Employment & Labour Law

Alberta Court of Appeal Decides CERB Should not be Deducted from Wrongful Dismissal Damages

February 22, 2023

Office space representing wrongful dismissal and CERB

The pandemic was a difficult time for many Albertans. In response to COVID-related disruptions to the economy, the federal government enacted the Canada Emergency Response Benefit (“CERB”). Although the subsidy is now closed, income received from CERB has been highly litigated in the realm of employment law. A recent decision from the Court of Appeal of Alberta considered whether CERB benefits should be deducted from the damages from a wrongful dismissal.

Damages in Wrongful Dismissal

We have previously discussed the legal requirements regarding dismissal. However, to summarize, the Employment Standards Code sets out the conditions and the process for legally dismissing employees. Generally, an employee can be considered wrongfully dismissed if their employer terminates their employment without cause and without providing reasonable notice or pay in lieu of notice. The amount of notice an employer must provide an employee depends on several factors, including the length of service and the nature of the job. An employer can also be considered to have wrongfully dismissed an employee if they constructively dismiss the employee by making substantial changes to the employee’s job duties, hours of work, or working conditions.

An employee who has been wrongfully dismissed may be entitled to damages, including lost wages and benefits, as well as compensation for mental distress. However, the courts in Canada have been divided on the issue of whether CERB benefits should be considered a “compensating advantage” and thus deducted from damages to be paid by the employer as a result of wrongful dismissal. For example, in Irotakis v Peninsula Employment Services Ltd, the CERB payment was not deducted because it was deemed to be “only a subsistence-level, ad hoc benefit” which can be distinguished from an Employment Insurance benefit, which will ultimately be repaid.

The issue was considered by the Alberta Court of Appeal in Oostlander v Cervus Equipment Corporation.

CERB Deducted at the Lower Court

The case involved the wrongful dismissal of Steven Oostlander (“Oostlander”), a mechanic that was previously employed by Cervus Equipment Corporation (“Cervus”) for 36 years. Due to some restructuring, Oostandler was notified that his employment would end after another 16 months, which did not happen. Towards the presumed end of his employment, Oostlander inquired about the status of his termination but was told he was being kept on. After working for some time more, Oostlander was again notified that he was to be terminated, but with only one month’s notice.

After suing for wrongful dismissal, Oostlander was awarded 24 months’ pay in lieu of notice in the amount of $134,904 plus vacation pay in the amount of $14,196. However, the trial judge deducted CERB benefits on the basis that she had “no evidence whatsoever before me that Mr. Oostlander will be required to repay these CERB benefits” and “in the absence of any such proven obligation, I am assuming that Mr. Oostlander will retain his CERB benefits and so they are properly deducted from his final damage award.”

Cervus appealed the decision on the grounds that the trial judge had erred in her assessment of whether Oostlander had mitigated his damages, and Ooslander cross-appealed on the basis that his CERB benefits should not have been deducted from his damage award for wrongful dismissal.

Appeal Allowed: CERB Not Deducted

In the judgement, the Alberta Court of Appeal reviewed a decision recently released by the British Columbia Court of Appeal (“BC Court”). The Alberta Court of Appeal noted that after the appeal and cross-appeals were filed, the BC Court released its decision in Yates v Langley Motor Sport Centre Ltd., which speaks to this issue.

In Yates, the BC Court dealt with arguments regarding whether the CERB benefit should be considered a “compensating advantage.” The BC Court considered the test as developed in IBM Canada Limited v Waterman, and was ultimately persuaded by “broader policy considerations favouring non-deductibility.” Specifically:

What tips the balance against deductibility in [the BC Court’s] view are the policy considerations of the desirability of equal treatment of those in similar situations, the possibility of providing incentives for socially desirable conduct and the need for clear rules that are easy to apply (Waterman at para. 76).

The BC Court also considered the repayment argument, which is a relevant consideration within the test. In that regard, the BC Court labelled it a “bit of a fruitless exercise” since it remains unclear whether these benefits will require repayment. Furthermore, it is not the concern of the employer.

The Alberta Court of Appeal found this analysis compelling and chose to adopt it. The Court acknowledged that the facts in Yates differ in that the employee was dismissed as a result of the COVID-19 pandemic, while in Oostlander, the dismissal was unrelated to the pandemic; however, the Court concluded that “broader policy considerations militate against the deductibility of CERB from damages for wrongful dismissal.”

As a result of this decision, it is likely that employers will not be able to claim that CERB benefits can be deducted from damages for wrongful dismissal. Arguments could be made regarding the cause of the dismissal and its connection to the COVID-19 pandemic. Still, the Alberta Court of Appeal has demonstrated that broader policy considerations will be persuasive.

Contact the Employment Lawyers at DBB Law for Wrongful Dismissal Advice

Conveniently located in Calgary, DBB Law offers modern, forward-thinking legal representation to clients across Alberta. If you believe you have been wrongfully dismissed, contact us today. To speak with one of our knowledgeable employment lawyers or to schedule a confidential consultation, please contact us online or by phone at 403-265-7777.

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