A still-unfolding Hollywood squabble has a few lessons on how to end employment relationships.
Actress sues over nonrenewal
Touchstone Television Productions hired Nicollette Sheridan to appear in the first season of Desperate Housewives. Its contract gave Touchstone the exclusive option to renew her services each year for an additional six seasons.
On exercising its renewal option, Touchstone was obligated to pay Sheridan for that particular year but was not obligated to use her services, the contract provided. Touchstone exercised its option and renewed the agreement with her for the next four seasons.
During the filming of an episode of the fifth season in September 2008, an incident occurred between Sheridan and show creator Marc Cherry. She subsequently complained to Touchstone that Cherry hit her.
In February 2009, while season five filming continued, Touchstone informed Sheridan that it would not exercise its option to renew her contract for the next season. It explained that her character would be killed in a car accident.
Touchstone paid Sheridan $4.2 million for her services for the entire fifth season, even though she didn’t appear in every episode. After the February meeting, Sheridan appeared in three more episodes.
In April 2010, Sheridan sued Touchstone for wrongful termination in violation of public policy (as opposed to wrongful termination under a specific statute, like a law prohibiting discrimination). She alleged that she had been fired in retaliation for complaining about Cherry’s conduct and sought more than $20 million in compensatory damages as well as punitive damages.
The jury deadlocked on her claim, and the trial court declared a mistrial. Touchstone made a motion asking the judge to assume the role of the jury and enter a “directed verdict” in its favor. After the judge declined, Touchstone turned to the California Court of Appeals for relief.
Wrongful Termination Claim
As it had at the trial court level, Touchstone argued that Sheridan’s employment wasn’t actually terminated. Instead, it claimed, her contract simply wasn’t renewed. The court of appeals agreed.
The appeals court explained that Sheridan couldn’t pursue a claim for wrongful termination in violation of public policy because she wasn’t fired, discharged, or terminated. Rather, Touchstone chose only not to exercise its option to renew her fixed-term contract for the sixth season. She continued to work through the fifth season and was compensated as the contract required.
Sheridan argued that the rule disallowing a wrongful termination claim when a fixed-term employment contract expires doesn’t apply when the employee is fired before the contract period expires. As the court noted, she was “correct on the law but wrong on the facts.”
If Sheridan had been fired, discharged, or terminated before her contract expired because of her complaint about unsafe working conditions, she could have sued for wrongful termination. But Sheridan wasn’t dismissed—she was allowed to serve out the full term of her existing contract for the fifth season. She continued to work, she was paid for the entire season, and her profit-sharing program vested.
The court of appeals, therefore, ordered the trial court to enter a directed verdict in Touchstone’s favor on the wrongful termination claim.
Suit Given New Life Under CA Labor Code
Unfortunately for Touchstone, the court didn’t stop there. It went on to essentially suggest an alternative approach for Sheridan—suing Touchstone under Section 6310(b) of the California Labor Code.
That provision allows employees to sue for damages if discharged, threatened with discharge, or discriminated against by their employer because of complaints about unsafe work conditions.
The court of appeals ordered the trial court to allow Sheridan to file an amended complaint under Section 6310(b), alleging that Touchstone retaliated against her by deciding not to exercise its option to renew her contract. Media reports indicate that Sheridan is indeed pursuing this option.