Williams HR Law LLP

Should CERB be Deducted from Wrongful Dismissal Damages? The Debate Continues

May 30, 2022

In the recent decision of Gracias v. Dr. David Walt Dentistry [Gracias], the Ontario Superior Court of Justice (“ONSC”) held that Canada Emergency Response Benefit (“CERB”) payments should not be deducted from an employee’s wrongful dismissal damages. However, the impact of CERB payments on wrongful dismissal damages remains unclear, as there have been inconsistent decisions from Ontario and British Columbia on this issue.

In Gracias, the employee received $16,000 in CERB payments after she was laid off, during the reasonable notice period. The ONSC declined to deduct the CERB payments from the wrongful dismissal damages awarded to her because it found that CERB was not a mitigation credit. In reaching this conclusion, the ONSC followed a number of decisions that declined to deduct CERB payments from wrongful dismissal damages, including its previous decision in Iriotakis v Peninsula Employment Services Limited [Iriotakis].

In Iriotakis, the ONSC found that it would not be equitable to reduce the employee’s entitlements to damages from his former employer by the amount of CERB payments he received during the notice period, particularly given that the amount of CERB payments was considerably less than the employee’s earnings before his dismissal. Similarly, in Fogelman v IFG [Fogelman], the ONSC held that CERB payments should not be treated as income for the purposes of mitigation. For more information about these decisions, please read our previous blogs on Iriotakis and Fogelman.

In contrast, in Livshin v The Clinic Network Canada Inc. [Livshin], the ONSC reached the opposite conclusion, and the employee’s damages were reduced by $8,000 to account for the CERB payments he had received. Similarly, in Hogan v 1187938 B.C. Ltd [Hogan], the British Columbia Supreme Court (“BCSC”) deducted $14,000 in CERB payments from the damages awarded to the employee. The BCSC found that the relevant facts were distinguishable from Iriotakis. Unlike in Iriotakis, retaining the CERB payments would have put the employee in a better economic position than he would otherwise have been in.

Takeaways for employers

Generally, income earned by an employee during the reasonable notice period has been treated as mitigation income, which must be set-off against any wrongful dismissal damages award. However, the conflicting decisions outlined above raise questions about the circumstances in which CERB and other government benefits may be taken into account for mitigation purposes. Given the legal uncertainty, the question remains whether or not CERB payments will be treated as mitigation income and reduce damages awards going forward. As such, employers should seek legal advice about the impact of CERB and similar government benefits prior to commencing settlement discussions or litigation involving former employees who were laid off or dismissed during the pandemic.