Moral Clauses in Business Contracts—What Do They Really Mean?

What Are Morals Clauses In Contracts?

In this age of social media, the importance of your employees positively representing your company has never been more important. But how do you put this into their contract?

Businesses take a lot of risks, especially when it comes to hiring employees, and in particular when hiring top level managers and executives. Anytime a company is committing significant dollars to a single individual over an extended period of time, there are some very real risks in play. Moral character plays an important role in most hiring decisions involving top level talent, and that especially true when that person will serve as the face, or a face, of the company. One of the most important tools that businesses can have to help control these contractual relationships are morality clauses. 

A morals clause is a provision in a contract or agreement that prohibits certain actions and behaviors that may damage the company’s reputation or brand. If the morals clause is violated the business will have the option of terminating the relationship and distancing itself from the person who violated it. They serve a couple of purposes, mainly deterring someone from bad behavior and giving the business options should someone do something that publicly puts the business in a bad light. 

In business they commonly come into play in agreements with employees, spokespeople and endorsement contracts. There are several agreements that new hires should sign, and having a morals clause be part of one is becoming commonplace. A business can use the morality clause to hold an individual accountable, and to a certain set behavioral standard in order to avoid potential scandals. The goal of a morality clause is to preserve the image of the company in the public eye, and while they have traditionally been used when a company is entering into business contracts with professional athletes, celebrities and other individuals as endorsers, they are becoming increasingly common in general employment agreements.

Social media has become entwined in everyday life, and the lines between professional and private have become blurred. This causes concern on the part of businesses and they are looking for ways to protect the company when it comes to employees. With social media, companies are now under greater scrutiny than ever before, and, as a business, protecting your image and reputation has never been more important. Nor has it ever been easier to have your image and reputation tarnished. 

Morality clauses may be drafted narrowly or broadly and can be treated like any other business contract negotiation. However, given the rise in the potential risk and issues that could arise, company’s are less likely than ever to negotiate to a large extent on the terms of morality. 

From the standpoint of the business you’ll want to get the broadest morality clause you can. This will give you more flexibility, and a greater range of reasons to terminate an employee or individual. Be prepared to answer concerns from an employee about why the language is so broad, and ambiguous. You don’t want to be in a situation where an employee or endorser is trying to get out of the morals clause. Don’t be afraid to negotiate the final product, narrow it if you need to, just make sure you’re still covering yourself. Especially in tight job markets, where potential employees have lots of options on the table, you may not be able to get as broad of a morals clause as you would like. 

Here are a few considerations when it comes to morals clauses: 

  • The other side may try to negotiate, in order to help protect the business a little more, do some due diligence on the individual. What’s their reputation and background. Have you checked for any similar issues in the past, or anything that looks like a red flag. It’s easier than ever to find information like that. If there are not previous issues that raise concerns, you may be more likely to provide some leeway in the morals clause. 
  • What action will trigger the clause? Are you going to specifically define them, or go for a broader approach?
  • Who decides whether or not the morals clause has been triggered?

Something else to consider is what are the remedies you’re looking for if the morals clause is violated? You’ll want to spell out your options in the agreement and consider a few different ways to exercise your rights depending on the circumstances that triggered the clause. Here’s an example of a few remedies that can be found in morals clauses: 

  • The individual is no longer allowed to make public statements about the business.
  • Termination of the agreement or employment, with no pay.
  • Indemnification for any damage that may have been caused, or could be caused by the actions.
  • Termination of the agreement or employment with some pre-negotiated amount of pay.

A well drafted morals clause can help protect your business from a variety of situations, and puts an employee, endorser or spokesperson on notice from the beginning that there are certain expectations to be met. Once the clause is in place you’ll want to make sure that you have some mechanism in place for monitoring the comments, and social media, of the individual who agreed to the clause. You’ll also want to be on the lookout for how the public is responding to any comments the individual makes. Keep in mind that morals and values and what’s acceptable behavior changes over time, so you should provide for the opportunity to amend the morals clause to reflect any of these changes. 


Have questions about morals clauses, contracts in general or want to discuss any legal or risk management questions? Contact us to schedule a free consultation. 



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