ESA Compensatory Payment Set Off Against Wrongful Dismissal Damages

A recent decision of the BC Supreme Court addresses for the first time the deductibility of certain compensatory payments made pursuant to the Employment Standards Act from a civil award for wrongful dismissal damages.

The employee in question brought a complaint before the Employment Standards Branch in 2011 alleging that the defendant had terminated her employment for exercising her rights under the Act. The delegate of the Director of Employment Standards found in the employee’s favour and, in lieu of reinstatement, awarded the employee six months’ lost wages. The employer was also required to pay a $500 administrative penalty for contravening the Act.

Following this decision, the employee commenced a civil action seeking, amongst other things, damages for wrongful dismissal. The employer argued that the amount awarded for lost wages under the ESA must be deducted from any award of damages for wrongful dismissal in order to prevent double recovery. The employee submitted that the ESA award was not deductible as, in her opinion, it was not primarily compensatory and was awarded as a result of the employer acting in a manner that obstructed the operation of the Act.

Following a thorough analysis of the law respecting the deductibility of employment standards payments in British Columbia and Canada, the Court agreed with the employer. Since the nature and purpose of the ESA award was substantially similar to that of an award for wrongful dismissal damages, the Court concluded that a failure to deduct the amount awarded under the Act  would result in double recovery. Further, deduction of the amount was consistent with the fact that other compensatory ESA payments are similarly deductible.

This is a positive decision for employers as the Court has confirmed that compensatory ESA payments are to be set off against wrongful dismissal damages.

Roy v. Metasoft Systems Inc., 2013 BCSC 1190