OCA should hold that CERB payments are not deductible

The impact of the COVID-19 pandemic on laid-off and terminated employees may be mostly forgotten as Ontario enters 2023. However, for Ontario employees let go during the pandemic, a critical employment law issue remains unresolved: Should employers be allowed to deduct Canada Emergency Response Benefit (CERB) payments from wrongful dismissal monies they owe?

More than a dozen lower courts in British Columbia, Alberta, Saskatchewan, Ontario and Nova Scotia wrestled with this issue throughout the pandemic, with decisions going both ways. When cases moved to appeal courts in B.C. and Alberta recently, both appellate courts ruled that CERB should not be deducted from wrongful dismissal payments.

But the Ontario Court of Appeal (OCA) has yet to rule on this important issue. Once they do, I believe they will also come down in favour of non-deductibility, that is, on the side of the employee.  I believe the Court will respect the reasons articulated in the other two appellate court decisions.

In B.C., the appellate court reasoned in Yates v Langley Motor Sport Centre Ltd. that CERB payments “were intended as a wage subsidy, and loss of wages was the sort of loss resulting from the respondent’s breach of the employment contract,” and the plaintiff had not contributed to the benefit.

Wrong to breach ‘income support program designed to benefit workers’

The court added, “it seems wrong for a defendant employer who has breached the employment contract with the plaintiff to enjoy, effectively, a windfall from an income support program designed to benefit workers impacted by the COVID-19 pandemic. If a windfall is to result, it seems to better reflect the intention of Parliament that it go to the worker.”

If further added that CERB payments “are a matter between the employee and the appropriate authority and do not concern the respondent company.”

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In the case of Oostlander v. Cervus Equipment Corporation, the Alberta Court of Appeal agreed that CERB payment should not be deducted from wrongful dismissal payouts, noting, “We find the analysis of the British Columbia Court of Appeal on this issue compelling and would adopt it.”

I believe the B.C. and Alberta appeal courts made the right decision and I trust Ontario’s appellate court will follow the same reasoning when presented with this issue. In Ontario, most but not all of the lower court decisions have favoured the argument that an employee should keep both the CERB payment and any wrongful dismissal damages.

Severance packages might have been negatively impacted

Because it took until late 2022 to get clarity on this issue from the B.C. and Alberta courts, a large number of employees across Canada had to negotiate separation packages during the pandemic with this issue hanging over their heads. I suspect that, while the deductibility issue remained unresolved, severance packages might have been negatively impacted, which is unfortunate. Unfortunately, courts cannot move quickly enough to resolve an issue of this nature before it leads to that impact. Even if the Ontario Court of Appeal weighs in, many of the disputes flowing from 2020-2022 terminations will have been resolved.

In the coming months, I nevertheless hope that our appeal court will weigh in on this issue and provide clarity for this province.

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