In the case of Hogan v 1187938 BC Ltd., 2021 BCSC 1021, the BC Supreme Court confirmed that an employee’s receipt of Canada Emergency Response Benefit (“CERB”) payments after termination should be deducted from an award of damages for wrongful dismissal.
Mr. Hogan started working at the defendant’s automotive dealership in 1998 as a technician. He was gradually promoted over the years to the position of assistant service manager. He, along with several other employees, was placed on a temporary layoff in March 2020 because of the significant downturn in business due to the COVID-19 pandemic. Mr. Hogan was ultimately not recalled for work after March 2020 and he was terminated in August 2020.
After he was laid off, Mr. Hogan received Employment Insurance (EI) benefits and he received approximately $14,000 in CERB benefits.
In early 2021, the employer offered Mr. Hogan work at one of its other companies but at a lower rate and requested that he sign a release related to his wrongful dismissal claim. Mr. Hogan refused this offer.
The court decided several issues.
First, the court decided that Mr. Hogan was constructively dismissed when he was temporarily laid off in March 2020 because his employment agreement did not allow the employer to unilaterally place employees on a temporary layoff.
Second, Mr. Hogan was entitled to reasonable notice at common law because he did not have a written employment agreement limiting his entitlement on termination without cause. The court decided that his notice period was 22 months.
Third, Mr. Hogan had received CERB payments of $14,000 and the employer argued those payments should be deducted from the payment of 22 months of wages. The court agreed and said that the $14,000 in CERB payments should be deducted from the award. The court noted that regular EI benefits are not deductible from these types of awards because the employee may be required to repay EI benefits after receiving severance payments. However, the CERB program does not appear to provide for this. Allowing employees to keep CERB payments and wrongful dismissal damages in these circumstances would put the employee in a better position than if they had received reasonable notice of termination.
Fourth, Mr. Hogan argued that his payment in lieu of reasonable notice should be based on his 2019 income, which included significant bonus payments. The employer contested this, saying that bonuses were not awarded to employees in 2020 and did not expect to pay bonuses in 2021, due to COVID-19. The employer argued that, if Mr. Hogan had received reasonable notice (working notice) of termination, he would not have received bonus payments during the notice period. The court accepted the employer’s position and did not include 2019 bonus payments as part of calculating his payment in lieu of reasonable notice.
Finally, the employer argued that Mr. Hogan failed to mitigate his damages by refusing the offer from the employer’s other company in early 2021. The court rejected this argument because the employer was offering a much lower rate of pay and was requiring Mr. Hogan to sign a release of his wrongful dismissal claim.
This decision confirms that a unilateral temporary layoff can constitute a constructive dismissal.
It is good news for employers that CERB payments should be deducted from wrongful dismissal awards to terminated employees so they cannot double collect. A recent Ontario decision reached the opposite conclusion in a case involving commission payments, so there may still be circumstances where CERB payments will not be deductible.
It is good news that the court will not rely solely on historical bonus payments to decide whether to include bonus amounts when calculating pay in lieu of reasonable notice.
This update was authored by Harper Grey lawyer, Scott Marcinkow. Have questions regarding changes in the workplace as a result of the COVID-19 pandemic? Contact Scott at firstname.lastname@example.org or anyone else listed on the authors page.