THE EMPLOYERS' EDGE
British Columbia Court Rules CERB Payments Deductible in Damage Calculations for Constructive Dismissal
Following Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, a decision we wrote about in March, the Supreme Court of British Columbia further clarified offsetting CERB payments from wrongful dismissal damages calculations. The trial level Court ruled in 1187938 B.C. Ltd., 2021 BCSC 1021 that CERB income benefits may be deducted from damage awards for constructive dismissal.
A 53-year old service manager was dismissed by his employer, 1187938 B.C. Ltd. (operating as “Mercedes-Benz”) due to the significant financial impact of the COVID-19 pandemic. He had worked with the company since April 6th, 1998. He started as an automotive mechanic and eventually was promoted to a service manager in 2013.
In March 2020, as a result of the worldwide COVID-19 pandemic, sales dropped and most service appointments were cancelled. On March 24, 2020 Mercedes-Benz issued temporary layoffs including the plaintiff. Both the plaintiff and Mercedes-Benz believed this would be a temporary layoff with a recall later in the year. However, throughout the summer vehicle service appointments did not improve. As a result, Mercedes-Benz issued a termination notice to the plaintiff on August 28th, 2020 effective immediately.
While the court explored several issues in the case including when the plaintiff was terminated and the length of notice he was entitled to, the most significant takeaway was the Court’s decision to deduct CERB benefits from the plaintiff’s damages.
Calculation of Damages
The Court calculated that the plaintiff was entitled to twenty-two (22) months’ reasonable notice based on an annual salary of $85,800.00. Justice Gerow reviewed several deductions including the plaintiff’s temporary employment with BC Elections, EI benefits, and income he received from CERB payments.
The trial level Judge affirmed that CERB was not private insurance nor did CERB constitute compensation or earnings since neither the plaintiff nor his employer made any contributions and there was no repayment obligation in contrast to EI benefits.
Comparing Horgan to Iriotakis
The Court differentiated the plaintiff’s situation from the Iriotakis v. Peninsula Employment Services Limited decision of the Ontario Superior Court.
In Iriotakis, the employee was terminated after 28 months and the court ruled that the reasonable notice period was 3 months. The employment contract included a base salary and commission. There was a significant disparity between CERB payments and the employee’s loss of salary and commission. Since the employee was not entitled to commission income upon termination, his past wage loss amounted to less than half of his actual income. Thus, the Court in Iriotakis found that deducting CERB payments was not equitable.
In contrast, in the BC decision, if damages were calculated without the deduction of CERB payments, the plaintiff would be “put into a better position than he would have been if there had been no breach of employment contract.” There was not a significant disparity between the plaintiff’s actual losses and the amount of damages he was entitled and therefore, without the deductions, the plaintiff would be unjustly enriched in the circumstances.
The Court concluded it was appropriate and equitable to deduct CERB payments.
Takeaway for Employers
This decision affirms our previous predictions that the courts may be willing to deduct CERB payments in different circumstances than those found in Iriotakis. The British Columbia Court clarified that in situations where a plaintiff would receive an unjust enrichment from CERB payments, they should be deducted from wrongful dismissal damages.
All said, the deductibility of CERB benefits still remains uncertain given these contrasting decisions. It remains to be see whether either of these decisions is appealed or how lower courts will treat CERB payments in future litigation.
And while we are encouraged by this new decision and believe it is more in keeping with common law mitigation principles, employers should be aware of their potential liabilities before terminating anyone’s employment. Contact the legal experts at CCPartners for assistance in dealing with the economic impacts of COVID-19 in the workplace.
With news and developments relating to the COVID-19 Pandemic and the reopening of the economy occurring at a rapid pace – be sure to stay tuned to our Employers’ Edge Blog and Lawyers for Employers Webinars and Podcast series. The team at CCPartners will continue to update our readers and listeners on all other pertinent developments regarding benefits and legislative changes related to COVID-19.