How CERB and EI Impact Wrongful Dismissal Damages
The federal government introduced the Canada Emergency Response Benefit (CERB) in March 2020 after public health measures intended to contain the COVID-19 pandemic left millions of Canadians without work. The CERB provided individuals unable to work for reasons related to the COVID-19 pandemic with $2,000 payment every four weeks. The benefit was available from March 15, 2020 until September 26, 2020 when it was replaced with expanded Employment Insurance (EI) coverage and the new Canada Recover Benefit (CRB).
Many employers and employees have been left questioning how wrongful dismissal damages interact with the new CERB benefit, and whether it will be treated in a manner similar to Employment Insurance (EI) benefits. This blog post compares these two benefits and provides some insight into two important employment law issues:
(1) Will CERB benefits be considered mitigation income, and therefore deducted from wrongful dismissal damages?
(2) If an employee receives wrongful dismissal damages, do they need to repay their CERB benefits?
EI vs CERB: What's the Difference?
Although CERB is new, income replacement programs are not. The federal government has provided income replacement benefits through the EI program for almost 100 years (though it was initially called Unemployment Insurance, or "UI").
EI is essentially an insurance plan where both employer and employee pay a certain amount of the employee's salary into the program. To apply for EI, individuals must present a Record of Employment (ROE) coded by a previous employer to indicate that they became unemployed through no fault of their own. Because EI benefits are tied to the employment relationship, they have historically been unavailable to the self-employed and those who work as independent contractors.
Conversely, CERB was intended to replace income lost due to COVID-19 and is available to both employees and independent contractors or self-employed. Unlike EI, CERB was a set benefit and did not depend on the amount of premiums the recipients had paid into the program.
(1) Should CERB be deducted from damages awarded for wrongful dismissal?
As the Ontario Court of Appeal held in Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402, “the law is clear: EI benefits are not to be deducted from damages awarded for wrongful dismissal.”
The purpose of this long-standing rule is to prevent the employer from profiting from benefits that the employee was compelled to collect due to the employer’s decision to terminate the contract of employment. However, this does not mean that employees get to "double dip" and receive payment from both their employer and EI: employees must generally pay back any EI benefits they received during a notice period once they have received proper payment from their employer. If this happens, the employee may requalify for EI at the end of their notice period.
Since the introduction of CERB, many employment lawyers have queried how courts will deal with this new income replacement. Unlike EI, CERB does not have a statutory requirement that employees repay the amounts received in the event they receive wrongful dismissal damages. Many employers have argued that CERB payments should be considered "mitigation income" and therefore discounted from amounts they owe to their employees. This would result in employers essentially getting a discount because the employer received CERB—this hardly seems fair.
The Ontario Superior Court of Justice’s considered this question for the first time in its recent Iriotakis v. Peninsula Employment Services Limited decision. While recognizing the differences between CERB and EI, Dunphy J nonetheless adopted the treatment of EI on this issue, and held that employers do not get a discount:
 […] While taking no issue with the diligence of the plaintiff’s mitigation efforts, the defendant asked that I take into account the Canada Emergency Response Benefit (or “CERB”) payments received by Mr. Iriotakis during whatever notice period I might find applicable.
 I agree with the defendant that CERB cannot be considered in precisely the same light as Employment Insurance benefits when it comes to calculating damages for wrongful dismissal. CERB was an ad hoc programme and neither employer nor employee can be said to have paid into the program or “earned” an entitlement over time beyond their general status as taxpayers of Canada. The level of benefit paid (approximately $2,000 per month) was considerably below the base salary previously earned by the plaintiff to say nothing of his lost commission income. On balance and on these facts, I am of the view that it would not be equitable to reduce Mr. Iriotakis’ entitlements to damages from his former employer by the amount of CERB given his limited entitlements from the employer post-termination relative to his actual pre-termination earnings. I decline to do so.
Even though the Court was careful to say that the decision only applied to the specific facts of Mr. Iriotaki’s case, in our opinion this approach will be adopted in any case where an employee receives wrongful dismissal damages relating to a period for which the employee also collected CERB. CERB raises the same concern as EI about an employer profiting from benefits that the employee only collected due to the employer’s decision to terminate the contract of employment.
(2) Do employees need to repay CERB if they are subsequently awarded wrongful dismissal damages?
The answer to this question is still somewhat unclear, as unlike EI, the statute that enables the CERB program does not specifically lay it out.
Under section 45 of the Employment Insurance Act, an employee who receives EI benefits during the period of reasonable notice must pay back those benefits if the employee subsequently receives damages for wrongful dismissal relating to the same time period. Furthermore, under section 46 (1) of the Employment Insurance Act, if an employer pays damages for wrongful dismissal to an employee and has reason to believe that the employee has received EI benefits during the applicable notice period, the employer is required by law to deduct the amount of EI received from the award and remit that amount directly to the government.
There is no employer liability provision contained in the Canada Emergency Response Benefit Act corresponding to section 46 of the Employment Insurance Act. In fact, the Canada Emergency Response Benefit Act does not mention employers at all. Instead, under section 12 (2), any CERB payments made to a person who is ineligible becomes a debt owed by the recipient to the government.
Although there is no obligation on the part of employers to deduct and remit from wrongful dismissal damages an amount for CERB received, the more complicated question, is whether an employee who received CERB during the period of reasonable notice is required to pay back the benefit if they subsequently receive damages for wrongful dismissal corresponding to the same period. The Canada Emergency Response Benefit Act makes no mention of wrongful dismissal damages. Instead, employees must repay CERB payments to which they are “not entitled.” Entitlement to CERB is addressed in section 6 of the Act which stipulates that:
6 (1) A worker is eligible for an income support payment if:
(a) the worker, whether employed or self-employed, ceases working for reasons related to COVID-19 for at least 14 consecutive days within the four-week period in respect of which they apply for the payment; and
(b) they do not receive, in respect of the consecutive days on which they have ceased working,
(i) subject to the regulations, income from employment or self-employment […]
Employees who missed work for reasons related to COVID-19 are eligible for CERB unless they receive more than $1,000 “in respect of” employment during the relevant four-week period.
If an employee receives wrongful dismissal damages exceeding $1,000 and relating to the same period for which they received CERB, they may have to pay back the CERB. Whether or not they must repay these amounts will depend on (1) whether courts interpret the words “in respect of” employment to include wrongful dismissal damages; and (2) whether or not the courts will consider the wrongful dismissal damages as income received during the CERB period, or whether it will be considered income as of the date it was received.
Until such time as the courts weigh in on this issue, or the government provides clear direction, it remains unclear whether wrongful dismissal damages will trigger an obligation to repay CERB.
*Special thanks to articling student Cole Eisen for his assistance in drafting this post.