BC Court of Appeal says CERB payments are not deductible from severance award

In Yates v. Langley Motor Sport Centre Ltd., 2022 BCCA 398, the BC Court of Appeal considered the issue of whether Canada Emergency Response Benefits (CERB) payments were deductible from damages owed to a terminated employee.  This addressed the earlier inconsistent decisions on this point. 

Ms. Yates was employed by Langley Hyundai at the onset of the COVID-19 pandemic.  She was placed on a temporary layoff in March 2020.  Her temporary layoff period was extended a few times, pursuant to the amended Employment Standards Act.  She was not recalled before August 30, 2020, and she was deemed to be terminated at the start of her layoff in March 2020.   During her temporary layoff, from March to August 2020, Ms. Yates received $10,000 in CERB payments.

Ms. Yates brought a claim for wrongful dismissal, seeking payment in lieu of notice, aggravated damages, and punitive damages. 

A BC Supreme Court judge awarded 5 months’ pay in lieu of notice, but deducted $10,000 in CERB payments from her award because she received those payments during the notice period.  Ms. Yates appealed to the BC Court of Appeal.  This is the first time the BC Court of Appeal was asked to consider this issue of deducting CERB payments in wrongful dismissal cases. 

The Court of Appeal confirmed that a “compensating-advantage” problem arises when the employee receives a benefit that would over-compensate them beyond their actual loss, and either: (a) the employee would not have received the benefit but for the defendant’s breach, or (b) the benefit is intended to be an indemnity for the sort of loss resulting from the defendant’s breach.   

Regarding (a), the Court of Appeal found the employee was receiving the CERB payments because she stopped working for reasons related to COVID-19 and not because of the defendant’s breach.  Regarding (b), the Court of Appeal found the CERB was intended to compensate workers who had ceased working.    

The Court of Appeal then considered the broader policy implications of deducting CERB payments and concluded that CERB payments should not be deductible.  For example, the Court was concerned that CERB payments should not work to provide a windfall to the employer for terminating an employee without adequate notice or payment in lieu of notice (i.e. in breach of their employment agreement).  

This case therefore provides some clarity to the law in BC for parties who are engaged in disputes about the deduction of CERB payments in the context of severance negotiations.  

For the full decision, click here.

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