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Canada Emergency Response Benefit: To Deduct Or Not To Deduct

The Canada Emergency Response Benefit (“CERB”) provided financial support to employed and self-employed Canadians who were directly affected by COVID-19. The CERB was available to workers:

  • residing in Canada, who were at least 15 years old;
  • who stopped working because of reasons related to COVID-19 or were eligible for Employment Insurance regular or sickness benefits or had exhausted their Employment Insurance regular benefits;
  • who had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and
  • who did not quit their job voluntarily.

If an individual was eligible, they could have received $2,000 for a 4-week period (i.e. $500 a week). CERB was in place from March, 2020 until October 23, 2021.

While CERB has concluded, outstanding questions remain regarding how to treat CERB earnings and whether such earnings can be deducted from wrongful dismissal damages. The courts remain divided on this issue.

Recently in Reotech Construction Ltd. v Snider (2022 BCSC 317), on appeal from a decision of the Provincial Court, the Court determined that the Trial Judge erred when she failed to deduct $9,000 in CERB earnings from the award. At paragraphs 80-90 of the decision, the Court relied on four factors:

  • Unlike a private insurance scheme, to which the Plaintiff contributed, he did not contribute to CERB;
  • The Plaintiff did not have an obligation to repay CERB;
  • The collateral benefit rule did not apply;
  • The design of CERB was intended to indemnify workers against wage loss. To not deduct CERB would place the Plaintiff in a more favourable position.

Reotech follows the reasoning as set out in Yates v. Langley Motor Sport Centre Ltd, (2021 BCSC 2175), where the Court deducted $10,000 in CERB payments from the wrongful dismissal award and Livshin v. The Clinic Network Canada Inc., (2021 ONSC 6796), where the Court deducted $8,000 in CERB payments.[1]

Yet, these decisions can be contrasted to Fogelman v IFG (2021 ONSC 4042) where the Court did not deduct $10,000 in CERB payments from the wrongful dismissal award. While the Court did not offer significant guidance on this issue, it noted that a worker who received payment in error, or who received overpayment would have an obligation repay some or all of the CERB amount. The court in Iriotakis v. Peninsula Employment Services Limited, (2021 ONSC 998), similarly did not deduct CERB payments.

Note that while Fogelman and Iriotakis, were decided before Reotech, Yates and Livshin, were “early” decisions, prior to the conclusion of the CERB program.

Takeaways

Despite the earlier decisions, courts now appear to be aligning on whether CERB payments are deductible from wrongful dismissal damages. If you are involved in a litigation matter, it should now be commonplace to request disclosure of CERB payments (and other COVID-19 benefits). Such amounts may be offset against amounts owed to an employee.

Should you have any questions regarding these decisions please do not hesitate to contact McCarthy Tétrault’s Labour and Employment group.

[1] See also Shalagin v Mercer Celgar Limited Partnership (2022 BCSC 112) where the Court deducted CERB payments.

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