CERB and Mitigation Income

CERB and Mitigation Income

Under employment law, a terminated employee has a duty to take steps as a reasonable person in the terminated employee’s position would take in his own interests – to maintain the person’s income and position in its industry, trade or profession.

The general rule is that all income earned by the terminated employee during the awarded notice period, except the income that would have been earned regardless of the status of the employment, will be deducted from the award of damages.

How does this principle apply to EI and CERB? In 2021, the Court in Ontario and BC visited the issue of mitigation income in light of CERB and EI.

CERB and Mitigation Income - Employment Law Calgary
CERB and Mitigation Income – Employment Law Calgary

In February 2021, the Ontario Court in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998 (CanLII), noted that CERB may not be considered mitigation income:

[20] Mitigation is a different question. Reasonable notice is assessed at the time the decision is made; mitigation is assessed in light of the actual efforts of the plaintiff in the actual circumstances he then faced. While taking no issue with the diligence of the plaintiff’s mitigation efforts, the defendant asked that I take into account the Canada Emergency Response Benefit (or “CERB”) payments received by Mr. Iriotakis during whatever notice period I might find applicable.

[21] I agree with the defendant that CERB cannot be considered in precisely the same light as Employment Insurance benefits when it comes to calculating damages for wrongful dismissal. CERB was an ad hoc programme and neither employer nor employee can be said to have paid into the program or “earned” an entitlement over time beyond their general status as taxpayers of Canada. The level of benefit paid (approximately $2,000 per month) was considerably below the base salary previously earned by the plaintiff to say nothing of his lost commission income. On balance and on these facts, I am of the view that it would not be equitable to reduce Mr. Iriotakis’ entitlements to damages from his former employer by the amount of CERB given his limited entitlements from the employer post-termination relative to his actual pre-termination earnings. I decline to do so.

Essentially, in Iriotakis, the Court compared the amount of CERB received by the terminated employee to the amount of lost income due to the wrongful termination. The Court then considered whether the terminated employee would be placed in a better or worse economic position if the CERB payments were deducted from the award as mitigation income. (In this case, the terminated employee earned a base salary of $60,000 per year, and earned commission over 80,000 in 2019).

About 3 months after Iriotakis decision was pronounced, the Court in Hogan v 1187938 B.C. Ltd., 2021 BCSC 1021, considered whether CERB should be considered mitigation income. In this case, the Court distinguished the facts from Iriotakis, and concluded that CERB should be deducted from the award of damages :

[103]   In this case, the plaintiff’s damages per month are based on the income he would have earned if he had continued to work during the reasonable notice period. In other words, the plaintiff will be compensated for the income he would have lost. He did not suffer additional losses due a loss in commission income. As a result, there is not a large disparity between the plaintiff’s actual loss and the amount of damages he will receive.

[104]   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.

[105]   The CERB payments are not private insurance, and neither the employer nor the employee contributed to them. As a result, they are not delayed compensation or part of the plaintiff’s earnings. There is no evidence that the plaintiff will have to repay the CERB.

[107]   As a result, I see 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.

[108]   Having considered the case law and the evidence, I have concluded the CERB benefits of $14,000 should be deducted from the award of damages.

Based on the foregoing cases, it is likely that the courts will continue to consider whether the terminated employee would receive a windfall as a result of receiving CERB. The decision is likely to be influenced by whether the terminated employee is obliged to repay the CERB to the government upon the Court’s award of damages or the settlement. For instance, in Hogan v 1187938 B.C. Ltd., 2021 BCSC 1021, at paras 99 and 105, the court stated: “The EI benefits should not be deducted. Section 45 of the Employment Insurance Act, S.C. 1996, c. 23, requires a claimant to repay any unemployment benefits if an employer becomes liable to pay their earnings”, and “There is no evidence that the Plaintiff will have to repay the CERB”.

Osuji & Smith Lawyers will closely monitor decisions regarding CERB and mitigation income. In the meantime, should you have any questions about your termination and your mitigation efforts and income, please contact our office.

Author: Justin Kwon