by Sayema Hameed
Does an employee have a legal cause of action for wrongful termination in violation of public policy if an employer decides not to exercise an option to renew the employee’s contract? The answer, according to a new California Court of Appeal opinion, is no, an employee whose employment contract is not renewed does not have a wrongful termination claim.
This case involves a famous employee, actress Nicollette Sheridan of Desperate Housewives fame. The case is Touchstone Television Productions v. Superior Court (Nicollette Sheridan) (Second District, Div. Four, Case No. B241137; filed 8/16/12).
In 2004, Touchstone Television Productions hired Nicollette Sheridan to play the character of Edie Britt in the television series Desperate Housewives. Touchstone’s agreement with Sheridan was for the first season only, but it gave Touchstone the exclusive option to renew her services on an annual basis for up to an additional six seasons.
Under Sheridan’s contract, if Touchstone exercised its option to renew her contract for the next season, it was obligated to pay Sheridan for that season but was not obligated to use her services. Touchstone exercised its option and renewed its agreement with Sheridan in 2005, 2006, 2007, and 2008 for Seasons 2, 3, 4 and 5.
During the September 24, 2008 filming of a Season 5 episode of Desperate Housewives, an incident occurred between Sheridan and Marc Cherry, the creator of the series. Sheridan claims that Cherry hit her, and she subsequently complained to Touchstone about the incident.
In February 2009, during the production of Season 5, Touchstone told Sheridan that it had decided not to renew her contract for Season 6. Touchstone explained that, during Season 5, Sheridan’s character (Edie Britt) would be killed in a car accident.
As required by her contract, Touchstone paid Sheridan $4.2 million for her services for the entirety of Season 5, even though she did not appear in every episode of that season. After the February 2009 meeting, Sheridan appeared in three more episodes of Season 5; Sheridan did publicity for the show as required by her contract; and Sheridan’s profit sharing plan with Touchstone vested. As televised, the Season 5 story arc included Edie Britt’s death during a car accident and subsequent return as a ghost.
In April 2010, Sheridan sued Touchstone and Marc Cherry, alleging that Cherry had committed battery on her in September 2008 and that she had been fired in February 2009 in retaliation for complaining about Cherry’s conduct. Sheridan sought compensatory damages in excess of $20 million as well as punitive damages.
In February 2012, the matter went to trial on three causes of action: wrongful termination in violation of public policy, breach of the implied covenant of good faith and fair dealing, and battery. During trial, the court granted a directed verdict in favor of Cherry and Touchstone on the battery claim, and Sheridan voluntarily dismissed the cause of action for breach of the implied covenant. The jury deadlocked on the wrongful termination claim, and the trial court declared a mistrial.
Touchstone asked the judge to enter a directed verdict in its favor on the wrongful termination claim. Touchstone argued that Sheridan’s employment had not been terminated but, rather, Touchstone had simply decided not to renew her contract, and that decision could not support a claim for wrongful termination. The trial court denied the motion and set the matter for retrial.
Touchstone then filed a writ petition in the Court of Appeal. Touchstone asked the Court of Appeal to order the trial court to enter a directed verdict in Touchstone’s favor on the wrongful termination cause of action. The Court of Appeal granted Touchstone’s petition.
As the Court of Appeal explained, the law does does not allow a plaintiff to sue for wrongful termination in violation of public policy based upon an employer’s refusal to renew an employment contract. Daly v. Exxon Corp. (1997) 55 Cal.App.4th 39.
Sheridan was not fired, discharged or terminated. Her employment contract was a for a fixed term and the term expired at the end of Season 5. Touchstone chose not to exercise its option to renew her contract for the next season. Sheridan continued to work through Season 5 and was paid for the entire season as required by her contract.
According to the Court of Appeal:
“Touchstone did not terminate Sheridan’s employment. Instead, her employment expired at the end of Season 5 because Touchstone decided not to exercise its contractual option to hire her for another season. Stated another way, this case does not involve a decision to terminate an employee but, instead, a decision not to rehire an employee whose contract would expire on its own terms.”
Although the Court of Appeal has rejected Sheridan’s wrongful termination claim, the Court is allowing Sheridan to file an amended complaint alleging a new cause of action under Labor Code Section 6310 that Touchstone retaliated against her for complaining about unsafe working conditions (e.g., Cherry’s conduct) by deciding not to renew her contract.
The Court made it clear that it rendered no opinion on the strength of this new Labor Code claim, only that it would allow Sheridan to pursue this new claim at the trial court level. The Court also explained that damages for this claim are limited to lost wages and work benefits caused by the acts of the employer. This means that Sheridan will not be able to seek punitive damages under this claim.
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