BC Court of Appeal Confirms That CERB Payments Are Not Deductible From Wrongful Dismissal Damages
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In Yates v. Langley Motor Sport Centre Ltd., 2022 BCCA 398 the British Columbia Court of Appeal confirmed that CERB payments cannot, and should not, be deducted from the damages awarded in wrongful dismissal cases. The Court of Appeal found that CERB payments do not concern the employer as it is a matter between a worker and the authorities administering the scheme. Therefore, whether it ultimately becomes repayable does not concern the employer, and should not be deducted from any damages awarded to the worker.
Background
Ms. Shelby Yates (“Ms. Yates”) brought a civil claim against Langley Motor Sport Centre Ltd. (“Langley Hyundai”) for damages for wrongful dismissal. She also sought aggravated and punitive damages for Langley Hyundai’s alleged misconduct in the dismissal process.
Ms. Yates had previously been employed with Langley Hyundai as a marketing manager and event coordinator. With the onset of the COVID-19 pandemic in March 2020, Ms. Yates was on temporary layoff from her employment. Her temporary layoff period was extended for various periods under amended provisions of the Employment Standards Act, R.S.B.C. 1996, c. 113 (the “ESA”) and the Employment Standards Regulation, B.C. Reg. 396/95, s. 45.01(2), until it ended on August 30, 2020. During this period, Ms. Yates applied for and received CERB payments totaling $10,000.
Since Langley Hyundai had allowed the August 30, 2020 date to pass without recalling Ms. Yates back to work or advising her that her layoff would become permanent, her termination date was deemed to be retroactive to the start of the layoff period at the end of March 2020. This was pursuant to the provisions of the ESA.
The Trial Judge’s Decision
At trial a judge of the BC Supreme Court awarded Ms. Yates five (5) months’ salary, which was assessed at $25,000, in lieu of notice. Langley Hyundai had conceded at trial that Ms. Yates had been terminated without cause. The judge declined to award aggravated or punitive damages: Yates v. Langley Motor Sport Centre Ltd., 2021 BCSC 2175.
At the time of the trial, Ms. Yates was 30 years, old, she had been employed by Langley Hyundai for approximately eight (8) months, and her annual salary was $60,000.
The trial judge found “that CERB payments would not have been payable to Ms. Yates had she not been terminated from her employment with Langley Hyundai – which termination constitutes a breach of her employment contract justifying payment in lieu of notice.”1
The Appeal
Ms. Yates brought an appeal challenging the trial judge’s refusal to award punitive and aggravated damages. What proved to be particularly significant, is that she also challenged the judge’s deduction of the $10,000 in CERB payments from her damages of $25,000. No issue was taken with the assessment of five months’ salary in lieu of notice.
The case raised the difficult issue of “compensating advantages” and their deductibility from damages awards for wrongful dismissal. The Court of Appeal first looked at IBM Canada Ltd. v. Waterman, 2013 SCC 70. As Justice Cromwell noted:
As noted by the Court of Appeal there are “well-recognized exceptions” that occur when the benefits flowing to a plaintiff are not taken into account, even though the result is leaving them better off economically after the breach than they would have been had a breach not occurred. Deductibility of compensating advantages depends “on justice, reasonableness, and public policy.”3
The Court of Appeal found that the trial judge had erred in the analysis of the deductibility issue by failing to allude to, or address, the “broader policy considerations” identified by Cromwell J. The Court of Appeal declared that this was an error in principle and determined that the deductibility issue of CERB in Ms. Yates’ case required a fresh review.
The Court of Appeal first looked at whether the case presented a compensating advantage issue and determined that it did since:
CERB payments became available under the Canada Emergency Response Benefit Act, S.C. 2020, c.5, s. 8 (the “CERB Act”). The CERB Act specifically addressed income support payments for workers. Pursuant to section 6 of the CERB Act, a worker became eligible for an income support payment if the worker ceased working for reasons related to COVID-19. The purpose of the CERB Act was “to provide emergency aid to Canadian workers who lost all or a significant portion of their income for a variety of reasons related to the pandemic. This includes sickness, self-isolation or quarantine, caring for an elderly parent or sick family member, caring for children during school and daycare closures, or those who were furloughed or terminated because of COVID-19.”5
The Court of Appeal disagreed with the trial judge’s findings regarding CERB payments. Instead, the Court of Appeal found that Ms. Yates received the CERB payments since she was furloughed, or on temporary layoff, for reasons related to COVID-19.
Upon weighing the broader policy considerations, the Court of Appeal favoured the conclusion of non-deductibility. The Court of Appeal was forthright in stating that it seemed wrong to them for an employer who has breached the employment contract with a worker to effectively enjoy a windfall from an income support program designed to benefit workers impacted by the COVID-19 pndemic.6 The Court of Appeal found that if a windfall was to occur, it would be better for the windfall to benefit the worker as was the intention of Parliament in providing the income assistance.
The Court of Appeal found that the CERB payments are similar to unemployment insurance benefits to the extent that they are a matter between the worker and the appropriate authority, and do not concern the employer.
The Court of Appeal placed particular import on the policy considerations of the desirability of equal treatment of those in similar situations, the possibility of incentives for socially desirable conduct, and the need for clear rules that are easy to apply. 7 The Court of Appeal looked at the purpose of programs like CERB , namely to support workers, reduce the impact of severance payments on businesses impacted by the COVID-19 pandemic, help businesses keep their employees, and quickly resume operations when the time was right.
The Court of Appeal found that it was “in the best interests of society for employers to provide laid-off employees with notice of their termination within the time prescribed by law, and recipients of CERB should be entitled to their full damages award even if their employer failed to terminate their employment within the temporary layoff extension period.”8
The Court of Appeal found that it was out of step with reality to conclude that the combination of CERB and damages awards left individuals “better off” after their employment was terminated.
The Court of Appeal allowed the appeal on the grounds related to the deductibility of CERB payments, stating that whether the payments are in the end repayable by the worker is of no concern to the employer, as it is a matter between the worker and the authorities administering the scheme.9
Since the trial judge failed to consider the non-payment of severance as part of the punitive damages analysis, the Court found that there was an error of law that required it to make its own assessment. Ultimately, the Court of Appeal concluded that this was not a case where punitive damages would be a rational response.
For more information about this post, or if you have any questions arising from this decision, email Employment & Human Rights Lawyer, Salona Nainaar, at snainaar@rbs.ca or call at 604.661.9243.
1 Yates v. Langley Motor Sport Centre Ltd., 2021 BCSC 2175 at para 43.
2 IBM Canda Ltd. v. Waterman, 2013 SCC 70 at para 15.
3 Parry v. Cleaver [1970] A.C. 1 at 13 [H.L.).
4 Yates v. Langley Motor Sport Centre Ltd., 2022 BCCA 398 [Yates] at para 37..
5 Yates at para 41
6 Yates at para 48.
7 Yates at para 55.
8 Yates at para 60.
9 Yates at para 65.
