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Tuesday, March 8, 2011

Charlie Sheen and . . . ERISA?

Well, he may not quite have reached raising ERISA issues, but it was only a matter of time before Charlie Sheen got close. His recent employment termination under his employment contract raises several potentially fascinating contract-related points:

- We often worry about the conviction/commission dichotomy in the felony prong of the Cause definition. How different would the parties' relative positions here have been were the contract to have had a conviction-only standard? Indeed, the Sheen contract apparently says that the trigger is pulled when the "Producer in its reasonable but good faith opinion believes Performer has committed an act which constitutes a felony offense involving moral turpitude" (or if there is a conviction). The contractual ability of an employer or an employer's affiliate to make subjective judgments about matters like this, as opposed to there being an objective standard, can itself be enough to change the parties' relative positions if and when there is a . . . blow . . . up.

- Many of us assume that the felony prong is a fait accompli. In some negotiations, however, the employee's counsel may look for an express connection to there being detriment to the company, maybe beyond mere indirect reputational damage. It's a request that can raise eyebrows, but note how different the Sheen situation would be if his contract had a "conviction" standard rather than a "commission" standard.

- Some employees and their advisors worry about witch hunts, and whether contractual provisions will open doors or at least start to . . . crack . . . them open. Here, one may wonder whether Sheen was really terminated here for having given cocaine to one or more other people. The practical impact of the provisions in a contract, as well as the literal meaning of the words on the page, are worth considering. For example, when one negotiates any number of clauses regarding wrongful acts, is the question how much leeway the employee will have to do wrong, or is the question how much the employer will have in making the case for Cause (and, let's say, getting past a motion to dismiss or a motion for summary judgment). Arguably, the more the door is ajar, the greater the likelihood of settlement at lower amounts.

- Indeed, on the be-careful-what-you-wish-for front, will performers and other service providers in the industry now become concerned that their behavior could effectively nullify their contracts, even where their behavior cannot be tied to damage to the employer? Will there be an effect on the way contacts in the industry will read going forward? Well, on the one hand, maybe people will gravitate to the notion that this is an extreme case, and that these dynamics are not likely to be repeated; on the other hand, termination situations by their very nature can turn adversarial, and there is often no real way to tell who will try to do what to whom.

Anyway, what blog would be complete without reference to Charlie Sheen? So, there ya go. And, in conclusion - winning.

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