Cynthia Katz and Jessica Mauceri give practical advice for protecting your brand with Morals Clauses.
At the end of each year since 1927, Time Magazine reveals their “Person of the Year” designation for the individual and/or party that has had the most influence over the news over the previous twelve months. Time has named the “Silence Breakers” as their “Person of the Year” for 2017 – meaning the thousands of people across the world who have come forward with their experiences of sexual harassment and assault.
The result of these allegations has triggered a domino effect in the entertainment business, taking down some of Hollywood’s most prominent stars, including Kevin Spacey and longtime producer Harvey Weinstein. One such star, former NBC News Anchor Matt Lauer, was terminated by NBC on December 1st for sexual misconduct in the workplace. Since the termination, Lauer’s attorneys have attempted to obtain the roughly $30 million dollars that Lauer was owed on his contract through the end of 2018. However, these attempts have been unsuccessful, since NBC deems Lauer’s firing for inappropriate sexual behavior to be a violation of the so-called “morals clause” in his employment agreement, which prevents Lauer from being entitled to this compensation.
A morals clause is a provision some personal services contracts where the individual party to the agreement agrees to refrain from engaging in certain specified behaviors which the company considers inappropriate and/or potentially damaging to its brand and reputation. It affords companies the opportunity to set moral and ethical standards and expectations for the individuals they work with and to establish consequences should those individuals participate in conduct that the contract has identified as disreputable. Consequences for violating a morals clause can include immediate termination as well as forfeiture of compensation, among other things. Morals clauses are particularly important for agreements with artists and other creative professionals, since companies often elect to work with such individuals at least in part because their public image aligns with the values of the company.
In an effort to ensure that the morals clauses in your contracts are enforceable and inclusive, keep in mind the following tips:
1. Utilize specific language to ensure that the individual is clear as to the type of conduct that violates the clause. Among other things, morals clauses will typically prohibit conduct involving the abuse of alcohol, use of illegal drugs, and illicit and inappropriate sexual activity.
2. Determine whether you want the clause to apply to future conduct only, or to also include past conduct that if proven true, may affect the company’s reputation.
3. Determine the scope of the morals clause; will it apply to conduct within the workplace only? Or will it include conduct outside of the workplace as well?
4. Decide what remedies are available in the event that the morals clause is triggered. By way of example, do you have the right to immediate termination of employment? And/or do you want to prohibit the terminated employee from being entitled to certain compensation under the agreement?
So, what’s the moral of this story? If you have concerns regarding the potential for independent contractors or employees to impact your business’s brand, or you simply wish to get everyone on your team on the same page regarding your company’s culture and the behavior that is acceptable both inside and outside of the workplace, then you should consider including morals clauses in all of your future personal services contracts.
Don’t hesitate to contact us for a consultation regarding your independent contractor and employment agreements; we are on hand to help!
About the authors
Cynthia Katz represents clients ranging from start-ups to large multinational companies. Her practice focuses on corporate and commercial transactions, including entity formations, equity and debt financing, mergers and acquisitions, intellectual property, data privacy and employment matters.
She is a graduate of the Wharton School at the University of Pennsylvania and Brooklyn Law School. She is licensed to practice law in the state of New York and is a member of the New York State Bar Association, the American Bar Association and the Wharton Club of New York.
Jessica Mauceri is a law student at Benjamin N. Cardozo School of Law in New York City. At Cardozo, she is an Articles Editor for the Cardozo Arts and Entertainment Law Journal, a New Student Mentor and a member of the Entertainment Law Society and Intellectual Property Law Society.
Jessica currently participates in the Indie Film Clinic, where she provides pro-bono legal assistance to independent documentary filmmakers. She received a Bachelor Degree in Sociology from the State University New York College at Cortland in 2014.