To help millions of Canadians, the Federal Government started the Canadian Emergency Response Benefit (CERB) program, which provided recipients with funding while they were unable to go back to or find new work.
A portion of the CERB recipients was also terminated. When an employee is terminated and provided a severance package, there can be an obligation to find new work and deduct the new income from what is owed by the former employer. This is known as the duty to mitigate damages.
With employees who collected CERB being terminated, employers were claiming that their CERB payments should be deducted from their damages because it replaced their employment income. As this is a novel issue, there was no case law that could guide the courts on how to react to these claims.
However, in late 2022, the British Columbia Court of Appeal (BCCA) delivered a powerful answer. Then, in January of 2023, the Alberta Court of Appeal (ABCA) followed suit with a decision which agreed with the BCCA.
The British Columbia Decision: Yates v. Langley Motor Sport Centre Ltd., 2022 BCCA 398
The BCCA held that CERB payments received by terminated employees are not deductible from wrongful dismissal damages. The windfall should be for the benefit of the employee, not the employer.
The court reasoned that CERB payments are similar to unemployment insurance benefits. However, the difference is unemployment insurance is made possible as a consequence of the contributions from the employer throughout the employment relationship. CERB does not have to do with the employer or the employment relationship.
Whether the recipient had to pay back CERB or not is not a concern of the employer. CERB is a matter between the recipients and the authorities administering the emergency measure scheme.
The appeal court further stated that:
“CERB was an emergency measure delivering financial aid during the early weeks and months of an unprecedented global pandemic. The program’s goal was to mitigate harm to individuals in a moment of great uncertainty. CERB payments notwithstanding, many people lost their livelihoods as a result of the pandemic. It strikes me as out of step with that reality to conclude that the combination of CERB and damages awards leaves individuals “better off” after their employment was terminated than before.”
In other words, the court decided, for social policy reasons, that it was unfair to assume individuals who collected CERB and damages for wrongful dismissal were better off compared to before their termination.
The Alberta Decision: Oostlander v Cervus Equipment Corporation, 2023 ABCA 13
The ABCA was the second appellate court in Canada to deal with the matter of CERB deductibility. The court here followed the reasoning of the BCCA, holding that the CERB payments were not to be deducted from the wrongful dismissal damages award. It agreed with the broader policy considerations that militate against the deductibility of CERB.
Much like the BCCA, the ABCA moved away from the approach of determining how likely it was that the employee would ultimately have to pay back the CERB payments. This is considered a fruitless exercise. Instead, the court here similarly focused on the social policy and the fact that CERB is not an employer/employee relationship issue but rather a matter between the recipient and the authorities administering the scheme.
Both wrongful dismissal cases dealing with the issue of CERB deductibility that has reached an appellate court in Canada have decided in favour of not deducting CERB from awards. This is a significant development. Lower courts in both provinces will have to follow those rulings, and it will be persuasive to courts in other provinces dealing with the same issue.