Whether CERB Payments Are Deductible From Wrongful Dismissal Damages – A Case of Double Recovery?
By: Michelle QuinnThe Facts
In Hogan v.1187938 B.C. Ltd., 2021 BCSC 1021, the plaintiff, Terence Hogan, (“Mr. Hogan”) was terminated (without cause) by his employer, Mercedes-Benz, on March 30, 2020, as a result of the Coronavirus pandemic.
At the time of his termination, he was employed as an Assistant Service Manager and had been with the car dealership for almost 22 years. He was 53 years of age at the time of his trial.
The trial judge concluded that Mr. Hogan was entitled to a notice period of 22 months.
Following his termination, Mr. Hogan tried to mitigate his losses by seeking alternative employment, but was ultimately unsuccessful. Mr. Hogan received $3,459 in Employment Insurance and $14,000 from the Canada Emergency Response Benefit (“CERB”).
The Issues
One of the issues considered at trial was whether the CERB payments Mr. Hogan received should be deducted from any damage award.
In the analysis, the trial judge held that the nature of the benefit is an indemnity for the wage loss caused by the employer’s breach of contract. There was no evidence before the Court that the plaintiff contributed to obtain the benefit by paying for it directly or indirectly.
The trial judge found that there was not a large disparity between Mr. Hogan’s actual loss and the amount of damages he will receive. In Mr. Hogan’s case, the trial judge reasoned that if the CERB payments were not deducted, the plaintiff would have been in a better economic condition than he would otherwise be.
The Court held:
[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.
The Decision & Post Hogan
The Court concluded that the CERB benefits of $14,000 should be deducted from the award of damages.
In a subsequent, recent decision of Yates v. Langley Motor Sport Centre Ltd., 2021 BCSC 2175, which was released on November 8, 2021, the Court considered the same issue of whether the CERB benefits paid to the plaintiff, Ms. Yates, during the reasonable notice period should be deducted from the damage award.
In Yates, the Court agreed with the analysis in Hogan, and found that the 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.
The Court found, on the available evidence, that Ms. Yates’ will not be required to repay the CERB benefit if she obtains an award of damages for wrongful dismissal.
The Court concluded that the amount of $10,000 should be deducted from the award to account for CERB benefits received by Ms. Yates during the five month notice period.
If you have any questions about these decisions and CERB payments generally, please contact Michelle Quinn at 604.661.9229 or email MQuinn@rbs.ca.
Photo By Peter J. Thompson/National Post
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When an employee resigns to pursue a new employment opportunity with a new employer, or to start a new business venture of their own, the departing employee has to be careful not to do anything which may breach the terms and conditions of their employment agreement, or the duties of loyalty, good faith, fidelity and confidence which all departing employees owe to their former employer.
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Employee or independent contractor: which one are you? You might even be a dependent contractor. This intermediate category of “dependent contractor” has emerged over the last few years. Unlike an independent contractor, a dependent contractor must be provided with reasonable notice of termination of the contractor relationship. To determine whether a person is an employee or a contractor, the CRA and the Courts look at the substance of the relationship as a whole, which is exactly what the BC Supreme Court did in the case of Glimhagen v. GWR Resources Inc., 2017 BCSC 761
