B.C. CERBs Up A Victory for Employers

In a time in which there have been few wins for business, B.C.’s Supreme Court has just served up a (small) victory for employers.  In one of the first “pandemic” decisions, the Court has determined that a terminated employee who collected CERB payments should have those payments deducted from his wrongful dismissal damages.

Why is that a good thing?  Because many, many employers are in the same position as the defendant in Hogan v 1187938 B.C. Ltd. (dba Mercedes Benz Vancouver).  They laid off staff during the last 16 months, were never able to bring them back to work, and are now facing the very real potential of court claims for damages for wrongful dismissal.

The B.C. Supreme Court’s recognition that employees who received CERB benefits during their “reasonable notice period” shouldn’t earn a windfall means that the amounts employers will be required to pay out as damages will be reduced.  In some cases, that reduction will quite substantially diminish – and possibly erase - the required payout.

Hogan v. 1187938 B.C. Ltd.

The factual scenario the Court addressed was as follows.

  • The plaintiff, Hogan, 53, had been employed for approximately 22 years, recently as an Assistant Service Manager.
  • In March 2020, as a result of the pandemic, the defendant’s business dropped substantially and all but essential service appointments were, for the most part, cancelled by customers.
  • As a response to the impacts of the pandemic, Mercedes Benz Vancouver issued a temporary layoff notice to Hogan.
  • At the end of August, 2020, Mercedes Benz Vancouver notified Hogan that his employment was permanently terminated, effective immediately.
  • Hogan sued for damages for wrongful dismissal.  In the interim, he had received $14,000.00 in CERB benefits via the federal government’s subsidy program.

Frustration?  What Frustration?

Surprisingly (to me, anyway), it doesn’t appear that Mercedes Benz Vancouver defended itself by asserting that the onset of the pandemic had frustrated the employment relationship (and, hence, no damages were payable).  It seems we’ll have to wait a little longer to see what B.C.’s courts think of that argument.

The Court simply determined that, in laying off Hogan, Mercedes Benz Vancouver had constructively dismissed him.  As a result, wrongful dismissal damages were payable in lieu of reasonable working notice.

CERB Benefits Must Be Deducted From Damages

In assessing the damages for wrongful dismissal payable to Hogan, the Court did rule that the CERB benefits he’d received had to be deducted from the amount payable by Mercedes Benz Vancouver.  The Court commented as follows.

[100]   The plaintiff received $14,000 in CERB payments in 2020. The CERB payments raise a compensating advantage issue. If the CERB payments are not deducted the plaintiff would be in a better position than he would have been if there had been no breach of the employment contract.

[101]   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.

[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.

[106]   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. In my view, this is similar to the situation in Sylvester and Ratych, where the benefits were deducted as the employee had not contributed in order to be entitled to the benefit.

[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.

The net effect is that Mercedes Benz Vancouver’s obligation to pay damages was reduced by $14,000.  In this instance, the damages payable (prior to the CERB deduction) were $85,800.00.  So, even after the $14,000 reduction Mercedes Benz Vancouver still has a hefty bill to pay.

But, the vast majority of wrongful dismissal claims are worth less than $25,000 (and, in my experience, the vast majority of those are worth less than $10,000).  That being the case, in many instances the CERB deduction will diminish the value of the claim substantially or erase it entirely.

That – in a time of overwhelmingly bad news for many employers – is at least a small victory.




This item is provided for general information purposes only and is not intended to be relied upon as legal advice. Informed legal advice should always be obtained about your specific circumstances.

Making a living is hard work.

We’ll help you get organized, resolve disputes, and save money.

Get in Touch