Skip to main content

Severance and CERB: What’s the deal?

Trevor R. Thomas

Co-Founder + Partner
November 12, 2021

Does my CERB payment affect my severance entitlement?

 

This is a question we have been hearing frequently since CERB was introduced. With little guidance from the Federal government on this question, we have been waiting for the courts to weigh in. Two recent decisions from the British Columbia Supreme Court provide us with an answer.

 

Hogan v 1187938 B.C. Ltd., 2021 BCSC 1021

 

On May 28, 2021, the Supreme Court released its decision in Hogan v 1187938 B.C. Ltd. While the majority of the decision falls under the typical wrongful dismissal case, it is the last part of the decision (at paragraphs 86-108) that is significant. The plaintiff, Mr. Hogan, received $14,000 in CERB payments in 2020. The issue, therefore, was that if Mr. Hogan was allowed to receive CERB and severance for the same period of time, he would experience a windfall – i.e., he would recover more than 100% of his loss.

 

The court commented that the nature of CERB is an indemnity for the wage loss caused by the employer’s breach of contract. The CERB payments were not private insurance, and neither the employer nor the employee contributed to them. There was no evidence that the plaintiff would have to repay the CERB. The court followed the general rule that contract damages should place the plaintiff in the economic position he would have been in had the defendant performed the contract. As a result, the court deducted $14,000 from Mr. Hogan’s award of damages for wrongful dismissal.

 

Yates v Langley Motor Sport Centre Ltd., 2021 BCSC 2175

 

On November 8, 2018, the Supreme Court released another wrongful dismissal decision that dealt with the CERB issue. In this case, Ms. Yates received $10,000 in CERB benefits over a 5-month period. Similar to the Hogan decision, the issue in Yates was whether the CERB amount should have been deducted from the court’s award of damages for wrongful dismissal.

 

The court found that CERB payments would not have been payable to Ms. Yates if she had not been terminated from her employment with Langley Hyundai – which termination constituted a breach of her employment contract justifying payment in lieu of notice. The CERB payments were a benefit intended by the Government of Canada to be an indemnity for the loss of regular salary arising from Langley Hyundai’s breach of Ms. Yates’ employment contract. Unlike an employee funded pension or a private disability insurance policy, Ms. Yates did not contribute to the benefit. Following the reasoning in Hogan, the court in Yates determined that the $10,000 in CERB benefits should be deducted from the award of damages for wrongful dismissal.

 

Considerations

 

Based on the above decisions, there are two key considerations when determining the impact of CERB on severance:

 

  1. The court in Hogan and Yates operated on the assumption that the Government will not be requiring recipients of CERB to repay any of those benefits. If the Government changes this policy, then the court will have to re-evaluate its position on this issue.

     

  2. If a plaintiff receives CERB and severance for the same period of time, but the amount does not result in a windfall, the court may refuse to deduct the CERB amount from the award of damages. This was the scenario in a case out of Ontario where, as a result of a contractual limitation on commission income after termination, the plaintiff’s severance was less than half of his normal earnings. Therefore, to deduct CERB from the award of damages would have been unequitable. As a result, the court refused to deduct CERB from the award of damages. See: Iriotakis v. Peninsula Employment Services Limited2021 ONSC 998

 

The interplay between CERB and severance can be complicated. Have questions? Call us!