By Kamara Willett
In principle, calculating damages for wrongful dismissal is a simple task: a successful plaintiff is entitled to damages equal to the value of the wages and benefits due to him or her during the notice period, less the value of any wages and benefits actually received during that period. This formula recognizes the obligation of the plaintiff to minimize his or her damages, while simultaneously ensuring that the plaintiff is properly compensated for the damages suffered.
This simple calculation becomes more complicated when one considers situations in which a plaintiff receives benefits during the notice period which are designed to lessen the impact of wage loss, such as unemployment insurance benefits, welfare or pension benefits. When these benefits are provided by a third party, they are sometimes referred to as “collateral benefits”, and whether they ought to be deducted from damages awards in wrongful dismissal actions is not immediately clear.
On the one hand, deducting collateral benefits from an award appears to subsidize a defendant’s bad conduct. On the other hand, refusing to deduct collateral benefits from an award can result in a windfall for the plaintiff. Neither of these outcomes is desirable. When determining whether collateral benefits should be deducted from an award of damages, courts consider the policy objectives underlying the relevant benefits scheme to determine whether deduction is appropriate, and a body of law has emerged that provides guidance regarding the deductibility of commonly received collateral benefits.
The Covid-19 pandemic resulted in the implementation of a new benefits scheme in Canada, the Canada Emergency Response Benefit program (“CERB”), and in the years since CERB’s implementation, courts have been divided as to whether CERB benefits should be deducted from damage awards for wrongful dismissal. In Saskatchewan, the matter was only briefly discussed by Demong J. in Abdon v Brandt Industries Canada Ltd., 2021 SKPC 37. In that case, Demong J. found in favour of the employer, but went on to state that if he had found in favour of the plaintiff, any award for damages would have been reduced by the amount of the CERB benefits the plaintiff received.
The issue has recently received consideration from appellate level courts, and the resulting decisions suggest that CERB benefits should not be deducted from damages payable for wrongful dismissal. In November of 2022, the British Columbia Court of Appeal rendered its decision in Yates v Langley Motor Sport Centre Ltd. 2022 BCCA 398 [Yates]. The plaintiff, Ms. Yates, was temporarily laid off from her employment at the onset of the pandemic. Her temporary layoff was extended for various periods of time as permitted by British Columbia’s employment standards legislation until August 30, 2020. After that date, Ms. Yates’ employer did not call her back to work and as a result, her termination date was deemed to be at the start of the layoff period in March of 2020.
Ms. Yates went on to commence an action for wrongful dismissal against her employer, and was successful. The trial judge awarded Ms. Yates five months salary in lieu of notice, but deducted from that award the $10,000 in CERB payments she received during the notice period. Ms. Yates appealed the trial judge’s decision to the Court of Appeal, and argued that the trial judge erred by deducting the CERB payments from the damages award.
The Court of Appeal relied on the Supreme Court of Canada’s decision in IBM Canada Ltd. v Waterman, 2013 SCC 70 [Waterman], to guide its analysis. In that case, Cromwell J. confirmed that deductibility of a collateral benefit depends on the consideration of “justice, reasonableness, and public policy”, and explained that there is no single marker to indicate the sort of benefits that will be deducted from an award for damages.
Cromwell J. went on to conclude that generally, a benefit will not be deducted from an award for damages if::
- It is not an indemnity for the loss caused by the defendant’s conduct; AND
- the plaintiff has contributed (ie. paid something) to acquire the benefit.
The Court cautioned, however, that broader policy considerations can influence the analysis, such as the desirability of equal treatment of those in similar situations, the possibility of providing incentives for socially desirable conduct, and the need for clear rules that are easy to apply (Waterman at para 76).
In Yates, the British Columbia Court of Appeal acknowledged that CERB payments are income support and were intended to compensate Ms. Yates for lost wages, a factor which weighs in favour of deduction. However, the Court of Appeal went on to consider broader policy considerations relating to the CERB program and it was these policy considerations are what tipped the balance in favour of non-deductibility.
First, the Court considered the optics of the situation. Put simply, it struck the Court as wrong for a defendant employer who has breached the employment contract to enjoy the benefit of an income support program designed by Parliament to benefit workers.
With respect to the matter of equal treatment, the Court observed that had Ms. Yates’s employer terminated her employment the day prior to August 30, 2020 the notice period would have commenced on that date and thus the deductibility of CERB benefits would not have been an issue. In contrast, because Ms. Yates’s employer simply let the layoff period expire without formal notice of termination, by operation of law the notice period commenced in March of 2020, after which date Ms. Yates received CERB benefits. The Court determined that ensuring equal treatment of those in similar situations favours not deducting CERB payments.
That same hypothetical situation also raised the matter of encouraging employers to act in a socially responsible manner. Non-deductibility of CERB payments would remove the incentive for an employer to manipulate matters by timing the termination of an employee on temporary layoff by allowing the layoff period to expire.
The British Columbia Court of Appeal ultimately determined that CERB was an emergency measure designed to deliver aid during the early weeks and months of a global pandemic. Its goal was to mitigate harm in a time of great uncertainty. According to the Court, it would be “out of step with reality” to conclude that allowing a successful plaintiff to receive CERB benefits leaves that plaintiff “better off” after their termination than before. As a result, the value of the CERB benefits received by Ms. Yates was not deducted from the damages award.
In January of 2023 the Alberta Court of Appeal issued its decision in Oostlander v Cervus Equipment, 2023 ABCA 13 [Oostlander]. Unlike the plaintiff in Yates, the termination of Mr. Oostlander’s employment was not directly related to the onset of the Covid-19 pandemic. Even so, the Alberta Court of Appeal adopted the British Columbia Court of Appeal’s reasoning in Yates and agreed that broader policy considerations militate against the deductibility of CERB payments from damages for wrongful dismissal.
While Yates and Oosterlander were not decided in Saskatchewan, they are appellate level decisions that will undoubtedly be persuasive in our jurisdiction. If a wrongful dismissal action contemplates a notice period in which a plaintiff received CERB benefits, defendant employers should not assume that the amount of the CERB benefits the plaintiff received will be deducted from any damages award. Similarly, plaintiffs will have a basis to resist deduction of the CERB benefits from any award of damages made.