A recent decision by the Ontario Superior Court of Justice (the “Court”) suggests that the COVID-19 pandemic may not increase the common law reasonable notice entitlements of employees that were dismissed early in the pandemic as much as one might expect, and that certain COVID-19 recovery benefit payments may not be set off against wrongful dismissal damages.
In Iriotakis v Peninsula Employment Services Limited [Peninsula], the Court provided guidance on how the COVID-19 pandemic may impact dismissed employees’ common law reasonable notice entitlements, and whether Canada Emergency Response Benefit (“CERB”) payments may be deducted from wrongful dismissal damages.
In Peninsula, the employee was dismissed without cause on March 25, 2020. Notably, the employee was dismissed during the COVID-19 pandemic in Canada, just over a week after Ontario declared its first state of emergency in relation to the pandemic.
The employee brought an action for wrongful dismissal. The parties agreed that the termination clause in the employee’s employment agreement was not enforceable. As such, the employee was entitled to common law reasonable notice of termination, which courts determine based on factors such as the employee’s age, length of service, and character of their employment, as well as the availability of comparable positions within the job market.
At the time of dismissal, the employee was 56 years old, had been employed for nearly 28 months, was in a non-managerial sales role, and earned approximately $145,000 per year.
Based on these factors, the employee claimed that he was entitled to at least six months of reasonable notice, while the employer argued that he was entitled to two to three months of notice. The employer also argued that the CERB payments that the employee received during the notice period should be deducted from any damages awarded to him.
The Court ultimately awarded the employee three months’ pay in lieu of reasonable notice. While determining the employee’s reasonable notice period, the Court balanced his relatively short length of service, which favoured a shorter notice period, with his older age and the “uncertainties in the job market”, which served to lengthen the notice period.
The Court found that the pandemic had adversely impacted the availability of comparable employment at the time of the employee’s dismissal in late March 2020. However, the Court ultimately refused to place much weight on the pandemic’s effects on the job market, given that its impact was “highly speculative and uncertain both as to degree and to duration” at the time of dismissal.
Further, the Court refused to reduce the damages awarded to the employee by the amount of CERB payments he received during the notice period because it found it would not be equitable to do so. In reaching this finding, the Court noted that the payments received through CERB (approximately $2,000 per month) was considerably less than the employee earned before his dismissal. Additionally, the Court distinguished CERB payments from Employment Insurance (“EI”) benefits. In particular, the Court reasoned that the CERB was an ad hoc program providing emergency payments and, unlike the EI program, neither the employee nor the employer were required to pay into the CERB program to “earn” an entitlement over time. However, it is not clear why the court distinguished CERB payments and EI benefits, because the law is clear that EI benefits are similarly not deductible from wrongful dismissal damages awards.
Takeaways for Employers
Peninsula is the latest in a series of decisions addressing the impact of the COVID-19 pandemic on reasonable notice periods and damage awards, which to this point have been largely favourable to employers.
Notably, Peninsula was decided shortly after the Court’s decision in Yee v Hudson’s Bay Company, which suggested that the pandemic will not increase an employee’s reasonable notice period if the employee was dismissed before the pandemic began (for more information on this decision, see our previous blog).
Fortunately for employers, Peninsula suggests that, even when an employee was dismissed during the pandemic, the pandemic will only increase their reasonable notice entitlements by a modest amount if their dismissal took place early in the pandemic when its impact on the job market was still uncertain. On the other hand, Peninsula also suggests that where employees are dismissed later in the pandemic, courts may place more significant weight on the pandemic’s economic impacts and award more lengthy notice periods. However, at this time, it remains to be seen how the courts will decide such cases.
Additionally, Peninsula suggests that Ontario courts will not deduct CERB payments from wrongful dismissal damages awards, at least where the amount of the CERB payments is “considerably below” an employee’s regular earnings. Notably, the Court’s reasoning suggests that CERB payments may be deducted from wrongful dismissal damages where an employee’s pre-dismissal earnings are closer to the amount of CERB payments that they received.
As Peninsula is the first of what we expect to be many decisions addressing the impact of CERB payments on damages awards, it is presently uncertain whether future decisions will follow the reasoning established by the Court in Peninsula. It further remains to be seen whether courts will treat other COVID-19 recovery benefits differently.
This blog is provided as an information service and summary of workplace legal issues.
This information is not intended as legal advice.