The COVID-19 pandemic has impacted every individual and business in Canada. Due to economic turbulence and uncertainty, businesses have collapsed and individuals have been terminated with limited warning. The Canadian government had responded to the upsurge in unemployment by implementing the Canadian Emergency Response Benefit (CERB). As a result of these changing circumstances, employers should be cognizant of updated law on (i) reasonable notice periods, and (ii) CERB deductions in wrongful dismissal actions.
Reasonable Notice Period
Many employment agreements have a clause that limits an employee’s notice entitlement if they are terminated without just cause. However, when an agreement lacks such a clause, or where such clause runs contrary to the Employment Standards Act, R.S.B.C., 1996, c. 113, the employer owes the common law “reasonable notice” to the employee. If the employer fails to give the employee reasonable notice of termination, the employer risks a wrongful dismissal.
To determine the applicable common law reasonable notice, the courts refer to the Bardal factors:
- the character of the employment;
- the employee’s length of service;
- the employee’s age; and
- the availability of similar employment.
In light of COVID-19’s influence on the economy, courts in Canada have been considering the impact on the fourth Bardal factor (the availability of similar employment). . The courts are divided on whether the economic uncertainty should allow for an increased reasonable notice period at common law.
The Ontario Supreme Court in Kraft v. Firepower Financial Corp., 2021 ONSC 4962 [Kraft] and Pavlov v. the New Zealand and Australian Lamb Company Limited, 2021 ONSC 7362, awarded extra notice to each employee to account for the difficulties the employee faced in seeking alternative employment in the midst of the pandemic. Particularly in Kraft, the Court noted that there was evidence that the pandemic impacted the employee’s ability to secure new employment. His job search lasted 13 months, during which time he applied to over 70 jobs.
The British Columbia Supreme Court in Moore v. Instow Enterprises Ltd., 2021 BCSC 930 [Moore] was not as generous. The Court held that an employee is not entitled to greater notice simply by virtue of the COVID-19 pandemic, and they must mitigate their loss which may look different in a pandemic. Justice Walkem stated at para. 38:
A job search in COVID times must necessarily look different. Physically knocking on doors or invitations to lunch are not reasonable job search expectations during COVID-time. Mr. Moore nonetheless has an obligation to take active steps to search for reasonably similar employment.
This could include phone calls, cover letters, emails, use of a headhunting employment search service, or otherwise reaching out and connecting with potential employers. I find that reasonableness in the circumstances required Mr. Moore to cast a net further than the very limited pool of commercial tire sales, and take steps beyond his limited efforts.
Moore is still the prevailing decision in BC on reasonable notice periods during the pandemic. However, we note that different industries and professions may also impact the court’s decisions on whether there was “economic uncertainty” so as to affect the fourth Bardal factor. As there has been an influx in wrongful dismissal complaints during the pandemic, it remains to be seen whether BC will follow in Moore’s footsteps, or will be persuaded by Ontario’s more relaxed approach.
Canadian courts were initially divided on whether CERB should be deducted from a damages award, but are now generally leaning towards its deduction.
In Ontario, the court in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, held that given that the CERB paid to the employee was considerably below the base salary and commissions previously earned by him that it would be inequitable to deduct the CERB payments from the dismissal damages owing. However, later in the year, the court in Livshin v. The Clinic Network Canada Inc., 2021 ONSC 6796 held that CERB payments should be deducted from the overall damage awarded, although the presiding judge did not engage with prior conflicting case law on the issue or provide reasoning for making the deduction.
In BC, the courts have generally deducted CERB payments to prevent double recovery. The principle behind these decisions is that damages should not place an employee in a better position than if there was no breach. In Hogan v. 1187938 B.C. Ltd., 2021 BCSC 10 [Hogan], the court held that but for the dismissal, the employee would not have received the benefit. There was no evidence that the employee contributed to obtain the benefit by paying for it directly or indirectly. This is different in instances regarding the treatment of employment insurance (EI) where the employees are paying their own premiums, and where EI is not deductible from an award because the employees purchased it themselves out of pocket. Hogan has been followed by subsequent decisions in BC.
Employers involved in a wrongful dismissal claims, particularly arising out of the COVID-19 pandemic, should actively seek information from the former employee regarding their mitigation efforts, and any CERB payments. In BC, the courts appear to be more favourable to employers if evidence adduced can show that the former employee failed to properly mitigate even in economic uncertainty, and that the CERB payment was provided to the plaintiff as a result of their dismissal. However, with an influx of cases currently moving through the court system, we will continue to monitor the court’s approach as we begin to move forward in the COVID-19 pandemic.