CERB PAYMENTS CANNOT BE DEDUCTED FROM DAMAGES PAYABLE BY AN EMPLOYER FOR WRONGFUL DISMISSAL OF EMPLOYEE, ALBERTA COURT OF APPEAL REAFFIRMS
For quite some time, the Courts were conflicted on whether or not the Canadian Emergency Response Benefit (CERB) payments received by a dismissed employee should be deducted from damages payable by an employer for breaching the employment contract and wrongfully dismissing the employee.
In Oostlander v Cervus Equipment Corporation, 2023 ABCA 13, the Alberta Court of Appeal, upon concurring with a decision of the British Columbia Court of Appeal on a similar matter, ended the debate in favour of the dismissed employee. CERB payments can no longer be deducted from damages in wrongful dismissal cases.
WHAT IS CERB?
CERB, under the Canadian Emergency Benefit Act S.C. 2020, was an ad hoc program created by the federal governments to provide benefits to those who have had to stop working as a result of the Covid-19 pandemic. Its purpose was to provide a statutory scheme to benefit those who have been terminated as a result of the pandemic and to indemnify them for lost wages as a result. It was not intended to indemnify losses that arise when one’s employer breaches their employment contract.
WHY COURTS DEDUCTED CERB IN THE PAST?
The primary reason for granting damages by the courts is to put the claimant in a position they would have been if the employer had not breached the employment contract and wrongfully dismissed the employee.
Given that dismissed employees often resort to claiming CERB payments after being dismissed, courts often took the position that damages unadjusted with the CERB payment received by the employee would put them in a better position. In other words, employees would be compensated twice for a particular amount of loss.
In some cases, the courts decided against deducting CERB payments where the dismissed employee was able to show to the court that they would have to pay back the CERB payments to the Government.
In short, the court’s decision to deduct the CERB hinged upon whether the employee was likely to retain the sum received under CERB, or whether the employee would have to repay them.
Mr. Oostlander had worked for Cervus for 34 years as a heavy-duty mechanic in Bassano, Alberta. Cervus decided to convert the Bassano location into a retail branch to sell equipment parts, so they notified Mr. Oostlander that his employment would be terminated 16 months later in September 2019.
However, as his termination date approached, Mr. Oostlander learned that the Bassano location was expected to remain in operation for another 5 years, and he was told that he “was being kept on” despite his termination notice.
Mr. Oostlander continued to work for Cervus in Bassano until June 3, 2020 when Cervus gave him 1 months’ notice of termination. When Mr. Oostlander inquired why he was being given such a short notice after 34 years of service, Cervus relied on the previous notice given in May 2018. That was when Mr. Oostlander retained employment lawyers at Osuji & Smith.
After receiving a demand letter from Osuji and Smith, Cervus decided to offer Mr. Oostlander an alternate job located in Brooks, about 50 km away. Mr. Oostlander decided not to accept the offer as it was a fundamental change to the terms of his original contract and sued Cervus for wrongful dismissal.
DECISION OF THE TRIAL COURT
Upon conducting a summary trial, the Court of Queen’s Bench of Alberta ruled in favour of Mr. Oostlander and found that he was wrongfully terminated and therefore was entitled to 24 months’ pay in lieu of notice plus vacation pay. However, the Court deducted CERB payments on the ground that there was no evidence that Mr. Oostlander would have to repay his CERB payments.
Both Cervus and Mr. Oostlander appealed against the judgment of the trial court. Cervus appealed on the ground that the trial judge made an error in her assessment on whether Mr. Oostlander mitigated his damages. Mr. Oostlander cross-appealed against the decision to deduct CERB payments as he suspected that he would have to repay the CERB payments to the Government.
DECISION OF THE ALBERTA COURT OF APPEAL
During the appeal, Mr. Oostlander’s counsel Mr. Charles Osuji argued that on the question of mitigation of damages, the appellate court could only interfere with the trial court’s factual findings in the event there was a ‘palpable and overriding error’. Cervus had not established any such errors committed by the trial court.
Regarding deduction of CERB, Mr. Osuji argued that the trial court erred by failing to grapple the broader policy considerations implicated by the CERB benefits Mr. Oostlander received from CRA. According to a recent judgment of the British Columbia Court of Appeal in in Yates v Langley Motor Sport Centre Ltd, 2022 CCA 398, these benefits, he argued, should never have been deducted from Mr. Ooslander’s benefits.
On both issues, the Court of Appeal agreed with Mr. Osuji, upheld the decision of the trial court on findings of wrongful termination, and set aside the trial court’s decision to deduct CERB.
In considering the question of mitigation of damages, the Court of Appeal found that the trial judge’s decision was not unreasonable. In considering the issue of deduction of CERB, the Court of Appeal completely departed from the debate of repayment of CERB. Relying on a decision of the British Columbia Court of Appeal in Yates, the Court termed the whole question of repayment as a ‘fruitless exercise’.
In the Court’s view, whether or not CERB would have to be repaid is uncertain and does not concern the employer. The Court held that there is no reason why employers should benefit from this uncertainty. It is a matter between the employee and the authorities. Considering this issue and other broader policy reasons, the court held that CERB payments could not be deducted from damages for wrongful dismissal.
In Alberta, this seminal judgment by the Court of Appeal will be instrumental in future wrongful dismissal case in determining what constitutes reasonable mitigation efforts by dismissed employees. It also clearly and unequivocally settles the long debated question of CERB in such cases in Alberta. The primary takeaways are as follows:
- In mitigating damages, a dismissed employee need not go further than what would be reasonable for a person in his/her position.
- A dismissed employee would not be bound to accept re-employment with the same employer where there is loss of trust or whether the new employment is fundamentally different from the original employment terms.
- Employers in wrongful dismissal cases can no longer expect to benefit from courts deducting CERB payments from the damages payable by them for wrongfully dismissing employees.
- Whether or not employees received the CERB payments or would have to repay them is now an irrelevant consideration and does not concern the employer’s liability for wrongful termination.
The employment lawyers team at Osuji & Smith has blazed a new trail. Their success in this landmark case has laid the groundwork for future wrongful dismissal cases. Their hard work and commitment to the best interests of their clients has paid off for Mr. Oostlander and the many clients who have trusted them with their legal challenges.
Author: Imtiaz Hafiz