It used to be that “morals clauses” were used primarily by studios and other entertainment businesses to help prevent actors and other performers from doing something that would embarrass or harm them – and potentially cost them millions of dollars. These clauses allowed them not only to cut ties with badly behaving employees but to hold them responsible for economic damages. Athletes who signed deals to be the face of an energy drink or shoes might have them in their contracts. The heads of large corporations might be bound by them.
These days, morals clauses can be found in virtually any industry – and not just for top executives. That’s in no small part due to social media. A racist rant or a tirade at a waiter who got an order wrong can be caught on camera and go viral within minutes.
Even if those caught on camera aren’t well known, it generally doesn’t take long for internet sleuths to find out who they are and whom they work for – even if the behavior occurred in their personal life. Calls to fire the employee and boycott threats can leave an employer with no option but to get rid of them and make clear that it doesn’t condone such behavior.
A morals clause makes that simpler and faster to do. The sooner an employer can free itself of a troublesome employee, the less reputational (and financial) harm it will likely suffer.
A morals clause needs to be clear, fair and enforceable
To be legally enforceable, a morals clause needs to balance an employee’s right to live their life with the employer’s right to protect itself if the employee does something that embarrasses their employer or causes people to take their business elsewhere. That’s particularly true if their behavior was widely seen.
The clause also needs to be clear about what kinds of actions or speech could cause it to be invoked. That means it shouldn’t be too broad, but also not too specific.
Finally, the potential consequences for an employee if the clause is invoked need to be clear. That can include termination, forfeiture of severance, liability for damages and more. Some clauses even allow employers to withhold earned bonuses or “claw back” those already paid.
Crafting an effective morals clause that is legally enforceable requires thought and skill. The best case scenario is that the clause never has to be invoked. Whether an employer is drafting the clause or enforcing it, it’s crucial to have experienced legal guidance.