More and more, morality clauses are becoming standard features in executive-level employment contracts. For decades, such clauses have been included as standard practice in sports, film, TV, and other types of celebrity employment contracts. Given how important reputation has become in modern business operations, morality clauses are now being added to employment contracts.

Typically, morality clauses give the employer — at its sole discretion — the right to terminate the employee’s employment if the employee behaves in some manner that causes damage to the reputation of the business or violates other listed offenses. Usually, the language includes behavior that is criminal, immoral, objectionable, or results in some disrepute attaching to the employee or the employer. A vintage example comes from this case — Loew’s, Inc. v. Cole, 185 F.2d 641, fn 6 (US Court of Appeals, 9th Cir. 1950) — involving a Hollywood employee:

“[Employee] … agrees that he will not do or commit any act or thing that will tend to degrade him in society or bring him into public hatred, contempt, scorn or ridicule, or that will tend to shock, insult or offend the community or ridicule public morals or decency, or prejudice the producer or the motion picture, theatrical or radio industry in general.”

Morality clauses in senior-level employment contracts must be reviewed and carefully negotiated. The worst-case scenario is an open-ended, vague clause where the employer has full and complete discretion. Remember that, by design, these clauses cover ALL behavior, not just workplace behavior. Since a very well-paying job is on the line, an executive will want as much due process as can be negotiated, along with definitions that are as tight as possible. Things to consider and negotiate:

• Who makes the decision to trigger the morality clause and the decision to terminate? — though the situation may differ, for an executive, for both questions, the answer should be the board; often, the more people that are involved, the more due process and the better the results
• What behavior will trigger the clause? — it is best to obtain the narrowest definition of what will trigger the clause; for example, if “dishonesty” is a trigger, then make it “willful commission of dishonest acts” and only those that are “demonstrably, materially, and financially injurious”; as another example, if “criminal conduct” will trigger the clause, then make it “felonious” criminal conduct
• Try and obtain some requirement of an internal review, investigation, and written report/findings before the clause can be triggered
• Obtain time for the employee to attempt a cure of the circumstances that triggered the clause
• Negotiate a requirement that a lesser penalty be imposed for the first breach
• Exclude certain behaviors, such as behaviors that were intended to be private but become public through accident or the malicious intent of others
• And more

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