Alberta, Canada Court Deducts CERB Payments from Substantial Reasonable Notice Award to Long-term Employee

In Oostlander v Cervus Equipment Corporation, 2022 ABQB 200, the Court of Queen’s Bench of Alberta awarded 24 months’ pay in lieu of reasonable notice to a long-term heavy duty mechanic, less mitigation income. The court also deducted the Canadian Emergency Response Benefit (CERB) payments received by the employee. This decision follows the recent judicial trend we have observed in western Canada to deduct CERB payments from reasonable notice awards in wrongful dismissal claims.   

Background

The employee worked from 1984 to 2020 as a heavy-duty mechanic. In May of 2018, the employer was notified that employment would terminate 16 months later on September 11, 2019, when certain operations ceased. The employee stated he was told a few days before the anticipated termination date that he “was being kept on” notwithstanding the May 2018 notice of termination. The employee continued to work with no further discussion about termination until June 3, 2020, when, relying on the previous working notice, the employer gave one months’ notice that employment would be terminated on July 3, 2020, on the basis that the original termination notice was effective. When the employee objected and his counsel wrote to the employer, the employer offered the employee another job  doing the same work for the same remuneration. The employee rejected that offer and sued for wrongful dismissal. The employee claimed pay in lieu of notice of termination of 24 months’ wages and benefits less income earned in that period.

Employer’s Position

The employer’s position was that:

• The May 18, 2018 notice of termination should be treated as effective notice, bringing the total working notice to 17 months, which is adequate;
• Even if adequate notice of termination was not provided, the employee could have completely mitigated any losses by taking the position in the other location;
• Even if it were not reasonable to expect the employee to do so, his effective notice period beginning July 3, 2020 should be no more than 18 months; and
• The employee has otherwise failed to mitigate his losses and his damages should be reduced in any event.

Decision

The court decided the employee was entitled to 24 months’ wages and benefits, plus his average monthly vacation pay in 2018 for 24 months, less CERB payments and earnings during the 24 months.

The court considered each of the employer’s arguments in turn.

Effect of May 22, 2018 Working Notice

The court decided the original termination notice was of no effect once that termination date passed and the employee’s employment was continued.  The one months’ notice of termination provided in June of 2020 was, by itself, insufficient notice of termination, and a breach of the implied term of the employment contract that the employer would provide reasonable notice of termination.

In arriving at this conclusion, the court noted that section 60 of Alberta’s Employment Standards Code provides that a termination notice is of no effect if an employee continues to be employed by the same employer after the date specified for termination of employment. The court accepted the employee’s clear testimony that he was told only that he was being kept on and was given no further information about the company’s plans. As well, the court stated that even if it accepted the employer’s testimony that it told the employee it would keep him on until further notice, that is not effective notice of termination because it was unspecified and uncertain.

Employee’s Failure to Mitigate

The court then considered whether it was reasonable for the employee to reject the employer’s offer of re-employment at another location. The court noted that although the job at the other Alberta location would have been “very similar if not identical” to the employee’s original job, he would be required to relocate from where he lived most of his adult life and where his wife’s job was, or make a significant daily commute. The court concluded that given these circumstances, the employee’s decision to reject the offer of re-employment was reasonable.

Duration of Employee’s Effective Notice Period

The court found 24 months to be appropriate because the employee was 60 years old when he was terminated; he had lived in his community for many years and remaining there would mean a limited number of opportunities for new and similar employment; and he had had one employer, one job description, and one job title for virtually all his life.

Employee’s Damages

The court stated that the damages would be calculated as the wages and compensable benefits he would have received over the notice period less any income earned during that time period. The parties agreed that the employee’s base wage plus health insurance benefits averaged $5,621 per month or $134,904 over 24 months. They disagreed, however, on the proper treatment of vacation pay and CERB payments.

Vacation Pay

The employee’s 2018 income information indicated the employer paid out at least some portion of the employee’s vacation pay. Since 2018 was the last full year of the employee’s earnings information, the court decided that his vacation pay for 2018 would be prorated to a monthly average and added to the monthly base wage payable for the 24 months.  This decision was based on Alberta case law, which generally includes vacation pay where the employer would have paid out unused vacation time based on the history of the employment relationship.

CERB

The court acknowledged that CERB payments have been treated differently by different Canadian courts in the context of wrongful dismissal damages. The court noted that most courts have focused on whether the plaintiff will ultimately be required to repay the CERB benefit to the government, but recognized that in Irotakis v Peninsula Employment Services Ltd, 2021 ONSC 998, the CERB benefit was not deducted because it represented only a subsistence-level, ad hoc benefit. The court was not convinced that was the case here, and also that it did not find the reasoning in Irotakis particularly compelling. The court noted it had no evidence the employee would be required to repay the CERB benefits, assumed he would retain them, and concluded they should be deducted from the employee’s final damage award.

Reasonable Mitigation of Damages

Next, the court considered whether the employee reasonably mitigated his damages. Following his termination, the employee collected some employment insurance and CERB benefits, and found casual employment beginning in September 2019, where he continues to work, and in September 2020, he also began to work variable hours as a caretaker, where he continues to work.

The court concluded that the employee met his obligation to reasonably mitigate his losses; it was reasonable for him to want to remain in his community, given that he and his wife had lived there for so long and that she was employed there, and because of his age and singular employment history he would have very few opportunities for re-employment. Although the jobs found by the employee did not pay him the same amount of money, the court was satisfied that his relatively quick re-employment demonstrated a reasonable level of diligence in his job search.

Bottom Line for Employers

As previously discussed here, here, and here, we have seen some inconsistency in the approach Canadian courts have taken regarding whether an employee’s entitlement to damages in lieu of reasonable notice should be reduced by the amount of CERB payments received during the reasonable notice period. In western Canada, courts are making the deduction, and Cervus is another example of a western court doing so. We are not currently aware of a decision considering this issue at a Court of Appeal level, although we anticipate that will happen. We will follow these developments and report on them when they arise.