July 22, 2019

In the decision of McGuinty v. 1845035 Ontario Inc. (McGuinty Funeral Home), 2019 ONSC 4108, the Superior Court awarded almost $1.3 million in favour of Mr. Grant McGuinty, an employee who was found to be constructively dismissed from his employment, representing one of the highest on-record awarded damages in any Canadian wrongful dismissal case to date.

In this case, Mr. McGuinty was an owner of the McGuinty Funeral Home Limited when, in 2012, he agreed to sell his shares to a company, a term of which included that Mr. McGuinty enter into an agreement wherein he would be employed by the funeral home for ten years.  Within the agreement, Mr. McGuinty was defined as “the key employee” and it was indicated that the purchaser required him to provide transitional services.  There were also clear, written terms confirming the fixed term, which ended in 2022.  There were no material provisions addressing the issue of contract cancellation or early termination.

Shortly following the transfer of ownership, various issues arose between Mr. McGuinty and Gary and Steven Eide, the purchasers of the business.  In less than a year, according to Mr. McGuinty, the situation had become so bad that Mr. McGuinty was forced to go off on medical leave due to stress, largely induced by Gary Eide.  Mr. McGuinty claimed he was therefore unable to work for the funeral home and asserted that he had been constructively dismissed.

In finding that Mr. McGuinty had been constructively dismissed from his employment, the Superior Court (at paragraph 101) wrote the following:

Gary: (1) Improperly terminated Grant’s use of the company vehicle; (2) Without notice to the Grant, recruited an employee who was subordinate to him to track his time at the funeral home; (3) Did not pay Grant commissions to which he was rightfully entitled; (4) Removed Grant’s photograph from the Funeral Home; and (5) Without notice to the Grant and without seeking any explanation from him, changed the locks to the funeral home.

The Court further held that, absent a term stating to the contrary, and in keeping with the Court of Appeal’s decision ofHoward v. Benson Group Inc., 2016 ONCA 256, a fixed-term contract obligates an employer to pay an employee to the end of that term, without being subjected to mitigation.  Accordingly, the Superior Court found that Mr. McGuinty was entitled to the compensation and benefits he would have received had the contract been honoured, to the tune of almost $1.3 million.

This case is a stark reminder to employers that, where a fixed-term contract is involved or being considered, the presence of an enforceable, early termination/cancellation provision is critical.  In the absence of any such provision, companies could find themselves in grave danger.