Morality clauses (sometimes known as morals clauses) have been around for at least a century. They were first used by studios to encourage stars to be careful how they conducted themselves in their personal lives. Bad behavior could not only kill a film but damage the studio to which that star was under contract. Later in the 20th century, they expanded to athletes and other celebrities who had lucrative endorsement deals for basketball shoes, car rental companies and more.
They eventually became a staple of executive contracts – particularly for CEOs, partners and board members whose ill-thought-out words or actions could destroy a company’s reputation. Now, those at any level of a company can do that if a video of them bullying someone with a racist or homophobic rant makes its way around the internet, with someone identifying them and their employer soon after.
The purpose of a morality clause
Morality clauses are most effective as a deterrent to bad public behavior. If someone knows they can lose their job and potentially have to pay damages if they cause financial harm to their employer, they’ll likely think twice before they do something that could violate this clause in their employment, partnership or other contract.
They also give employers the right to take action detailed in the clause with less likelihood of being countersued (at least successfully) if someone violates the terms and they can show they suffered financial harm as a result.
Crafting a valid morality clause
A morality clause is meant to address behavior that’s immoral, unethical and/or damaging to a business’s reputation. However, it needs to spell out what that means. If terms are too vague (like “immoral conduct”), a person can’t reasonably be expected to know what that covers.
Criminal behavior, hate speech or anything that could be construed as intolerance of a particular group is often addressed. So is public disparagement of the company or any individuals affiliated with it.
Of course, it can’t be too specific, either. It’s a balancing act. That’s why these clauses need to be carefully written (and in some cases negotiated with those required to agree to them). A balance is also necessary between the reputation of the business and the individual rights of those involved with the business to live their lives.
With experienced legal guidance, companies can use morality clauses to protect their reputations – and bottom line – without infringing on the rights and freedoms of those who work for and represent them.