Aside from the funny quotes and rants about warlocks, Adonis DNA, and tiger blood, employers can learn several valuable lessons from the dispute between Charlie Sheen and Warner Brothers Television. This past March, Warner Brothers terminated Sheen and suspended production of the hit prime-time comedy Two and a Half Men after Sheen made disparaging public remarks about his producer, Chuck Lorre. This was not the first time that Sheen engaged in inappropriate off-camera behavior; his record allegedly boasts of drug- and alcohol-fueled rampages, disturbing tirades, and several run-ins with the law, all dramatically outlined in his termination letter. Note: the content of the letter includes mature and obscene language. (Click here to view the letter: newsdesk/tmz_documents/0307_sheen_full_b.pdf).

Many employers have their own minor versions of Sheen: highperforming employees who display questionable conduct that routinely nudges close to – or even crosses – the line between acceptable and unacceptable behavior. These employees are frequently responsible for generating millions of dollars in revenue. Because of the significant impact these employees have on the bottom line, many employers look the other way when it comes to problematic conduct issues.

Erratic Employee Behavior Should Not Be Ignored

Erratic employee behavior should be a matter of serious concern for any company. Employees who act erratically tend to repeatedly test limits, push buttons, and engage in other risky behaviors. These behaviors expose an employer to expensive litigation and expensive settlements (what some call “hush money”), not to mention the negative press, publicity, and reputational damage that commonly accompany public exposure of inappropriate behavior by high-level employees.

As a general rule, if an employee causes harm, injury, or damage to another person (or to another person’s property) while on the job, the employer can be held liable for that employee’s acts. Imagine, for example, that your company hired and retained Sheen, notwithstanding his repeated poor behavior. Although you instructed him not to treat female customers inappropriately, Sheen ignores the instruction, and goes too far with comments or other conduct toward a female customer. When that customer sues for harassment, your company can be held liable for Sheen’s actions.

Retaining an erratic employee can also cause injury to, or problems with, other employees. For example, co-workers may be injured by an erratic employee, giving rise to workers' compensation claims. The inappropriate behavior can also spawn civil lawsuits where an injured coworker alleges that the employer effectively sanctioned the erratic employee's conduct by failing to discipline, or terminate, the employee.

Failure to discipline or terminate an erratic employee can also result in talent loss, as fed-up coworkers seek out less stressful work environments. It can interfere with a company’s ability to attract new talent, as well. If word gets out that a highperformer’s grossly inappropriate behavior is ignored or tolerated, top outside talent may look elsewhere rather than willingly enter a problematic work environment.

Additionally, if co-workers see another employee getting away with egregious conduct, they may conclude that their employer wo’t "sweat the small stuff" with everyone. As a result, they may let their job performance slide, or begin to test the limits of their employer’s policies, assuming that those policies will not be strictly enforced. If the employer then disciplines or terminates one of those coworkers for violating company policy, but has not done so with an erratically-behaving high-performer, the company opens itself up to liability for discrimination claims.

For example, let’s say the erratic employee is a Caucasian male executive who has been caught working while drunk multiple times, in violation of the company’s Alcohol and Drug Policy. He has been told to stop, but has not been otherwise disciplined or terminated. Later, an African-American male employee is found working while drunk, and is suspended for violating the Alcohol and Drug Policy. By not enforcing the Policy uniformly against all employees, the employer has just made itself a target for a race discrimination claim under Title VII of the Civil Rights Act of 1964.

Off-Duty Conduct

While on-duty behavior is particularly problematic, smart employers do not ignore off-duty behavioral problems, either. An employee's severe behavioral problems off the job indicate that he or she may be more likely to act out on the job. Even if an employee avoids acting out at work, the employee's off-duty behavior can still damage an employer's reputation, resulting in loss of business and an inability to attract or retain talented employees.

Additionally, to the extent that customers or clients seek to promote their own social agendas, they may reconsider purchase of a particular company’s products or services after learning that it has tolerated inappropriate employee behavior, especially when such behavior becomes public.

Before disciplining or terminating an employee for off-duty conduct, employers should confer with legal counsel to ensure that the discipline or termination is handled in a manner that won’t unnecessarily expose the employer to additional liability. There may be, for example, state or local laws that impact an employer’s ability to terminate an employee in certain situations. (e.g., California, which prohibits termination of employment for lawful off-duty behavior). Similarly, public sector employers have to be careful to avoid infringing employees’ Constitutional rights when disciplining them for off-duty behavior.

High-Performers Should Have Employment Contracts

When big egos and big money are on the line, it is best to avoid at-will employment situations. Instead, employers should ensure that rainmakers and other high-performers have employment contracts.

The best time to plan for potential problems in an employment relationship, including the potential termination of an employee, is during the hiring process. Although it may seem pessimistic to think about firing an employee who is just being hired, that’s when the iron is hottest for negotiating an employment agreement that has terms amenable to everyone.

As a general rule, employers should not allow a new highperforming employee to start working before the employment agreement has been fully executed by all parties. While many twists and turns in an employment relationship are unpredictable, employers can more easily control the ultimate outcome by negotiating a good employment contract at the outset. This includes not only carefully negotiating the terms at the outset of employment, but also enforcing those terms throughout the course of the employment relationship.

The Bottom Line

When you consider the potential for civil lawsuits, discrimination claims, fed-up coworkers, negative publicity, reputation damage, and even physical injury to employees or other third parties, the risks associated with hiring or retaining a troubled employee far outweigh the potential benefits – no matter how significant their contribution to the bottom line.