Covid-19 Case Law Update: Is It CERB Payback Time?

By Fiona H. McFarlane and Janelle Neufeld

The courts are slowly weighing in on the impact of the global pandemic on employment relationships.  The BC Supreme Court’s decision in Hogan v. 1187938 B.C. Ltd., 2021 BCSC 1021 is one example.

The Facts

Terence Hogan was an assistant service manager of Mercedes-Benz and was 52 years old at the time of his dismissal. Mr. Hogan had been working for Mercedes-Benz (the Employer/Defendant) since April 6, 1998, and had limited formal training for his position, instead learned on the job.

On March 24, 2020, Mr. Hogan was temporarily laid off, soon after Covid-19 was declared a public health emergency in Brit

ish Columbia. While both the Employer and Mr. Hogan expected Mr. Hogan to return to work, Mr. Hogan was terminated effectively immediately on August 28, 2020.

Constructive Dismissal

The Court was asked to consider if Mr. Hogan was constructively dismissed. Applying the leading case of Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, the Court held that Mr. Hogan was constructively dismissed because:

  • it was Mercedes-Benz’s decision to layoff Mr. Hogan;
  • Hogan did not consent to the layoff; and
  • there was no term in the employment contract that allowed for a unilateral temporary layoff.

Further, the Court concluded that the termination date was March 30, 2020, which was the last day of a vacation that Mr. Hogan was approved to take prior to the layoff on March 24, 2020.

Failure to Mitigate

Recognizing that Mr. Hogan had a duty to find replacement work and mitigate his damages, the Employer offered Mr. Hogan a new job after Mr. Hogan sued for wrongful dismissal, and served his Application for Summary Trial. In part because Mr. Hogan is unable to relocate for work because a young child with health problems requiring health care in Vancouver, Mr. Hogan had not yet found replacement when the Employer offered the new job.

The burden is on the employer to prove that the employee failed to mitigate their damages arising from their wrongful dismissal. Relying on Coutts v. Brian Jessel Autosports Inc., 2005 BCCA 224, which defines the duty to mitigate as what a reasonable person in the employee’s position would take as steps to find replacement income, the Court determined that Mr. Hogan did not fail to mitigate his damages.  Specifically, the Court found that the job offered by the Employer was a demotion, and one of the conditions of employment was releasing the employer from the wrongful dismissal claim.

CERB

There has been little case law on the topic of what to do with CERB payments when awarding damages in a wrongful dismissal matter. Earlier in 2021, the Ontario Superior Court weighed in about CERB in Iriotakis v. Peninsual Employment Services Limited, 2021 ONSC 998. That case involved a short period of employment, and the employee’s income included a significant amount of commission. CERB payments were not deducted in that case because the CERB payments did not place the terminated employee in a better economic position had he not been terminated because the loss of income after termination was much greater than what the employee received as CERB payments.

In Mr. Hogan’s situation, the Court found that CERB should be deducted from Mr. Hogan’s damages because “but for his dismissal, the plaintiff would not have received the benefit” (para. 101), and not deducting the CERB payments meant Mr. Hogan would be in a better position that had be not been constructively dismissed on March 30, 2020. (para. 89 & 100).

The result was that Mr. Hogan was entitled to a 22 months reasonable notice period, however CERB payments of $14,000 were deducted from that damages award.

Takeaways

Midway through 2021 and the Courts are only now starting to opine on the impact of the global pandemic on employment relationships.  Expect to see more decisions about lay-offs and whether or not they amount to a constructive dismissal, and decisions about CERB that look closely at the impact of the CERB payments.  It is our opinion that the CERB decisions will look closely at whether or not the terminated employee is in a better position because of the CERB payments when compared to the compensation the employee was getting pre-termination.

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