Morals Clauses: Why 'Exonerated' Celebrities are still 'Fired'

Posted by Terri Williams on  December 30, 2024

Why do companies such as AT&T, H&M, NBC, ABC, and the Milk Processor Education Program have the right to do this? Usually, these companies are permitted to terminate an agreement with talent based on actions like those of Marv Albert, Mel Gibson, Tiger Woods and the Olsen twins by invoking what is commonly known as a morals clause in their contracts with talent.

The purpose of a morals clause in an agreement is to protect the contracting company from the immoral behavior of the talent with whom it contracts. But this begs an obvious question: what constitutes moral or immoral behavior? The concept of moral behavior, as it relates to the law, is constantly in a state of flux as it reacts to changes in community standards and incorporating natural evolutionary advancements associated with the growth and development of a society.

By their very characteristics, morals are subjective concepts and are often governed by the prevailing thoughts of the time. That being the case, there is no single definition of “moral” or “immoral” conduct, and when disputes arise between parties, courts are often left to decide what the parties intended the terms of the moral clause to mean.

Given the volatile state in which “moral” behavior is defined, it is rather difficult to discern a basis for “morality” or “moral behavior” applicable in all circumstances. This is especially true when one considers the factual sensitivity of making such evaluations. At the very least, moral behavior refers to behavior that compares to an existing code of conduct put forward by society. In the context of talent, there emerges a divide between what is “immoral behavior” and what is merely unusual.

Why Have a Moral Turpitude Clause?

These contractual provisions or clauses have become standard practice in advertising, motion pictures, and television agreements and are generally upheld by the courts. Morals clauses give sponsors the right to terminate a talent contract if the talent fails to conduct himself according to the moral standards of society, thereby tarnishing his own reputation and the reputation of his employer. For example, a contract could have a morals clause allowing for the termination of the agreement if the hired talent is convicted of a drug offense. Upon the talent's conviction, the morals clause is triggered, and the talent's employer has the right to terminate the contract. 

A contractual provision that gives one contracting party the unilateral right to terminate the agreement, or take punitive action against the other party (usually an individual whose endorsement or image is sought) in the event that such other party engages in morally reprehensible behavior or conduct that may negatively impact his or her public image and, by association, the public image of the contracting company. 

Morals clauses are also commonly employed in agreements between corporations and their most talented executives, such as “C-level” executives. In one study of chief executive officer (“CEO”) employment contracts, it was found that of such contracts allowed the employing company to terminate the employment contract for cause based on acts of moral turpitude.

Martha Stewart is but one example of a CEO having a morals clause in her employment agreement. Stewart's contract with Martha Stewart Living Omnimedia Inc. contained a morals clause as part of the definition of “cause” for termination, although Stewart could not be sued by the company for breach of contract if she violated the clause.

Ordinarily corporations include morals clauses in executive employment agreements. CEOs are often regarded as the face and primary representative of a company, and in some cases, the welfare of the company can be directly linked to the public image of the CEO. As such, it is easy to understand why a company would include a morals clause in its executive employment agreements to give itself the flexibility to disassociate the executive with the company in the event of the executive's damaging conduct.

The morals clause is not just for executives, a county Board of Supervisors accepted the resignation of a county administrator, after only a year on the job. The county has a clause that states in the event the an act involving moral turpitude, malfeasance, or dishonesty, then the county has no obligation to award the severance payment and benefits designated.

Why are celebs involved in a scandal not rehired?

It is implied in every contract of employment that employee will conduct himself with decency and propriety so that he will not injure the employer in his business. The morals clause in a contract binds the celebrity by an implied covenant on their part not to do anything which would prejudice or injure his employer. This can apply retroactively in civil contracts in regards to prior bad acts.

In May 2023, Matt Araiza was 'exonerated' when prosecutors declined to pursue criminal charges against the former Buffalo Bills rookie punter who was accused of raping a 17-year-old high school student. The event occurred in October of 2021 at a party where Araiza admitted to committing a statutory rape. The Buffalo Bills cut Araiza, who was a rookie, in August 2022, two days after he and two college teammates, Nowlin Ewaliko and Zavier Leonard, were accused of rape stemming from the 2021 incident.

Brandon Beane, the Buffalo Bill’s general manager stated, “We don’t know all the facts, and that’s what makes it hard, but at this time we think it is the best move for everyone to move on from Matt and let him take care of this situation.”

 As for the National Football League (NFL), discipline of players, including suspensions, is governed by the league’s personal conduct policy, which does not cover actions that took place before a player or other employee joined a team or league office. The league did not conduct an investigation.

The Bills can cut Araiza or any other player for conduct it deems detrimental to the team. The broad definition of turpitude covers many things. Araiza had signed a four-year contract worth nearly $3.9 million, with about $216,000 of that amount guaranteed. Araiza was recently signed by the Kansas City Chiefs. As far as other famous sex misconduct cases, Trevor Bauer was given an unprecedented two-season suspension without pay by baseball Commissioner Rob Manfred in 2022 for violating the league’s domestic violence, sexual assault and child abuse policy after a woman said Bauer beat and sexually abused her. An accusation the pitcher denied. 

An arbitration panel cut the suspension to 194 games, but Bauer was released by the Los Angeles Dodgers in January 2023. He spent last season with the Yokohama DeNA BayStars of Japan’s Pacific League. Bauer was not charged with any crime. Trevor Bauer was cleared to play in the Mexican League because he was not convicted for charges of sexual assault, according to the executive president for the Diablos Rojos club, Othón Díaz.

The Major League Baseball (MLB) morals clause provides the team's right to terminate a contract, or otherwise sanction a player, who has engaged in criminal or unseemly behavior. If the athlete is found to partake in actions that bring themselves, the club, organization, and their sponsors into disrepute, the club, organization or sponsor has the right to suspend or terminate the contract.

Bauer was first accused of sexual assault by a San Diego woman, Lindsey Hill, in 2021. Prosecutors declined to file charges, and Bauer filed a defamation lawsuit against Hill in 2022, saying they had engaged in “consensual rough sex.” The defamation case and a counterclaim from Hill were settled out of court, and Hill’s lawyer stated, "no money was exchanged between the parties in the settlement."

While criminal charges may not be pursued for varying reasons, the essential breach of the morals clause can preclude a reinstatement. By virtue of the contract the employee agrees that they will conduct themself with due regard to public conventions and morals and would not do anything which would tend to degrade themselves in society or bring them into public disrepute. This extends to behavior that would create contempt, scorn or ridicule, or that would tend to shock, insult or offend the community or public morals or decency or prejudice the industry in general. It is inarguable that statutory rape and deviant sexual activity or "rough sex" would not be actionable in court because it is rightly construed as immoral behavior. Finally, note that the immoral behavior need not be criminal to activate the morals clause, e.g. Tiger Woods' loss of endorsements for infidelity. Because of these player's behavior, they forfeit the contract, even if they are not charged or convicted criminally.

Cases of Note

Scott v. RKO Radio Pictures, Inc., 240 F.2d 87, 89 (9th Cir. 1957)

Action by former screen director against motion picture company for breach of unexpired written contract under which director was working at time of his discharge. The United States District Court for the Southern District of California, Central Division, Benjamin Harrison, J., entered judgment for company, and director appealed. The Court of Appeals, Chambers, Circuit Judge, held that director's discharge on ground that director had breached morals clause of the contract.

At time of his discharge following his participation as a witness in hearings before Congressional Committee on Un-American Activities and his conviction for refusal to answer Committee's questions, screen director was working for motion picture company under unexpired written contract which contained a “morals clause.”The director's discharge on ground that director was in breach was justified, and therefore, in absence of waiver of rights or condonation or excusing of the director's conduct, director could not recover on the contract.

Nader v. ABC Television, Inc., 150 F. App'x 54, 56 (2d Cir. 2005) 

Michael Nader (February 19, 1945 – August 23, 2021) was an American actor, known for his roles as Dex Dexter on the ABC primetime soap opera Dynasty from 1983 to 1989, and Dimitri Marick on the ABC daytime soap opera All My Children from 1991 to 2001, and in 2013. He also starred as Kevin Thompson in the soap opera As the World Turns from 1975 to 1978. Nader died at the age of 76 at his home, ten days after being diagnosed with an untreatable form of cancer.

On February 24, 2001, Nader was arrested and charged with one count of criminal sale of a controlled substance, cocaine and one count of resisting arrest. Although ABC had taken no adverse employment action on a previous occasion (August 22, 1997) when Nader had been arrested and charged with driving while intoxicated and resisting arrest, see McKenna Declaration, in response to this further arrest on February 24, 2001, ABC suspended Nader.

 On February 28, 2001, at a meeting attended, on the one hand, by Nader and his attorneys Zachary Flax and Joseph Stalonas and, on the other hand, by the president of the daytime division of ABC, Angela Shapiro, and an ABC in-house attorney, Tanya L. Menton, ABC informed Nader that he was under suspension “pending the outcome of that drug sale charge,” and that any further decision on his employment status would be based on a review of the outcome of this indictment. Nader states that he was further told “if these charges are not true, ABC would like Nader to come back to work and that ABC was “glad” that he was “going away tomorrow to pursue recovery” at a drug treatment facility in Hazelden, Minnesota.

Despite these statements, however, and despite Nader's admission on March 2, 2001 to a 28–day in-patient program at Hazelden, see McKenna Declaration,  ABC sent him a letter on March 16, 2001 formally terminating his employment on the ground that he had “breached the clear language and intent of paragraph 8 of the Standard Terms and Conditions,” i.e., the morals clause.

Nader's discrimination claims allege, in essence, that ABC both terminated him and failed to re-hire him because of his addiction to cocaine. Regarding termination, however, ABC's letter of March 16, 2001, expressly notified Nader that he was being terminated because he had breached the morals clause of his contract.

This was a facially legitimate reason for termination, because the morals clause permits ABC to terminate any “Artist” if “in the opinion of ABC, Artist shall commit any act or do anything which might tend to bring Artist into public disrepute, contempt, scandal, or ridicule, or which might tend to reflect unfavorably on ABC.” 

When ABC initially terminated his contract three weeks after his arrest, Nader was explicitly excluded from the scope of the ADA, as a current substance abuser. See 42 U.S.C. § 12114(a). In any event, even if Nader were protected by the disability discrimination laws and were able to make out a prima facie case, ABC fired him because of his breach of his contract's morals clause, and Nader has not made any showing that this legitimate non-discriminatory explanation is pretextual.