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California Court declines to expand the scope of wrongful termination claim to nonrenewal of an employment contract

An employee cannot sue for wrongful termination in violation of public policy based on an employer’s refusal to renew an employment contract.

The California Court of Appeal, in Touchstone Television Productions v. Superior Court (Sheridan), refused to extend the theory of wrongful termination in violation of public policy to an employer’s decision not to exercise an option to renew a contract.

In 2004, Touchstone Television Productions hired actress Nicollette Sheridan to appear in a new television series, Desperate Housewives, with an option to annually renew Sheridan’s employment for up to six additional seasons.  Touchstone exercised its option to renew the agreement with Sheridan for Seasons 2, 3, 4, and 5.  During Season 5, Sheridan reported to Touchstone that Marc Cherry, the series’ creator, had hit her during the filming of an episode.  A few months after this alleged incident, Touchstone informed Sheridan that it would not exercise its option to renew her contract for Season 6, because her character would be killed during Season 5.  Sheridan sued Touchstone and Cherry asserting that Touchstone fired her in retaliation for complaining about Cherry’s conduct.  Touchstone argued that Sheridan’s wrongful termination claim failed because Touchstone had not terminated her employment but rather had merely declined to renew her contract.

The Court agreed with Touchstone and explained that, even if Touchstone’s decision not to renew her contract may have been influenced by her complaints about an unsafe working environment, the employer’s decision not to renew a contract is not the same as wrongful termination of employment.  Thus, Sheridan cannot sue for tot damages based on wrongful termination because her contract already expired in accordance with a fixed term.

However, the court held that Sheridan is allowed to sue instead under Labor Code § 6310(b), which permits “an action for damages if the employee is discharged, threatened with discharge, or discriminated against by her employer because of the employee’s complaints about unsafe work conditions.”  Thus, if Sheridan can prove that the non-renewal was a discriminatory act solely based on her complaint of the alleged assault against her by Cherry, she could support her claim under Section 6310(b).

How this affects your business?

While certain claims against a company have been limited by this decision, you’re not out of the woods.   If an employee-plaintiff prevails under Section 6310(b), the potential recovery would include lost wages and benefits, and could also lead to reinstatement which could mean a huge financial hit to the company.

If your company is considering not renewing an employee’s contract and you have experienced issues with the affected employee in the past, please contact us for a complimentary consultation at info@mitzelgroup.com for further information.