Can CERB payment be deducted from wrongful dismissal damage award?

If an employee is fired unjustly, can HR deduct the emergency grant from their payout?

BY Contributor 12 Apr. 2022

by Rhonda Levy and George Vassos

In Reotech Construction Ltd. v Snider, 2022 BCSC 317 (Reotech), the Supreme Court of British Columbia found that the trial court erred when it did not deduct the employee’s $9,000 Canada Emergency Response Benefit (CERB) payment from his damage award for wrongful dismissal.

Background

The employee began working for Reotech in February 2018. He was placed on a temporary layoff in March 2020, never recalled, and terminated without cause. He was paid two weeks’ salary as compensation in accordance with the termination provision in a policy and procedure manual, which he received and signed after his employment began.

The employee claimed $35,000 in damages comprising, among other things, five months’ damages for reasonable notice. He argued there should be no set-off based on any amounts he received under CERB.

The trial judge awarded the employee damages for a 4.5-month reasonable notice period, and declined to deduct his CERB payments.

Decision

On appeal, the court concluded that the trial judge was wrong in declining to deduct the $9,000 in CERB payments from the damage award. The court determined the CERB payments should be deducted from the damage award based on judicial precedents that established:

If the CERB payments are not deducted, the employee would be in a better position than he would have been if there had been no breach of the employment contract. The employee would not have received the benefit if he had not been dismissed. The benefit is an indemnity for the wage loss caused by the employer’s breach of contract.
CERB payments are not a form of private insurance and the employee did not contribute to obtain the benefit by paying for it directly or indirectly (unlike an employee-funded pension or a private disability insurance policy).
There is no evidence the employee would be required to repay the CERB.
CERB payments are a collateral benefit (i.e., a benefit flowing to a plaintiff and connected to the defendant’s breach) and considered a compensating advantage justifying a deduction from a damage award when the advantage is one that:
- would not have accrued to the plaintiff if the breach had not occurred; or
- was intended to indemnify the plaintiff for the sort of loss resulting from the breach.

Bottom Line for Employers

As previously discussed here and here, we have seen some inconsistency in the approach Canadian courts have taken as to whether an employee’s entitlement to damages in lieu of reasonable notice should be reduced by the amount of CERB they received. Reotech is another reminder that some Canadian courts deduct CERB payments from wrongful dismissal damage awards.