The person who posted the video said the employee asked the customer to remove his child from a riding lawnmower on display at the Sears location in the Polo Park Shopping Centre, saying it was not a toy.
The employee can then be heard asking the man, "Let me guess, you just came off the boat?"
The customer, obviously upset with the derogatory remark about being an immigrant, immediately demanded a store manager fire the employee.
The customer's anger then boiled over, leading him to yell several profanities at the employee.
Sears spokesman Vincent Power said the incident was unfortunate, and it is being investigated. He confirmed the employee has been suspended.
Power apologized on behalf of Sears to those involved in the incident, including the passersby who witnessed the exchange, and said the company plans to discuss proper conduct with staff.
"This is not the kind of behaviour that is demonstrated by Sears people across Canada," he said.
WARNING: Video contains graphic language