In McGuinty v. 1845035 Ontario Inc. (McGuinty Funeral Home), the Superior Court of Justice awarded one of the largest monetary awards on record in Canadian employment law, reiterated the factors considered in a finding of constructive dismissal, and affirmed an employee’s entitlement to payment of an entire fixed-term contract when breached by the employer.

The plaintiff, Grant McGuinty, sold his family’s funeral home to the defendant corporation. As a term of the share purchase agreement, the plaintiff entered into a Transitional Consulting Services Agreement (the “Agreement”) with the defendant for a ten-year fixed-term. The Agreement did not contain an early termination provision.

The relationship between Mr. McGuinty and the new owner of the funeral home soured, and after eleven months, the plaintiff went on medical leave due to stress as well as depression and anxiety caused by the conduct of the defendant. Mr. McGuinty never returned to work, and two years later, he commenced a constructive dismissal claim.

The Court held that Mr. McGuinty had been constructively dismissed, based on the cumulative actions of the defendant, including the fact that:

  • the plaintiff’s company vehicle was improperly taken away;
  • his hours were tracked by a subordinate employee without notice to him and at the request of the defendant;
  • the defendant failed to pay the plaintiff commissions which he was entitled to under the Agreement; and
  • the defendant changed the locks to the funeral home without advising or consulting the plaintiff.

The defendant argued that Mr. McGuinty had acquiesced to the changes, and that he was, therefore, precluded from commencing a constructive dismissal claim. The Court rejected this argument and held that a finding of acquiescence would require an acceptance of the new terms. An employee’s acceptance may be inferred by their willingness to remain in the altered position for a significant period of time, absent mitigating factors. However, in this case, it was clear that Mr. McGuinty had not acquiesced to the changes in his employment because he did not remain in his position, but rather, went on a medical leave.

Further, the Court followed the Court of Appeal’s decision of Howard v. Benson Group Inc., and held that, absent a term stating to the contrary, a fixed-term contract obligates an employer to pay an employee to the end of that term, without  reduction for any other income earned during that time.

Accordingly, the judge awarded the full length of service contained in the Agreement and the plaintiff received a judgment for the 9 remaining years of salary, commissions, the cost of the use of a vehicle, and benefits. The total judgment for the plaintiff was $1,274,173.83.

The Takeaway

This decision is a stark reminder of the risky business that is fixed-term contracts. It is critical for employers to ensure that, where a fixed-term contract is involved or being considered, it contains enforceable termination language which limits employees’ entitlement upon the early termination of the contract.

In addition, the case sheds some light into the test for acquiescence, which has long been a grey area in constructive dismissal claims.