The British Columbia Supreme Court recently issued its first decision on whether the Canada Emergency Response Benefit (“CERB”) payments should be deducted from severance awards in a claim for wrongful dismissal in the case of Hogan v 1187938 BC Ltd., 2021 BCSC 1021. In deducting the CERB payments from the ultimate award, the decision highlights the overarching principle to ensure that dismissed employees are treated equitably but do not receive a windfall as a result of collecting CERB payments.

Mr. Hogan, an employee for almost 22 years, was temporarily laid-off in March 2020, as a response to the impacts of the pandemic, and ultimately dismissed in August 2020. He had received $14,000 in CERB payments prior to his dismissal.

The Court determined Mr. Hogan was constructively dismissed and that 22 months was the appropriate notice period. The Court then turned to the issue of damages and mitigation, and found that CERB payments constituted mitigation income and should be deducted from wrongful dismissal damages for, inter alia, the following reasons.

  1. Unlike EI benefits (which are not deductible from a wrongful dismissal award as an employee may be required to repay EI benefits to the government upon receipt of severance), CERB payments are not required to be repaid.
  2. CERB payments are not private insurance and therefore are not considered to be delayed or deferred earnings rightfully belonging to the employee.
  3. The CERB payments raised a “compensating advantage” issue. If the CERB payments were not deducted from the damages award, the dismissed employee could end up in a better position than he or she would have been if there had been no wrongful dismissal at all.

The BCSC in the Hogan decision is a departure and distinguished the decision of Iriotakis v. Peninsula Employment Services Ltd. in which the Ontario Superior Court of Justice did not reduce the employee’s entitlement to damages in lieu of reasonable notice by the amount of CERB he had received.  The primary reason for the differing outcome was that in Iriotakis, the employee would not be compensated for all of the income he lost, as it would not account for his significant loss of commission that he received in addition to his salary

This is the first BC decision to discuss the impact of CERB payments on severance awards and is a reminder of the uncertainty within Canadian authority on the matter. While the decision confirms that CERB may be considered mitigation income properly deducted from severance awards, whether it will result in a reduction will be a case specific analysis.  One thing is evident, CERB payments are now a relevant and possibly important consideration for employers when assessing severance packages.

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