CASE ALERT: Deduction of CERB from Notice Entitlements 

Another decision coming from British Columbia that opens the door for Canada Emergency Response Benefit (CERB) to be deducted from notice entitlements. In Hogan v 1187939 B.C. Ltd., 2021 BCSC 1021 (“Hogan”), the Court held that Employment Insurance (EI) benefits should not be deducted pursuant to Section 45 of the Employment Insurance Act, which requires a claimant to repay any unemployment benefits if an employer becomes liable to pay their earnings. 

The court determined that damages should be based on the plaintiff’s annual salary of $85,800 per year. The base salary amounts to $7,150 per month of lost income. The plaintiff received $14,000 in CERB payments in 2020. The CERB payments raise a compensating advantage issue because if the CERB payments are not deducted, the Court reasoned that the plaintiff would be in a better position than he would have been if there had been no breach of the employment contract. But for his dismissal, the plaintiff would not have received the benefit. The nature of the benefit is an indemnity for the wage loss caused by the employer’s breach of contract. There is no evidence that the plaintiff contributed to obtain the benefit by paying for it directly or indirectly. 

 This case is distinguishable from a similar case in Ontario where the CERB payments were not deducted. In Iriotakis v Peninsula Employment Services Limited, 2021 ONSC 998 (“Irotakis”), the plaintiff was terminated after 28 months. The court determined the reasonable notice period was three months and that on the specific facts of the case—particularly the disparity between the payments and the employee’s loss of salary and significant loss of commission—it would not be equitable to reduce his entitlement to damages by the CERB payments. In Iriotakis, the employment contract provided that the plaintiff was not entitled to commission income upon termination. The evidence in Iriotakis was that the plaintiff’s salary on which his past wage loss was based amounted to less than half of his actual income. 

However, in Hogan, the plaintiff’s damages per month were based on the income he would have earned if he had continued to work during the reasonable notice period. In other words, the plaintiff is to be compensated for the income he would have lost. He did not suffer additional losses due a loss in commission income, and as a result, there was not a large disparity between the plaintiff’s actual loss and the amount of damages he is expected to receive. In Iriortakis the award for the lost wages was reduced by more than half as a result of the plaintiff’s employment contract and retaining the CERB payments would not have put the plaintiff in a better economic position than he would have been but for the breach. In this case, if the CERB payments are not deducted, the plaintiff will be in a better economic condition than he would otherwise be. 

 Furthermore, the CERB payments themselves were not private insurance, and neither the employer nor the employee contributed to them. As a result, they are not considered delayed compensation or part of the plaintiff’s earnings, and there is no evidence that the plaintiff will have to repay the CERB. Moreover, the CERB payments were intended to be an indemnity for the type of loss resulting from the employer’s breach, but the employee had not contributed in order to obtain the entitlement. As a result, the Court found no basis to depart from the general rule that contract damages should place the plaintiff in the economic position he would have been in had the defendant performed the contract. In conclusion, the Court ordered the CERB benefits of $14,000 to be deducted from the award of damages. 

 PooranLaw will continue to monitor legal developments related to CERB and CERB deductions during the COVID-19 pandemic. In the meantime, if you require legal assistance in determining how these new rules apply to you or your organization, we encourage you to reach out to your regular PooranLaw lawyer, or any member of our team. 

Note: This article provides general information only and does not constitute, and should not be relied upon as, legal advice or opinion. PooranLaw Professional Corporation holds the copyright to this article and the article and its contents may not be copied or reproduced in any form, in whole or in part, without the express permission of PooranLaw Professional Corporation.