Mitigating the Uncertainty of Canada’s Emergency Response Benefit

On November 8, 2021, the British Columbia Supreme Court issued a decision in the matter of Yates v Langley Motor Sport Centre Ltd., 2021 BCSC 2175, where the court addressed how the Canada Emergency Response Benefit (“CERB”) may be treated in light of a wrongfully dismissed employee’s duty to mitigate their loss.

Traditionally, the duty to mitigate places a positive obligation on a previously terminated employee to go and look for alternative work, and lessen the financial impact of their wrongful termination. If the dismissed employee is successful in finding an alternative income source, then the amount they receive in income from the alternative employment will often be deducted from what their former employer would otherwise owe them in damages after a wrongful dismissal.

Unlike Employment Insurance (“EI”), where any deduction (or in this case, repayment) of EI is dealt with as between the employee and the federal government, the legal community is divided on whether CERB payments should reduce the amount of wrongful dismissal damages that an employer owes to a wrongfully dismissed employee.

Many legal experts have suggested that CERB payments should not be treated as mitigation between the employer and employee, which would, in essence, allow the employer to set off any damages it must pay a dismissed employee against any CERB payments that the employee received. Further, given the federal government’s ongoing direction that CERB may need to be repaid if the dismissed employee receives supplemental income (as is the case with EI), such as damages during a reasonable notice period, treating CERB as mitigation as between the employer and dismissed employee may in fact punish the dismissed employee twice.

Nonetheless, the courts in British Columbia have said otherwise. In Yates v Langley Motor Sport Centre Ltd., the British Columbia Supreme Court awarded a 30-year-old employee with eight-and-a-half months of service with a reasonable notice period of five months. After arriving at this notice period, the courts then deducted the Plaintiff’s CERB payments that she accrued during the five-month reasonable notice period as mitigation, meaning the employer was not liable for the totality damages over the reasonable notice period. The courts based this reasoning on the notion that there was no evidence that the Plaintiff would actually be required to repay her CERB income, and to not count CERB as mitigation may lead to “an impermissible double recovery” by the Plaintiff.

This case was predated by the decision in Hogan v 1187938 B.C. Ltd., 2021 BCSC 1021, which came to the same conclusion as Yates. In Hogan, the British Columbia Supreme Court held that “but for” the Employer’s breach of the employment contract, the dismissed employee would not have been entitled to collect CERB, and thus, CERB payments should be deducted from wrongful dismissal damages. Essentially, the court took the position that the Plaintiff would be put in a better position, by being awarded damages and collecting CERB concurrently, than they would otherwise have been in had the employment contract not been breached.

However, it is still not entirely clear if CERB payments will always be deducted from wrongful dismissal damages. Another recent case, Andrews v Allnorth Consultants Limited, 2021 BCSC 1246, is at odds with Yates and Hogan. In Andrews, the British Columbia Supreme Court did not deduct CERB payments from the employee’s damages award, based on a reasonable likelihood that these benefits will eventually need to be repaid by the Plaintiff.

Given the conflicting authorities above, when it comes to how the BC courts will treat CERB payments in the context of mitigation, it seems that the law is far from settled. Where there is evidence that a Plaintiff will need to repay their CERB benefits, it seems that these payments will not be deducted from an award of damages. But if a repayment requirement cannot be shown, then Plaintiff’s should prepare for the likelihood that damages stemming from their wrongful dismissal will be reduced by the amount the employee collects by way of their CERB payments.

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