In response to the COVID-19 Pandemic, the Canadian government introduced the Canada Emergency Response Benefit (CERB). The goal was to provide financial support to employed and self-employed Canadians directly affected by the pandemic. Eligibility required, among other things, that applicants had stopped working as a consequence of the pandemic and did not quit their jobs voluntarily. If eligible, applicants could receive $500 a week for a maximum of 28 weeks (i.e., applicants could receive a maximum of $14,000).This, of course, was welcome news to anyone whose livelihood was jeopardized.

However, as it turns out, receiving CERB may come back to bite you if you intend to seek wrongful dismissal damages against your former employer. This was recently discussed in the following decision of the Supreme Court of British Columbia.

Hogan v 1187938 B.C. Ltd: Factual Overview

The employee in this case was 53 years old. He began working for his employer, a Mercedes-Benz dealership in Vancouver, back in 1998. He was issued a temporary layoff notice by his employer in March 2020. The layoff was brought about by the COVID-19 pandemic, which saw business at the dealership drop substantially. In August of 2020, that temporary layoff became permanent. The employee was given $13,255 in termination pay. Notably, he also received $14,000 in CERB payments – the maximum available amount.

The court found that the initial temporary layoff amounted to a constructive dismissal. It was unilateral and the employee neither consented nor acquiesced. The subsequent termination confirmed for the court that the employer no longer intended to be bound by the contract at the time of the temporary layoff. The employee, therefore, was entitled to damages. Justice Gerow concluded 22 months’ compensation was appropriate. What remained to be decided was whether or not the $14,000 in CERB payments received by the employee should be deducted.

At Trial: Should CERB be Deducted from Wrongful Dismissal Damages?

Unsurprisingly, the employee argued that the CERB payments he received should not be deducted from the damages owed to him by his former employer. On the other hand, the employer argued they should be deducted.

Ultimately, Justice Gerow concluded that the CERB payments were deductible. In her view, the CERB payments raised a “compensating advantage issue.” Namely, allowing the employee to receive both the 22 months’ compensation and the CERB payments would put the employee in a better position than he would have been had he not been dismissed. The employee would not have received the CERB payments had he not been dismissed. Allowing him to retain both the full 22 months’ compensation along with the CERB payments would be like double dipping. Justice Gerow relied on a deeply entrenched contract law principle: damages should place the employee in the economic position he would have been in had the employer performed the contract.

A Welcome Sight for Employers

This result is one to be celebrated for employers. Practically, it means that where an employee has received CERB benefits, the government will shoulder in part (i.e., to the extent they granted CERB payments) the cost of any wrongful dismissal damages you may otherwise have been obligated to pay.

It is likely, however, that these cases will be decided on a case-by-case basis. The goal will be to ensure that employees are treated fairly while also preventing them from receiving a windfall as a result of CERB payments.