Alberta court of appeal agrees: CERB is not deductible from wrongful dismissal damages

Previously, the only appellate decision that directly addressed whether Canada Emergency Response Benefit (CERB) payments should be deducted from damages for wrongful dismissal was Yates v Langley Motor Sport Centre Ltd (Yates), a decision released by the British Columbia Court of Appeal (BCCA). In that decision, the employee had been laid off with the onset of the COVID-19 pandemic, and the trial judge, in finding that the plaintiff had been wrongfully dismissed, deducted the CERB payments she received from her awarded damages. On appeal, the BCCA was asked to revisit the issue, and ultimately agreed with the employee that her CERB payments should not have been deducted.

The discussion surrounding the deductibility of CERB payments was centered on whether it amounted to a compensating advantage. Also known as a collateral benefit, this issue arises when the plaintiff receives a benefit that would result in compensation of the plaintiff beyond their actual loss and either (a) they would not have received the benefit but for the defendant’s breach, or (b) the benefit is intended to be an indemnity for the sort of loss resulting from the defendant’s breach. In Yates, the trial judge found that CERB was intended as a wage subsidy that would compensate, in part, the loss of wages arising from termination of employment, and further, it did not fall into previously recognized exceptions of accepted compensating advantages. However, the BCCA determined that the trial judge failed to contemplate the broader policy considerations surrounding CERB payments, specifically that it was to provide emergency aid to Canadian workers who lost all or a significant portion of their income for a variety of reasons related to the pandemic. In particular, the BCCA made the following comments:

1. [A]s a matter of overall impression, it seems wrong for a defendant employer who has breached the employment contract with the plaintiff to enjoy, effectively, a windfall from an income support program designed to benefit workers impacted by the COVID-19 pandemic. If a windfall is to result, it seems to better reflect the intention of Parliament that it go to the worker.
2. [CERB payments] are a matter between the employee and the appropriate authority and do not concern the [employer]; and
3. What tips the balance against deductibility…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.

In Oostlander v Cervus Equipment Corporation, the Alberta Court of Appeal (ABCA) was similarly asked to reconsider the deduction of the plaintiff’s CERB payments from his wrongful dismissal damages. While the employee’s dismissal, in this case, was not related to the COVID-19 pandemic, the ABCA nevertheless found the analysis in Yates persuasive, and agreed that “broader policy considerations militate against the deductibility of CERB [payments] from damages for wrongful dismissal.” As a result, the ABCA also held that the CERB payments the plaintiff had received were not deductible from his damages award.

Conclusion

Going forward in Alberta, any payments from CERB will not be deductible from wrongful dismissal damages calculations. Further, while appellate courts are only binding on the lower courts in their provinces, these decisions will likely be persuasive in other Canadian jurisdictions.

If you have any questions surrounding wrongful dismissal damages, or any other employment and labour questions, please reach out to Alison Walsh and Jenny Wang.