Should the Canadian Emergency Response Benefit (CERB) be deducted from damages for wrongful dismissal?

Recent cases from the Ontario Superior Court, and Tribunal’s have determined that the Canadian Emergency Response Benefit (CERB) is not deductible against damage awards, but is that the end of the matter?

Recall that the entire purpose of damages for reasonable notice is supposed to put the employee in the same position had an employer provided reasonable notice of termination. The purpose of damages for wrongful dismissal is not to provide a windfall to employees. Unfortunately, recent decisions from Ontario courts and tribunals have not accepted that argument and have permitted employees to collect CERB and damages for reasonable notice resulting in an unfair windfall for employees, at the taxpayer and employer’s expense.

In the case that we reported in our newsletter, Iriotakis v Peninsula Employment Services Limited. , [2021] O.J. No. 635 the Court refused to offset CERB payments that were received by the employee during the period he was entitled to reasonable notice. The Court determined it would be inequitable to do so, and determined that the employee would be paid during the period for lost wages, and receive CERB.

More recently, in the case of Safecross First Aid Ltd. [2021] O.L.R.D. No. 546, an employee was awarded damages at the Ontario Labour Relations Board under section 50 of the Occupational Health and Safety Act. The employee was awarded lost wages as a result of a reprisal. The employer argued that the Board should reduce damages for lost wages by the $500.00 per week due to the CERB benefit. The Board declined to do so. It agreed with the decision in Iriotakis, stating that it would be unfair to do so, and that no double award as suggested by the employer would arise because the employee may be required to repay any amounts in excess determined by the CRA. It further noted that the employee should not have to bear the risk of not being made whole as a result of the Employer’s reprisal.

In respect of these two decisions, it is important to note that the Canada Emergency Response Benefit was required to be an income replacement benefit. Under section 4 and 6 of the Canada Emergency Response Benefit Act, it specifically refers to the payment as “income”:

                The Minister must make an income support payment to a worker who makes an application under section 5 and who is eligible for the                  payment.

               6 (1) A worker is eligible for an income support payment if

The Federal government specifically classified this as an “income” payment and not simply a cash handout. As it is classified as income, it should be properly deductible against a damage award that is to replace lost income. If the employee receives both the CERB payment and the damages for wages, this amounts to double recovery as both are meant to replace lost income. The rule against double recovery, is a contractual principle that a plaintiff under contract can only be put into the place he/she would have been if the contract had not been breached. He/she cannot recover more than they would have otherwise received if the contract was not breached.

At the time of writing this article, there has been no guidance from CRA with respect to repayment of CERB in the event of a damage award for lost wages, or alternatively for wrongful dismissal.

Equally, the Canada Emergency Response Benefit Act is not clear as to whether these amounts would have to be repaid or not by the employee. The Act indicates that the amounts must be repaid where the person is “ineligible” but do not make any mention in the scenarios where the person has been provided a damage award for wrongful dismissal.

While in the cases above, the Court and Tribunal appear to feel it would be inequitable for the employee to pay the amounts back, what they have permitted is a type of double recovery. Effectively, it results in the employer paying out a windfall to the employee as the employee has already recuperated their losses and there is no certainty that they will have to pay the CERB back.

Most recently, a British Columbia Superior Court in Hogan v 1187938 B.C. 2021 BCSC 1021, has come to the opposite conclusion from those Courts and Tribunals in Ontario, and has indicated that CERB payments are deductible from damages for reasonable notice.

It is expected that there will be further litigation in respect of the deductibility of CERB payments, and it will be interesting to see if the two provinces will have completely differing case law. It may be that an Ontario Court will apply the B.C. decision and follow the common law principle against double recovery, but only time will tell.