As lawyers like to say, it depends. But threatening to punch him immediately afterwards certainly doesn’t help.  

It’s not controversial to say that selling your business and staying on as an employee can be tricky. Yesterday you were the boss, today, the people who bought your company are the boss. You almost certainly have opinions about how they are running things. 

The recently affirmed decision in 2551965 Ontario Ltd. v. Warkentin illustrates that there are better ways of expressing those opinions than dropping F-bombs, threatening to assault your new boss and referring to him as a “greedy asshole” in the company database.  

From owner to employee 

Harold Warkentin founded Cabin Country Realty Ltd. around 1990 and sold the business in December 2016 for $200,000, subject to adjustments. As part of the deal, Cabin agreed to employ him as a real estate agent on an 80% commission basis.  

This meant a rather significant change in status. As Justice F. B. Fitzpatrick would later observe, before the sale Harold Warkentin was effectively the operating mind of the business. He decided whom to hire and fire, set commission rates and controlled what he paid himself. After the sale, he was an employee, and the transition did not go smoothly. 

In April 2017, a dispute arose over a property listing. After being told that the listing would be pulled, Harold Warkentin drove to the office while, in his own evidence, “stewing.” The trial judge found that he arrived and opened the festivities with “Fuck you Graham,” directed at his employer, Graham Chaze. He subsequently threatened to hit him if Graham Chaze ever spoke to him that way again.  

If there is an HR manual recommending this approach to dispute resolution, we have yet to find it. 

Worse, when directed to apologize the following day, Harold Warkentin did not do so. Instead, the judge found, he told Graham Chaze that he “had no balls.”  

The workplace database was not a private diary 

Cabin used an internal system called Top Producer that employees could access to review and update listings. Harold Warkentin admitted leaving comments in the system that included calling someone a “sniveling idiot” and his broker of record a “greedy asshole.”  

Justice F. B. Fitzpatrick concluded that the notes were “unacceptable, unprofessional, and inappropriate” for a workplace database accessible to employees.  

A useful modern translation: Teams, Slack and internal databases are generally poor locations for thoughts that would be better screamed quietly into a pillow. 

The Court also found serious misconduct surrounding a client’s real estate transaction. Harold Warkentin arranged for the client, Ron Davis, to sign a listing agreement with a competing brokerage. The judge found that the client was misled about which brokerage was representing him and that Harold Warkentin intentionally deprived Cabin of the commission it should have received.  

Condonation 

And that is where the case becomes particularly interesting – Cabin didn’t immediately terminate Harold Warkentin after the April confrontation. It waited until October. 

Ordinarily, an employer that knows about misconduct but continues employing the employee for a considerable time risks condoning it. You cannot generally keep serious misconduct in your back pocket indefinitely and produce it when termination later becomes convenient. 

But Justice F. B. Fitzpatrick found that the approximately six-month delay was reasonable in context. This was the first sales season under the new ownership. The purchasers had paid substantial money for the business and Harold Warkentin’s continued involvement was important to its economic success. There were also subsequent incidents, including the Top Producer comments and the Davis transaction.  

The Ontario Court of Appeal has now upheld that conclusion. It rejected the argument that the employer condoned the misconduct by waiting until the end of the real estate season to terminate Harold Warkentin. It also rejected his related argument that a separate “culminating incident” was required. Even if one was necessary, the Court said there was one: at the October meeting, before being terminated, Harold Warkentin acknowledged that the parties no longer trusted one another.  

Just cause is still contextual 

Importantly, neither court adopted a rule that swearing at your boss automatically equals just cause (still, don’t do it). 

The trial judge applied the three-step Dowling/Hucsko analysis:  

• Determine the nature and extent of the misconduct;  

• consider the employee and the employment relationship; and  

• decide whether the misconduct is reconcilable with continuing that relationship.  

Here, the threats, insulting workplace communications and conduct surrounding the competing brokerage collectively supported an irreparable breakdown.  

Justice Fitzpatrick also concluded that the April confrontation and the Davis transaction constituted wilful misconduct or wilful neglect of duty under Ontario’s Employment Standards Act regulation. As a result, the wrongful dismissal counterclaim failed entirely. 

Costs! 

There was one final harsh lesson for the employee. Before trial, Cabin offered Harold Warkentin $100,000 and later $110,000 to settle. He had offered to settle for a net $280,000. After losing his wrongful dismissal counterclaim, he was ordered to pay $80,657.12 in trial costs, which he appealed. 

The Court of Appeal dismissed the appeal and added another $15,000 in costs.  

So perhaps the broadest lesson from Warkentin is not only about F-bombs and just cause.  

For employees, becoming an employee of the company you used to own requires actually accepting that someone else is now in charge. 

For employers, serious misconduct should still be addressed promptly, but delay will not necessarily amount to condonation where the surrounding circumstances and subsequent conduct demonstrate that the employment relationship has genuinely broken down. 

For everyone involved in litigation: when somebody offers you $110,000 and your alternative is years of litigation, it may be worth stepping back and giving the offer a careful read.

Before a heated workplace moment turns into a bigger legal problem, get clear on your options. Contact SpringLaw to discuss your situation and find a practical path forward.