Last week a California Appeals court ruled that a decision not to renew an expiring employment contract cannot form the basis of a wrongful termination case. Nicollette Sheridan, former co-star of the one-time hit television drama “Desperate Housewives,” lost her wrongful termination claim against the show, the network, and its creators when the court ruled that she was not “fired, discharged or terminated.” Instead, the network exercised its option not to renew her employment contract.

It makes sense that non-renewal of an employment contract cannot form the basis of a wrongful termination lawsuit. If it could, an employee with a contract for a certain term of employment would essentially be converted to an employee with an indefinite employment term or one who could only be fired for cause. In either case, it would undercut a major reason for having an employment contract with a set term or duration. As the court ruled, allowing Sheridan to continue her wrongful termination lawsuit based on the non-renewal of her expiring contract would violate the public policy found in the very existence and recognition of contracts for set terms of employment.

It is important to note, however, that wrongful termination claims are based in state law (and do not even exist in some states, such as in Georgia). This is very different from discrimination or retaliation claims under laws like Title VII. In claims brought under Title VII (and other federal anti-discrimination statutes), the non-renewal of an employment contract can be considered an adverse employment action, and therefore if non-renewal is allegedly based on discrimination or retaliation, it is actionable. Based on the concepts under these federal laws, the court ordered that Sheridan could amend her complaint to allege that the decision not to renew her contract was in retaliation for her complaints that the show’s creator, Marc Cherry, struck her in the head during an argument (assuming that she asserts such complaints are protected from retaliation). Interestingly, the court will allow such an amendment even though Sheridan already lost her battery claim before a jury. This is because Sheridan does not have to prove that Cherry actually struck her – only that she complained of the action and her contract was not renewed because of her complaint.

The decision not to renew an employment contract could also entitle an employee to unemployment insurance benefits depending on the applicable state laws and whether the non-renewal was “for cause.” So, “wrongful termination” lawsuits may be the only circumstances in which a decision not to renew an employment contract cannot form the basis of the claim.

Sheridan’s lawyers have not yet indicated whether she will amend her complaint to try to continue her effort to recover lost wages from the network. However, at this point, it appears to be the only way Sheridan can recover in court for the non-renewal of her employment contract. Time will tell how “desperate” she really is…