Morality clauses require an employee to abide by certain ethical standards for the lifespan of the contract with an employer. They are created to maintain the employer’s reputation and protect it from public embarrassment.
“Employers often include a code of conduct, a type of morals clause, in employment agreements or handbooks to specify acceptable behavior both in and outside of the workplace,” says Kenneth Anand, employment law expert and former general counsel of the apparel brand Yeezy. If an employee’s behavior violates the morality clause, the employer retains the right to terminate the contract.
Employers have broad discretion over that determination. For some, criminal behavior is regarded as worthy of contract termination. For others, it might be behavior that is at odds with the employer’s institutional values. “Depending on how they are phrased, morality clauses are a prohibition on certain off-duty behavior,” says Patricia Abril, a business law professor at the University of Miami Herbert Business School. Other morality clauses “don’t really focus on the behavior, rather the effect of the behavior: ‘You embarrassed us,’” Abril says.
The Origin of the Morality Clause
Morality clauses were first used in the film and media industry, specifically as a reaction to the Roscoe “Fatty” Arbuckle case of 1921 in which a popular comedic actor was accused of murder. Amid the allegations and subsequent media outrage, Arbuckle’s employer Universal Studios began including provisions in its agreements with talent that protected the studio against employee behavior that would offend community standards of decency.
In the decades that followed, morality clauses started to be used in contracts with professional athletes and other public figures. (Famously, Babe Ruth was barred from drinking and staying up late.) Morality clauses now commonly cover endorsement contracts and any employment contract that associates the individual’s reputation with the company’s reputation.
The Expansion of Morality Clauses
Morality clauses have become more common for workers outside the limelight.
Particularly, as the power of social media and cancel culture has grown, companies rely on morality causes to protect their reputation from damage by the individual behavior of employees.
This is particularly important for individuals, such as executives and board members, whose high-level positions in companies thrust them into “representative” roles. But morality clauses can be added to the contract of an employee at any level. Companies justify using morals clauses against these types of individuals because there is “a fiduciary responsibility to be a representative or steward of the values of that organization … displaying yourself to be contrary to that is problematic,” Abril says.
This expansion makes experts like Abril uneasy. The freedom of contract — a legal concept that generally protects contracts made between two able and consenting parties — maintains the enforceability of provisions that control employees’ behavioral standards. Morality clauses can incentivize good behavior, as well as protect companies against illegal or immoral actions. Abril stresses, however, that an expansive usage and interpretation of morals clauses subject employees to “the moral judge and jury of their employer.” This means that any activity outside of work “might produce a negative consequence that in turn may be associated with an employer.”
Reverse Morality Clauses
Reverse morality clauses might be an avenue to protect employees against this bargaining power disparity. They protect individual actors against the inappropriate acts of their employers. These devices are gaining popularity, allowing celebrities and influencers to sever themselves from potentially disadvantageous or reputationally harmful associations, Anand says. Individuals in the same contract where a morality clause exists can add these reverse morality clauses.
The Limits of Morality Clauses
Since the early 20th century, courts have consistently upheld morality clauses as legitimate contract provisions. Nonetheless, morality clauses, like all contract provisions, can be deemed unenforceable if they are not reasonably certain and definite.
Judgments made on ague morality clauses are more likely to favor the employee. Meanwhile, companies will find more success enforcing morality clauses that are clearly written and define specific impermissible behaviors or violations.
“Problematic morality clauses are ones where it isn’t clear what the values of the organization are other than to not be hurt,” Abril notes. Employees have prevailed in situations where courts have determined that the employees’ unfavorable conduct was not foreseeable based both on the specific language of the clause and community standards of decency.
An example of a clearly enforceable morality clause would be a clothing company’s mandate that a brand ambassador only publishes or publicly says favorable things about its merchandise. On the other hand, a clause preventing a high-level executive at a tire company from engaging in adultery would be problematic, because such behavior would not foreseeably affect the company’s bottom line.