The recent termination of Charlie Sheen from "Two and a Half Men," and the swirl of negative publicity around the incident, has shed light on the use of arbitration agreements. After he was fired, Sheen filed a $100 million lawsuit against Warner Bros. He wants the proceedings held in front of a jury rather than being privately adjudicated by an arbitrator as outlined in his Warner Bros. contract.
In And Out Of Court
Sheen's lawyers filed an emergency restraining order in March to avoid arbitration proceedings initiated by Warner Bros. The court denied Sheen's request. That's one lawsuit. The actor then filed another action to avoid arbitration which was first heard by the Los Angeles Superior Court on April 20, but the court ordered further briefing. That's two lawsuits. The dispute resolution company JAMS appointed an arbitrator in late March to adjudicate the dispute.
Following a lengthy briefing process, on June 15 the court ruled against Sheen. The court ordered that the dispute related to his employment agreement must proceed in arbitration as outlined in that agreement. The agreement spells out that any controversy or claim related to Sheen's employment agreement – including the issue of what matters should be arbitrated – were to be decided by the arbitrator. That's not a lawsuit at all, so we'll call that one the one-half.
The ruling in favor of Warner Bros. is significant for employers in at least two ways. First, it illustrates the significance of arbitration agreements in employment disputes. The actor and his attorneys would not be trying to avoid arbitration if they thought it was advantageous to their case. Second, this case reminds employers of how critical it is to prepare a well-written arbitration agreement.
Employees are increasingly litigious, so many employers favor arbitration for a variety of reasons. Unfortunately, crafting an enforceable arbitration agreement is a complex exercise. Requirements vary from state to state and it can be easy for employers to find themselves in a situation where an employee, looking to place a wrongful termination or unlawful harassment claim before a jury, challenges the previously-executed arbitration agreement. It is essential to regularly review the details of your arbitration agreement to ensure it's enforceable.
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