid into the program or “earned” an entitlement over time beyond their general status as taxpayers of Canada. The level of benefit paid (approximately $2,000 per month) was considerably below the base salary previously earned by the [employee] to say nothing of his lost commission income. On balance and on these facts, I am of the view that it would not be equitable to reduce [the employee’s] entitlements to damages from his former employer by the amount of CERB given his limited entitlements from the employer post-termination relative to his actual pre-termination earnings. I decline to do so.”

More recently, a British Columbia court considered a similar issue, but came to a different conclusion, ruling that the employee’s CERB payments should be deducted from his damages for wrongful dismissal.

Employee Terminated During COVID-19 Pandemic

The employee began working for the employer in 1998 at a car dealership. In response to the impacts of the COVID-19 pandemic, the employer issued a temporary layoff notice to the employee, along with a number of other employees, on March 24, 2020. Both the employer and the employee had anticipated that it would be a temporary layoff, and the employee would be recalled to work.

However, on August 28, 2020, the employer provided notice to the employee that his employment was permanently terminated. The employer provided the employee with termination pay in the amount of $13,255.

Prior to termination, the employee’s annual salary was $85,000.

The employee then took steps to mitigate his loss by seeking alternative employment, but was unable to secure new employment. Following his termination,the employee had received $3,459 in Employment insurance and $14,000 from CERB.

The employee applied to court seeking judgment for wrongful dismissal, claiming constructive dismissal. He argued that his employment had been terminated without just cause and without a reasonable period of notice. He asked for a reasonable notice period of 21 to 22 months.

In response, the employer stated that the employee was one of a number of employees whose employment was ended due to the impact of the COVID-19 pandemic. The employer conceded that the employee was terminated without cause, and stated that the reasonable notice period for the employee should be in the range of 15 to 18 months. However, the employer also submitted that the employee had failed to take reasonable steps to mitigate his damages and his reasonable notice period should thus be reduced. Finally, the employer argued that any award should be reduced by the amount of CERB payments received by the employee.

Court Deducts Employee’s CERB Payments from Damages Award

At the outset, the court held that the employee had been constructively dismissed. Further, after considering the relevant factors, the court ruled that the employee was entitled to a reasonable period of notice of 22 months. With regard to the issue of mitigation, the court concluded that the employee had taken reasonable steps to mitigate his damages.

Finally, the court evaluated the amount of damages to which the employee was entitled. As part of its analysis, it considered the employee’s receipt of CERB payments.

The court distinguished the employee’s case from that in Iriotakis, stating:

“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.

In this case, the [employee]’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 [employee] 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 [employee]’s actual loss and the amount of damages he will receive.”

The court concluding by stating:

“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….

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.”

The court therefore held that the employee’s CERB benefits of $14,000 would be deducted from his damages award.

Get Help

If your employment has been terminated without reasonable notice or severance from your employer, you might have a claim for wrongful dismissal. Even if your employer claims that the notice or severance is reasonable, it pays to check with a highly qualified employment lawyer to ensure that all legal requirements were, in fact, met by your employer. The employment laws are complicated and intertwined. The basis for a claim might exist even if your employer claims to have followed the law.

At Peter A. McSherry Employment Lawyer, I provide each of my clients with a full assessment of his or her case. Disputes in wrongful dismissal claims are usually based on severance pay, benefits and/or the timeliness of the notice. However, if an employer claims or cites misconduct as the cause for dismissal, reasonable notice is not needed. We can discuss the facts of your case. I can help you discover and weigh your options in a straightforward manner with respect for your needs and objectives. I can protect your rights. Call me at 519-821-5465 or contact me by e-mail to schedule a consultation.