Worker’s job-for-life lasts less than 3 years

Was termination a breach of contract for former owner?
|Canadian Employment Law Today|Last Updated: 04/01/2019

This instalment of You Make the Call features a business owner who sold his business, stayed on as an employee, and was then fired.

John McNabb, 74, was the president of John H. McNabb Construction, an Ontario construction company he founded in 1969 in the township of Georgian Bluffs, Ont., and incorporated in 1979. In 2012, McNabb was having some financial difficulties so he sold the company to his nephew, Tony Clouatre, who had worked for the company since 1997. McNabb remained employed with the company and leased the property where it was located — which he owned. McNabb’s employment included the use of a vehicle — along with the cost of maintenance and insurance — and health benefits.

Though McNabb performed his duties well and provided valuable knowledge and experience to the construction company, Clouatre soon began having problems with his uncle. According to Clouatre, McNabb poured concrete over a company storage container after he was told not to, he sometimes operated equipment while under the influence of alcohol —  contrary to the employee manual that prohibited alcohol and intoxication at work — and was often absent from work with no justification throughout 2013 and 2014. In addition, Clouatre claimed McNabb made “disturbing and threatening” phone calls to him and used company resources for his own use, costing the company thousands of dollars.

Clouatre also said McNabb went on “miserable rampages” at work, verbally abused the office manager, and refused to submit time cards indicating his hours worked. The office manager agreed with Clouatre's version of events, and the company warned McNabb about his misconduct. However, it continued.

In January 2014, McNabb went on vacation to Florida. When he returned in March, he found Clouatre had moved the company off his property. He continued to work for the company until November 2014, when the company dismissed him for insubordination, absenteeism, intoxication at work, and threatening conduct. McNabb sued for wrongful dismissal and breach of contract, arguing part of the sale agreement allowed him to remain an employee of the company for life.

You Make the Call

Was the company entitled to terminate McNabb’s employment for cause?

OR

Did the company wrongfully dismiss McNabb and breach his contract?

If you said the company was entitled to terminate McNabb’s employment, you’re right. The court found the evidence of Clouatre and the office manager to be consistent and believable, making it likely there were “numerous problems with McNabb” in 2014 leading up to his termination, including rude and abusive behaviour, threatening phone calls to Clouatre, using company equipment for personal reasons, being impaired at work, and frequent unapproved absences.

“Collectively, the persistent problems outlined above are more than enough to constitute just cause for McNabb’s dismissal in November 2014,” said the court. “Consequently, the claim for wrongful dismissal fails.”

The court also found there was no breach of contract. There was no evidence of a formal agreement that McNabb was guaranteed a job for life after he sold the company to Clouatre and McNabb’s claim of such an agreement was weak, the court said.

“A nephew buys a business from his aging uncle (a smart man who ought to be commended for his entrepreneurship but who was clearly struggling in and around 2012), and the nephew guarantees his uncle a well-paid job (regardless of economic circumstances) forever, ceasing only upon the uncle’s death? Nonsense, in my view,” said the court.

For more information see:

• McNabb v. Clouatre et al., 2018 CarswellOnt 2316 (Ont. S.C.J.).

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