Hollywood celebrities have long been required to sign agreements containing “morality clauses.” These generally state that the celebrity will not engage in various activities or make various public statements that “materially damage or injure” the reputation of the film/entertainment studio and/or production company. The same has also long been true for sports celebrities. With the rise of internet-based “endorsers,” the use of morality clauses has seen a geometric increase in the last decade. Most of the time, the morality clause is one-way; that is, the brand or studio or team or online platform has the option of canceling the endorsement contract and ceasing payments if the celebrity violates the morality clause.

However, trends are showing an uptick in reverse morality clauses whereby the celebrities and endorsers can remove permission for the use of their names and likenesses if the brand or company or team engages in some socially odious behavior. As an example, Harvey Weinstein’s indictment for criminal sexual assault caused a number of actors and actresses to disassociate themselves from his production company. See New York Times report here. As noted in the report, many of the members of the board of directors resigned and “many actors, producers and writers have no interest in working either now or in the future for a studio that has become so tainted.” Note that morality clauses are not just for celebrities and endorsers anymore. Many companies are also requiring them for their high-profile employees like their CEOs and the Chair of the board of directors.

When considering one-way or reverse morality clauses, there are several important legal issues to consider. If you are being asked to sign a clause or are considering having employees/endorsers sign morality clauses, it is important to consult an experienced San Diego corporate attorney for advice and counsel. Among the issues are:

• Clear definitions of what behavior is expected
• Clear definitions of what behavior will result in termination of the endorsement contract
• At what point do payments cease?
• Clawback language for fees paid in advance
• And more

In addition to these, probably the most crucial portion of the morality clause, which should be subject to vigorous negotiation, is what publicity or disclosure or third party action will trigger the morality clause. Is “bad publicity” enough to trigger the clause? What is the definition of “bad publicity?” Are a few, or even thousands, of negative comments on social media sufficient? What if the publicity is merely online, but not on the television networks or in/on the major news services? A morality clause could be drafted to specify that the “bad publicity” must be “run” in, say, the LA Times. With sports celebrities, another set of issues is whether some sort of team or league discipline has been given (or threatened). Even with something like discipline, there are timing issues, since most rules and procedures allow for an internal appeal.

With respect to crimes, it is important to specify what types of crimes and also whether an arrest or conviction is needed before the clause is triggered. In older morality clauses, the phrase “a crime involving moral turpitude” was used. That is very vague and should be fully defined. Furthermore, given the multitude of unique circumstances in which morality clauses might be used, different sets of crimes might be relevant. For example, allegations of stock insider trading might not trigger a morality clause for a Hollywood celebrity, but most certainly would/should for the CEO of a Wall Street hedge fund.

As can be seen, morality clauses are complex and you need legal advice before you sign.

Contact San Diego Corporate Law

For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard provides a full panoply of legal services for San Diego and California businesses. Mr. Leonard can be reached at (858) 483-9200 or via email.

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