CERB Payments Cannot be Deducted from Wrongful Dismissal Damages, Appeal Court Rules

A lower court ruling that deducted an employee’s Canada Emergency Response Benefit (CERB) payments from her wrongful dismissal damages has been overturned by the British Columbia Court of Appeal.

In Yates v Langley Motor Sport Centre Ltd., 2022 BCCA 398, Chief Justice Bauman concluded that the trial judge erred in his deductibility analysis by failing to “allude to or grapple with the ‘broader policy considerations’” identified by Justice Cromwell in IBM Canada v Waterman, 2013 SCC 70 (Waterman).

In Waterman, the Supreme Court of Canada discussed the requirement that a “collateral benefit” or “compensating advantage” (i.e. a benefit flowing to a plaintiff and connected to the defendant’s breach) be deducted from a damages award subject to two common exceptions: charitable gifts and private insurance, as they are not intended to indemnify the employee from the type of loss suffered as a result of the employer’s breach. Justice Cromwell recognized that charitable gifts and private insurance are the two clearest exceptions but found that there is “room in the analysis of the deduction issue for broader policy considerations such as 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.”

While Chief Justice Bauman agreed that CERB payments are a “compensating advantage” because they are a benefit that the employee would not have received “but for” their dismissal, he concluded that non-deducibility was favoured after the policy considerations were weighed. First, it seemed wrong that the breaching party would receive the benefit of the windfall. Second, CERB payments and the repayment of CERB payments are a matter between the employee and the government, not the employer. Last, the interest in equal treatment, incentivizing desirable (or disincentivizing undesirable) conduct, and clear and easy-to-apply rules, tipped the balance in favour of non-deductibility.

Chief Justice Bauman found that if CERB payments were deductible, employees could be treated differently depending on the timing of their dismissals, undesirable conduct could be incentivized if reduced damages could result and the goal of clear and easy-to-apply rules would be threatened “where the actual deduction from the award must await the realization of any income tax impacts on the employee….” Given that the goal of CERB was to mitigate harm in a moment of great uncertainty, and notwithstanding, many people lost their livelihoods it struck Chief Justice Bauman as “out of step with that reality to conclude that the combination of CERB and damages awards leaves the individual ‘better off’ after their employment was terminated than before.” Ultimately, whether CERB payments are repayable by the employee is of no concern to the employer. “It is a matter between the [employee] and the authorities administering the scheme.”

Yates is the first appellate-level decision to address the issue of the deductibility of CERB payments from wrongful dismissal damages, and therefore is the authoritative decision on the issue in British Columbia until it is revisited by the British Columbia Court of Appeal or the Supreme Court of Canada.

The lawyers in the MLT Aikins Labour & Employment group have wide-ranging experience advising employers on terminating employees and acting for employers in wrongful dismissal claims. Contact us to learn more.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.