Contracting Correctness: A Rubric for Analyzing Morality Clauses

Washington and Lee Law Review Washington and Lee Law Review

Volume 74 Issue 1 Article 3

1-1-2017

Contracting Correctness: A Rubric for Analyzing Morality Clauses Contracting Correctness: A Rubric for Analyzing Morality Clauses

Patricia Sánchez Abril

University of Miami

Nicholas Greene

University of Miami

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Contracting Correctness: A Rubric for Analyzing

Morality Clauses

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Contracting Correctness: A Rubric for

Analyzing Morality Clauses

Patricia Sánchez Abril

∗

Nicholas Greene

∗∗

Abstract

Morality clauses give a contracting party the right to

terminate if the other party behaves badly or embarrassingly. A

curious product of twentieth-century Hollywood, these contract

clauses have traditionally been used to control the antics of

entertainers and athletes. The current politically-sensitive

historical moment, combined with the internet’s ability to

broadcast widely and permanently, has put everyone’s off-duty

speech, conduct, and reputation under the microscope. Media

reports detailing people’s digital falls from grace abound. For fear

of negative association, businesses are more attuned than ever to

the extracurricular acts of their agents and associates—and are

increasingly binding them to morality clauses that allow for

abrupt separations.

However, morality clauses have largely escaped judicial and

academic scrutiny. Perhaps due to the hefty bargaining power of

their traditionally famous parties, most courts have generally

found these clauses enforceable with fleeting analysis. Outside of

the sports and entertainment industries, academic literature on

the morality clause is scant.

We ignore morality clauses at our peril. Like non-compete

clauses, which suffer from well-documented overuse and

overbreadth, morality clauses can be socially harmful. Their

unrestricted use allows and invites unpredictability, bad faith,

and broad limitations on expression, privacy, and other liberties.

∗ Associate Professor of Business Law, University of Miami School of

Business Administration.

∗∗ Lecturer of Business Law, University of Miami School of Business

Administration.

4 74 WASH. & LEE L. REV. 3 (2017)

This is especially true when imposed on low-profile agents with

little bargaining power.

Unlike the well-trodden area of non-competes, there is no

uniform rubric for assessing whether and to what extent morality

clauses are enforceable, fairly imposed, and lawfully interpreted.

This Article addresses this gap, offering to courts and jurists alike

a five-factor test by which to determine the validity of morality

clauses in a world where reputation pervades and the line between

home and office is blurred.

Table of Contents

I. Introduction ........................................................................ 5

II. Morality Clauses: Taxonomy and Evolution ...................... 9

A. Taxonomy .................................................................... 10

1. Bad Behavior Clauses ........................................... 10

2. Reputational Impact Clauses ............................... 11

B. The Logic and Evolution of Morality Clauses ............ 12

1. Political Correctness and Sensitivity ................... 19

2. The Role of the Internet and Social Media ........... 25

3. Businesses’ Increased Political and

Values-Based Engagement ................................... 29

III. Legal and Policy Challenges to Morality Clauses ............ 32

A. Mutual Assent and Definiteness ................................ 36

B. Subjective Enforcement and Bad Faith ..................... 40

C. Concerns of Free Speech and Expression .................. 43

D. Bargaining Power and Unilaterality .......................... 46

E. Privacy Rights ............................................................ 48

IV. A Model Test for Morality Clauses ................................... 50

A. Nexus Between Misconduct and Business

Interest ....................................................................... 51

B. Degree of Meaning Transfer: What is the

Likelihood of Association? .......................................... 55

C. The Scope and Definiteness of the Restrictive

Clause ......................................................................... 58

1. Legal Behavior ......................................................

2. Prohibiting Speech ................................................ 60

D. Impact of Offending Behavior .................................... 62

CONTRACTING CORRECTNESS 5

1. Actual Occurrence ................................................. 62

2. Known or Likely to be Known .............................. 62

3. Likely to Cause Damage to the Imposing

Party ...................................................................... 63

E. Burden on the Restricted Party ................................. 64

1. Parties’ Relative Bargaining Power ..................... 64

2. Employee’s Reputation ......................................... 66

F. Application of the Model Test ..................................... 68

V. Conclusion ......................................................................... 74

I. Introduction

Since the beginning of time, people have sought to get out of

deals because they no longer wanted to be associated with the

other party in the public’s view. Maybe the offending party broke

the law, embarrassed himself, or stated an unpopular political

opinion. Or perhaps the desired rupture had more to do with a

soured relationship, bad faith, or even discrimination.

Morality clauses

generally grant a contracting party the

right to terminate if the other party behaves in an objectionable

manner or attracts disrepute.

These unilateral contract

provisions are usually broadly drafted, allowing for expansive

and often highly-subjective interpretations.

A product of the

twentieth century, morality clauses found their genesis with

1. Morality clauses are sometimes referred to as morals, moral turpitude,

public image, role model, personal conduct, behavioral or good conduct clauses.

For consistency, we refer to them as morality clauses throughout.

2. See Seth William Stern, The IRS’ Double-Bogey: Goosen v.

Commissioner Remains a Fairway to Characterize Endorsement Income for

Nonresident Alien Athletes in Garcia v. Commissioner, 20

JEFFREY S. MOORAD

SPORTS L.J. 605, 622 (2013) [hereinafter Stern, The IRS’ Double-Bogey]

(explaining how morality clauses protect endorsed parties in endorsement

contracts from damage to their reputation caused by the endorsee’s disreputable

behavior as well as from subsequent devaluation of the endorsement caused by

the endorsee’s damaged image).

3. See Fernando M. Pinguelo & Timothy D. Cedrone, Morals? Who Cares

About Morals? An Examination of Morals Clauses in Talent Contracts and What

Talent Needs to Know, 19 S

ETON HALL J. SPORTS & ENT. L. 347, 370 (2009)

[hereinafter Pinguelo & Cedrone, Morals? Who Cares About Morals?] (describing

the broad provisions preferred by employers such as companies and major

sports leagues).

6 74 WASH. & LEE L. REV. 3 (2017)

libertine actors in the Roaring Twenties

and have grown to near-

universality in the sports and entertainment industries today.

To date, almost all of the legal scholarship on morality

clauses focuses on high-profile personalities in

endorsement-related agreements.

However, these contract

4. See id. at 354 (explaining how declining film attendance rates,

attributed to actors’ off-screen misbehavior, led to early examples of morality

clauses in talent contracts).

5. See id. at 363–64 (describing the prevalence of morality clauses in the

contracts of professional athletes, entertainers, and corporate executives).

6. See generally id. (discussing morality clauses in talent agreements);

Daniel Auerbach, Morals Clauses as Corporate Protection in Athlete

Endorsement Contracts, 3

DEPAUL J. SPORTS L. & CONTEMP. PROBS. 1 (2005)

[hereinafter Auerbach, Morals Clauses as Corporate Protection] (discussing

morality clauses in athlete endorsement agreements); Porcher L. Taylor, III. et

al., The Reverse-Morals Clause: The Unique Way to Save Talent’s Reputation

and Money in a New Era of Corporate Crimes and Scandals, 28

CARDOZO ARTS &

ENT. L.J. 65 (2010) [hereinafter Taylor, III. et al., The Reverse-Morals Clause]

(discussing reverse-morals clauses in talent agreements); Adam Epstein, An

Exploration of Interesting Clauses in Sports, 21

J. LEGAL ASPECTS SPORT 5 (2011)

[hereinafter Epstein, An Exploration of Interesting Clauses in Sports]

(discussing morality clauses in professional sports); Paul A. Czarnota, Athlete

Privacy Rights and Endorsement Contracts: An Analysis of U.S., U.K., and

Australian Law, 11

VA. SPORTS & ENT. L.J. 460 (2012) (same); Joshua S.E. Lee &

Jaimie K. McFarlin, Sports Scandals from the Top-Down: Comparative Analysis

of Management, Owner, and Athletic Discipline in the NFL & NBA, 23

JEFFREY

S. MOORAD SPORTS L.J. 69 (2016) (same). Morality clauses have been a popular

topic for student notes and practitioner literature. See generally Stern, supra

note 2 (discussing morality clauses in professional sports); Noah B. Kressler,

Using the Morals Clause in Talent Agreements: A Historical, Legal and Practical

Guide, 29

COLUM. J.L. & ARTS 235 (2005) [hereinafter Kressler, Using the Morals

Clause] (discussing morality clauses in talent agreements); Andrew Zarriello, A

Call to the Bullpen: Alternatives to the Morality Clause as Endorsement

Companies’ Main Protection Against Athletic Scandal, 56

B.C. L. REV. 389 (2015)

(discussing morality clauses in athletic endorsement agreements); Kira N.

Buono, Athletes Sacked by Moral Turpitude Clauses: Presumed Guilty Unless

Proven Innocent, 41

NEW ENG. J. ON CRIM. & CIV. CONFINEMENT 367 (2015)

[hereinafter Buono, Athletes Sacked by Moral Turpitude Clauses] (discussing

morality clauses in professional sports); Caroline Epstein, Morals Clauses: Past,

Present and Future, 5 N.Y.U.

J. INTELL. PROP. & ENT. L. 72 (2015) [hereinafter

Epstein, Morals Clauses] (discussing morality clauses in entertainment

industries); Sarah D. Katz, Note, “Reputations . . . A Lifetime to Build, Seconds

to Destroy”: Maximizing the Mutually Protective Value of Morals Clauses in

Talent Agreements, 20

CARDOZO J. INT’L & COMP. L. 185 (2011) [hereinafter Katz,

Note, Reputations] (discussing morality clauses in talent agreements); Lauren

Rosenbaum, 140 Characters or Less: A Look at Morals Clauses in Athlete

Endorsement Agreements, 11

DEPAUL J. SPORTS L. & CONTEMP. PROBS. 129

(2015) [hereinafter Rosenbaum, 140 Characters or Less] (discussing morality

clauses in athletic endorsement agreements); Nathan Law, Manufacturing a

CONTRACTING CORRECTNESS 7

clauses have slowly and quietly found their way into contracts

and enforceable employee handbooks at all levels.

As one author

put it, “any talented individual who is or may become associated

with a company or organization in the minds of the public is

likely to have a morals clause included in his or her contract.”

And given the ubiquity of social media and the ease and

permanence of digital information, virtually anyone can become

associated with a company or organization in the minds of the

public. Authors, teachers, executives, board members, donors,

franchisors, and even rank-and-file employees are often subject to

contractual restrictions on off-duty behavior and potential

ensuing embarrassment.

Morality clauses have generally been held to be valid and

enforceable as applied to high-profile figures.

One could rightly

argue that the precept of freedom of contract allows parties the

latitude to bargain and create the terms of their own agreements.

Moreover, few can dispute the laudable ends of curtailing

someone’s right to behave badly.

However, it does not follow that these curious contract

clauses should escape scrutiny. Any contract clause that broadly

and vaguely restricts civil liberties deserves close inquiry,

Run: How Major League Baseball Can Use the Morals Clause to Clean Up

Baseball, 48

J. MARSHALL L. REV. 539 (2015) (discussing morality clauses in

professional baseball); Sarah Osborn Hill, How to Protect Your Brand When

Your Spokesperson Is Behaving Badly: Morals Clauses in Spokesperson

Agreements, 57

FED. LAW. 14 (2010) (discussing morality clauses in endorsement

agreements).

7. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 365–66 (describing morality clauses for models, authors, multimedia

designers, and others).

8. Id. at 366.

9. Some professions charged with public trust and safety have morality

requirements made explicit by statute or governing rules. Lawyers are an

obvious example. Other examples include air transport pilots, who are required

by the Federal Aviation Regulations to maintain “good moral character.” 14

C.F.R. § 61.153(c). Police officers are another example, and are required by state

law to maintain good moral character generally. See, e.g., F

L. STAT. § 943.13(7)

(2013). These examples are beyond the scope of this Article, as they are not

contractual in nature.

10. See R

ESTATEMENT (SECOND) OF AGENCY § 380 (AM. LAW INST. 1958)

(discussing an agent’s duty not to bring disrepute upon the principal); Taylor,

III. et al., supra note 6, at 105 n.237 (describing the enforceability of morality

clauses against television actors, directors, and screenwriters).

8 74 WASH. & LEE L. REV. 3 (2017)

especially when imposed on parties with little bargaining power.

Non-compete clauses, which restrain trade in the name of a

principal’s business interest, suffer from similar overuse and

overbreadth.

Both clauses have gained popularity in the modern

business environment, as employers grasp for more control in a

globalized and interconnected world.

Unlike morality clauses,

however, the law of non-competes is well-trodden—their use is

strictly regulated by state legislatures and examined by courts

with well-established tests for their validity.

Recent reports of

their overuse have even elicited White House response.

Morality clauses, on the contrary, have been largely ignored.

There is much that current law leaves unanswered. Under what

circumstances should a court invalidate a morality clause? Are

the current rules—formulated throughout almost a century of

cases about famous people—applicable to a clerk, a product

manager, or a baggage handler? In the age of social media and

political correctness, how should courts measure the dauntingly

slippery concepts of “public disrepute” or “public scandal”? When

is enforcing a morality clause necessary for protecting a

legitimate business interest? When is it simply a pretext for bad

faith or discrimination?

A review of the extant case law and literature reveals an

obvious gap in this highly-subjective area of contract law—there

11. See Jonathan L. Israel, State Attorneys General on the Attack Against

Noncompete Overuse, N

AT’L L. REV. (Aug. 15, 2016), http://www.nat

lawreview.com/article/state-attorneys-general-attack-against-noncompete-overuse

(last visited Mar. 4, 2017) (describing enforcement reactions against the overuse

of non-compete agreements) (on file with the Washington and Lee Law Review).

12. See Epstein, An Exploration of Interesting Clauses in Sports, supra note

6, at 78

(explaining the enhanced demand for morality clauses in the modern era

of social media and reduced privacy).

13. See generally Michael J. Garrison & John T. Wendt, The Evolving Law

of Employee Noncompete Agreements: Recent Trends and an Alternative Policy

Approach, 45 A

M. BUS. L.J. 107 (2008) (providing an overview of state and

federal systems of regulating non-compete agreements).

14. See generally Non-Compete Agreements: Analysis of the Usage, Potential

Issues, and State Responses, T

HE WHITE HOUSE (May 2016),

https://www.whitehouse.gov/sites/default/files/non-competes_report_final2.pdf

(“These agreements currently impact nearly a fifth of U.S. workers, including a

large number of low-wage workers. This brief delineates issues regarding

misuse of non-compete agreements and describes a sampling of state laws and

legislation to address the potentially high costs of unnecessary non-competes to

workers and the economy.”).

CONTRACTING CORRECTNESS 9

is no uniform rubric for assessing whether and to what extent

morality clauses are enforceable, fairly imposed, and lawfully

interpreted.

This Article proposes to address this gap, offering to courts

and jurists alike an organizational lens through which to analyze

morality clauses. Part II provides an overview of the history and

justifications of morality clauses. It also discusses the impact of

the democratization of information flow on the market for

morality clauses. The internet, and particularly social media, has

expanded the reach of the average person’s speech and behavior.

Any individual with company ties can ostensibly affect a

company’s reputation negatively, at least by association. A second

aggravating factor affecting the implementation and

interpretation of modern morality clauses is the current

sensitivity in public discourse, commonly referred to as political

correctness. Part III of the Article discusses the legal and public

policy issues inherent in morality clauses, especially as applied to

non-public figures. In Part IV, we present a multi-factor test to

ascertain to what extent morality clauses are enforceable. Each

factor of the proposed analysis is buttressed by established legal

principles and social science. Looking at morality clauses through

the lens of this five-pronged analysis will allow for their more

efficient, balanced, and just use and enforcement as against a

variety of contracting parties.

II. Morality Clauses: Taxonomy and Evolution

A “morality clause”

is a contractual provision that gives one

contracting party (usually a company) 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

reprehensible behavior or conduct that may negatively impact his

or her public image and, by association, the public image of the

15. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 351 n.10 (“The term ‘morals clause’ . . . has several alternative

formulations. These analogous counterparts include . . . ‘morality clauses.’”

(quoting Daniel Auerbach, Morals Clauses as Corporate Protection in Athlete

Endorsement Contracts, 3 D

EPAUL J. SPORTS L. & CONTEMP. PROBS. 1, 3 (2005))).

10 74 WASH. & LEE L. REV. 3 (2017)

contracting company.

Such clauses can prohibit a variety of

behaviors and consequences depending on the breadth of the

language used.

A. Taxonomy

For ease of reference, we will refer to two general types of

morality clauses: those prohibiting certain behavior outright

(“Bad Behavior clauses”) and those prohibiting the backlash or

reputational consequences of bad acts, sometimes measured by a

public outcry, scandal, or ridicule (“Reputational Impact

clauses”).

Although these terms are neither technical nor widely

used, they are helpful for our purposes in distinguishing the two

most common types of restrictions in morality clauses.

One

should also note that they are not mutually exclusive, as some

contracts may contain both prohibitions.

1. Bad Behavior Clauses

At their most narrow and defined, some morality clauses

contain outright prohibitions on certain unwanted behavior,

irrespective of the act’s impact or association.

For instance, a

narrowly drafted clause could cover behavior such as failing a

drug test, an arrest, or conviction of a crime.

Broader morality

16. Id. at 351.

17. See Rosenbaum, 140 Characters or Less, supra note 6, at 132

(explaining that morality clauses “cover illegal drug use, drug dependency,

criminal conduct, and public criticism injuring the athlete or endorser’s

reputation or the value of the endorser,” among a plethora of other behaviors).

18. See Katz, Note, Reputations, supra note 6, at 224–26 (providing a

comprehensive classification of the various examples of morality clauses in

different industries).

19. See id. at 189 (discussing the “inefficacy of the two morals clause

models currently used in U.S. and international talent agreements: (1) the

‘morality’ trigger; and (2) the ‘disrepute’ trigger”).

20. See id. at 218 (describing that talent agreements that use morality and

disrepute triggers fail to “maximize the protective value of morals clauses”).

21. See id. at 202 (stating that “during the heyday of the Hollywood studio

system,” standard contracts encompassed basically everything pursuant to a

contract signee’s life).

22. See id. at 202–03 (discussing that a clause prohibiting interracial

CONTRACTING CORRECTNESS 11

clauses may encompass any conduct that is outside of public

morals or decency or acceptable social norms.

One example is found in the 1918 case of Ackerman v.

Siegel

—the earliest reported morality clause case.

In this case,

an employer included a provision in an employee’s written

contract that simply prohibited the employee’s “bad behavior or

fast living.”

When the employer discovered that the employee

secretly charged an extra fee to customers, the employer

terminated the contract.

The employee brought a claim for

unlawful discharge, and the New York Supreme Court found that

the employer rightfully terminated the agreement under the

morality clause.

2. Reputational Impact Clauses

Instead of forbidding certain definite acts or, much more

generally—indecency or bad behavior at large—some morality

clauses are even less self-defining. That is, the act triggering

termination is not measured by its own substance, but rather by

the effect that it produces in the community, or, more specifically,

on the other contracting party.

These clauses generally contain

language prohibiting acts that offend the community, or that

reflect unfavorably on either of the contracting parties

or bring

dating once existed).

23. See Stern, The IRS’ Double-Bogey, supra note 2, at 622 (discussing

clauses concerning athletes who compete in tournaments, such as clauses

reflecting that athlete’s image and mandatory attendance of particular

tournaments).

24. 170 N.Y.S. 522 (App. Term 1918).

25. See id. at 523 (“The conduct of the plaintiff in soliciting the alleged

commission was certainly behavior tending to imperil the morals and success of

defendant’s shop.”).

26. Id. at 522.

27. Id. at 522–23.

28. Id. at 523.

29. See Katz, Note, Reputations, supra note 6, at 213 (discussing actor

Michael Nader’s suit against ABC when ABC terminated Nader’s contract

because of his arrest for selling cocaine to an undercover police officer that ABC

claimed tainted its programs (citing Nader v. ABC Television, Inc., 150 Fed.

App’x 54, 55 (2d Cir. 2005))).

30. See Rosenbaum, 140 Characters or Less, supra note 6, at 132 (“In

12 74 WASH. & LEE L. REV. 3 (2017)

the offending party “into public disrepute, contempt, scandal, or

ridicule, or tend to shock, insult or offend the majority of the

consuming public or any protected class or group thereof.”

public outcry, scandal or adverse reaction is evidence that the act

has negatively affected the reputation of one or both parties.

Other contracts adopt a broader approach, requiring no

evidence of a scandal, only a unilateral assessment that

reputational harm has occurred.

The morals clause found in

NFL player contracts is an example: it allows a team to

unilaterally fire a player if he has engaged in conduct deemed to

adversely affect, or reflect on, the team.

Based on the language,

it is plausible to conclude that a team could terminate a player if

in its sole discretion it believes his behavior could adversely affect

or reflect on the team, regardless of actual damage.

B. The Logic and Evolution of Morality Clauses

However worded or classified, the logic behind morality

clauses is relatively straightforward and intuitive: organizations

want to be able to disassociate from reputational hazards for fear

of the negative spillover effect caused by an actor’s bad

general, a morals clause may include behavior that ‘(a) is not ‘with due regard’

to ‘social conventions and public morals and decency’; (b) ‘shocks, insults or

offends’ the community; or (c) ‘reflects unfavorably’ on the person, the financier,

the producer, the employer, or the distributor.” (quoting T

HOMAS D. SELZ,

MELVIN SIMENSKY & PATRICIA NASSIF ACTON, ENTERTAINMENT LAW 3D: LEGAL

CONCEPTS AND BUSINESS PRACTICES § 9:107 (2013))).

31. Mendenhall v. Hanesbrands, Inc., 856 F. Supp. 2d 717, 720 (M.D.N.C.

2012).

32. See id. at 719–23 (discussing that due to Mendenhall’s tweets, he

received public scrutiny regarding the words that he was putting on the

internet).

33. See Auerbach, Morals Clauses as Corporate Protection, supra note 6, at

10 (“The parties should determine ahead of time whether a unilateral decision

on the part of the company is sufficient for termination.”).

34. See NAT’L FOOTBALL LEAGUE & NAT’L FOOTBALL LEAGUE PLAYERS ASS’N,

COLLECTIVE BARGAINING AGREEMENT 260 (2011), https://nfllabor.files.

wordpress.com/2010/01/collective-bargaining-agreement-2011-2020.pdf (explaining

that under § 11 of the NFL Player Contract, a football club may terminate the

player contract “[i]f at any time, in the sole judgment of the Club . . . [the]

Player has engaged in personal conduct reasonably judged by the Club to

adversely affect or reflect on [the] Club . . . .”).

CONTRACTING CORRECTNESS 13

behavior.

The underlying assumption, of course, is that an

individual with ties to the organization—whether an official

endorser or an employee wearing the company uniform—

represents the organization in the public’s eyes.

Thus, their acts

and reputation are attributable to the company and its

products.

The power of association is well documented in philosophy

and psychology. Consumer behavior research also supports the

notion. In the late 1980s, consumer studies professor, Grant

McCracken, articulated this phenomenon as “meaning

transfer.”

His theory suggests that an endorser’s cultural

meaning flows through consumer goods and ultimately transfers

to the consumer’s life.

That is, celebrity endorsers carry cultural

meanings (i.e., allusions to status, class, gender, lifestyle, and

values).

The advertising system enables a metaphoric

transference of these meanings to products.

Consumers then

“take possession of these meanings and put them to work in the

construction of their notions of self and the world.”

More recent

35. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 352 (describing that morality clauses “protect the contracting company

from the immoral behavior of the talent with whom it contracts” (citing Noah B.

Kressler, Using the Morals Clause in Talent Agreements: A Historical, Legal and

Practical Guide, 29

COLUM. J.L. & ARTS 235, 235 (2005))).

36. See id. at 349 (“[T]oday’s increasingly public society, where the

proliferation of tabloids, celebrity gossip blogs, and news magazines inundate

the public with information on talent’s personal lives . . . .”).

37. See Katz, Note, Reputations, supra note 6, at 191 (“[T]he non-talent’s

industry determines the manner in which the talent’s image will be used to

generate beneficial value for non-talent . . . .”).

38. Grant McCracken, Culture and Consumption: A Theoretical Account of

the Structure and Movement of the Cultural Meaning of Consumer Goods, 13 J.

CONSUMER RES. 71, 74 (1986) [hereinafter McCracken, Culture and

Consumption].

39. See id. at 71 (“Cultural meaning flows continually between its several

locations in the social world, aided by the collective and individual efforts of

designers, producers, advertisers, and consumers.”).

40. See id. at 76 (“Motion picture and popular music stars, revered for their

status, their beauty, and sometimes their talent . . . . [I]nvent and deliver a

species of meaning that has been largely fashioned from the prevailing cultural

coordinates established by cultural categories and cultural principles.”).

41. See id. (“These opinion leaders are permeable to cultural innovations,

changes in style, value, and attitude, which they then pass along to the

subordinate parties who imitate them.”).

42. Grant McCracken, Who Is the Celebrity Endorser? Cultural

14 74 WASH. & LEE L. REV. 3 (2017)

elaborations on this theory suggest that negative associations are

more likely to transfer to a brand than positive ones.

It is

through these natural associations that consumers come to

approve or reject products as symbolic of their own lives.

stands to reason then, that a company representative who

behaves badly will engender negative associations in consumers’

minds, and these will likely be reflected onto the company’s

product.

It was exactly this fear of a negative association—and impact

on the bottom line—that became the first major catalyst for the

use of morality clauses in the early 1920s.

As the media

increasingly reported on the debaucherous behavior of Hollywood

stars, the American public began to condemn their allegedly wild

lifestyles.

As ticket sales decreased considerably, the movie

industry blamed the actors’ behavior and the subsequent media

reports for their downturn and, as a result, started including Bad

Behavior Clauses in movie contracts.

Foundations of the Endorsement Process, 16 J. CONSUMER RES. 310, 314 (1989).

43. See Margaret Campbell & Caleb Warren, A Risk of Meaning Transfer:

Are Negative Associations More Likely to Affect Transfer Than Positive

Associations?, 7 SOC. INFLUENCE & CONSUMER BEHAV. 172, 172 (2012) (“Three

studies show that brands are more likely to acquire the negative than the

positive personality traits associated with a celebrity endorser and that negative

associations transfer even under conditions that inhibit the transfer of positive

associations.”).

44. See id. (“[B]rands acquire associations through links with other cultural

entities, including . . . products . . . .”).

45. See Buono, Athletes Sacked by Moral Turpitude Clauses, supra note 6,

at 378 (“The moral turpitude clause originated during the Roaring ‘20s in

Hollywood, California.” (citing Mark Kesten, Reputation Insurance: Why

Negotiating for Moral Reciprocity Should Emerge as a Much Needed Source of

Protection for the Employee, C

ORNELL HR REV. (Nov. 23, 2012),

http://www.cornellhrreview.org/reputation-insurance-why-negotiating-for-moral-reci

procity-should-emerge-as-a-much-needed-source-of-protection-for-the-employee/

(last visited Mar. 4, 2017) (on file with the Washington and Lee Law Review))).

46. See id. at 378–79 (discussing that since there was an “increase in the

media’s interest in reporting” the illicit acts of movie stars, certain movie

studios “promulgated morals clauses” to “shield” themselves from imputed

negative reputation).

47. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 354 (“Much of the focus of the press was on the individual movie stars,

whose ‘garish and scandalous’ behavior was often blamed for declines in film

attendance.” (quoting Auerbach, Morals Clauses As Corporate Protection, supra

note 6, at 3)).

CONTRACTING CORRECTNESS 15

In 1921, shortly after signing a three million dollar contract

with Paramount Pictures, comedian Roscoe “Fatty” Arbuckle was

accused of the rape and murder of a young female guest of one of

his parties.

The state brought charges after a witness told police

she had heard screaming coming from a room in which Arbuckle

had gone with the guest.

Although he was later acquitted of the

crimes, his public image was irreparably damaged.

As a result,

the benefit Paramount stood to gain from his lucrative contract

diminished greatly.

The case has since been said to have

inspired production companies to include morality clauses in

talent agreements.

In fact, later that same year, Universal

Studios began inserting the following clause into all of its actor

and director contracts:

The actor (actress) agrees to conduct himself (herself) with due

regard to public conventions and morals and agrees that he

(she) will not do or commit anything tending to degrade him

(her) in society or bring him (her) into public hatred, contempt,

scorn or ridicule, or tending to shock, insult or offend the

community or outrage public morals or decency, or tending to

the prejudice of the Universal Film Manufacturing Company

or the motion picture industry. In the event that the actor

(actress) violates any term or provision of this paragraph, then

the Universal Film Manufacturing Company has the right to

cancel and annul this contract by giving five (5) days’ notice to

the actor (actress) of its intention to do so.

48. See Epstein, An Exploration of Interesting Clauses in Sports, supra note

6, at 76 (discussing that Fatty hosted a party where a female guest was “found

severely injured in his hotel suite,” and that she later died).

49. Kressler, Using the Morals Clause, supra note Error! Bookmark not

defined., at 236 (citing Sam Stoloff, Fatty Arbuckle and the Black Sox: The

Paranoid Style of American Popular Culture, 1919–1922, in H

EADLINE

HOLLYWOOD: A CENTURY OF FILM SCANDAL 56 (Adrienne L. McClean & David A.

Cook eds., 2001)).

50. See id. (“Public opinion quickly turned against the comedian as

newspapers nationwide gave the story front-page coverage.” (citing ROBERT H.

TANLEY, THE CELLULOID EMPIRE: A HISTORY OF THE AMERICAN MOVIE INDUSTRY

180 (Hastings House Pub. 1978))).

51. Id.

52. See id. at 237 (discussing how studios started adding morality clauses

“to quickly disassociate from” scandalous behaviors deemed reprehensible by the

public and media).

53. Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note 3,

at 355 n.30.

16 74 WASH. & LEE L. REV. 3 (2017)

The next major historical phase for morality clauses occurred

between the late 1940s and early 1960s. At this time, the United

States was in the midst of the McCarthy era—a period known for

its extreme fear and condemnation of Communism.

In 1947, as

part of the government’s phobia of the far left, the congressional

House Un-American Activities Committee (HUAC) held nine days

of hearings to investigate the alleged Communist infiltration of

Hollywood’s motion picture industry.

Throughout the hearings,

HUAC cited ten “unfriendly” witnesses for contempt of Congress

when they refused to answer questions relating to whether they

had ever associated with the Communist party.

No one wanted to be associated with an alleged Communist.

Studios fired the witnesses based on their alleged involvement in

Communist activities.

Subsequently, three of the witnesses

sued their respective employers, alleging that their terminations

were based on unjustly expansive readings of the morality

clauses in their contracts.

One was Lester Cole, who had been

employed as a screenwriter for Loew’s, Inc., doing business as

Metro-Goldwyn-Mayer films (MGM).

Cole’s employment was

pursuant to a written agreement, which included the following

morality clause:

The employee agrees to conduct himself with due regard to

public conventions and morals, and 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

54. See Robert M. Lichtman, McCarthyism and the Court: The Need for “an

Uncommon Portion of Fortitude in the Judges,” 39 J. SUP. CT. HIST. 107, 108

(2014) (“The Court’s McCarthy era, which (in this reading) spanned the October

1949 through 1961 Terms . . . .”).

55. Id. at 109.

56. See Loew’s, Inc. v. Cole, 185 F.2d 641, 645 (9th Cir. 1950) (“When Cole

was called to the stand he was asked ‘Are you now or have you ever been a

member of the Communist Party?’ The statement he then made was interpreted

by the committee as a refusal to answer . . . .”).

57. See id. (stating that after Cole was called as a witness he “was sent a

notice of suspension” that discussed his refusal “to answer certain questions put

to [him] by such committee”).

58. See id. at 641 (summarizing that plaintiff did not believe that his

testimony warranted a violation of the employment agreement).

59. Id. at 644–45.

CONTRACTING CORRECTNESS 17

the producer or the motion picture, theatrical or radio industry

in general.

After Cole was cited for contempt of Congress, MGM

terminated his agreement.

In his breach of contract case, the

Ninth Circuit held that MGM properly terminated Cole under the

agreement for two reasons. First, the court concluded that Cole’s

misdemeanor conviction was within the scope of the morality

clause.

Second, the court reasoned that Cole’s refusal to answer

questions regarding his alleged association with Communists

could be—and was publicly—interpreted as affirming his belief in

Communism.

The Ninth Circuit concluded that because “a large

segment of the public did look upon Communism and

Communists as things of evil, . . . it cannot be said, as a matter of

law, that in acting as he did Cole did not breach [the]

agreement.”

The Ninth Circuit subsequently heard cases from two more of

the ten convicted witnesses who were employed and terminated

pursuant to very similar morality clauses.

In each case, the

court affirmed its reasoning in Cole and found that the alleged

Communists violated their employment contracts and were

rightfully terminated.

60. Id. at 645.

61. See id. (“Cole was . . . sent a notice of suspension reading as follows:

‘Dear Mr. Cole . . . you refused to answer certain questions put to you . . . . By

your failure to answer these questions . . . . [T]his is to notify you that we have

elected to suspend your employment . . . .’”).

62. Se id. at 648 (“We think it rather elementary that one who, for

whatever motive, chooses to conduct himself in such manner as to be guilty of a

misdemeanor as serious as this one can hardly be said to be doing so ‘with due

regard to public conventions.’”).

63. See id. at 649 (“We think that a jury might well find as a fact that the

natural result of Cole’s refusal to say whether he was . . . a member of the

Communist party . . . was for the purpose of concealing his actual membership

in the party.”).

64. Id.

65. See Scott v. RKO Radio Pictures, Inc., 240 F.2d 87, 91 (9th Cir. 1957)

(“We are confident that the morals clause in Scott’s contract was no weaker from

management’s position than Lardner’s. If there be shades of the two, Scott’s

clause was the stronger or stricter.”); Twentieth Century-Fox Film Corp. v.

Lardner, 216 F.2d 844, 848 (9th Cir. 1954) (“One may observe that Lardner’s

contract said everything that Cole’s said and a little more.”).

66. See Scott, 240 F.2d at 91 (citing both Cole’s and Lardner’s contracts, the

court went on to say that an “opposite result in two companion cases so nearly

18 74 WASH. & LEE L. REV. 3 (2017)

In more recent years, morality clauses have become de rigeur

in endorsement agreements involving advertisers, television

personalities, movie stars, models, authors, and athletes.

While

a 1997 survey found that less than half of all endorsement

contracts included morals clauses, in 2003 that number had risen

to at least 75%.

The National Football League, National

Basketball Association, National Hockey League, and Major

League Baseball now all have standard player agreements that

include morality clauses.

The increasing popularity of morality clauses has spread

beyond the realm of the sports and entertainment industries and

into the corporate world.

Today, high-level corporate officers

have also become frequent subjects of media spotlight.

One

recent study found that of 375 CEO employment contracts, 271

included such clauses.

Further, moral turpitude has become one

of the most commonly listed reasons for a company terminating a

CEO.

alike would discredit the law”); Lardner, 216 F.2d at 850 (“The law of this circuit

having been established by Cole’s case . . . it is appropriate that the implication

of the same condition be made here.”).

67. See Auerbach, Morals Clauses as Corporate Protection, supra note 6, at

3 (“As important as the selection and negotiation process is for companies, they

can never be entirely certain that an endorser’s image is bulletproof. To hedge

against much of this risk, corporate employers are more often insisting on

stricter contractual protections, primarily through the inclusion of so-called

‘morals clauses.’”).

68. Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note 3,

at 356.

69. Id. at 356–57.

70. See id. at 364 (“Morals clauses are also commonly employed in

agreements between corporations and their most talented executives, such as

‘C-level’ executives.”).

71. See Patricia Sanchez Abril & Ann M. Olazabal, The Celebrity CEO:

Corporate Disclosure at the Intersection of Privacy and Securities Law, 46 H

OUS.

L. REV. 1545, 1551 (2010) (“We posit that it is the confluence of three historical

trends that has thrust CEOs onto center stage: higher levels of investment by

average folk, dramatically increased availability of detailed personal

information, and the reemergence of controversial business issues in popular

debate.”).

72. Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note 3,

at 364 (citing Stewart J. Schwab & Randall S. Thomas, An Empirical Analysis

of CEO Employment Contracts: What Do Top Executives Bargain For?, 63 W

ASH.

& LEE L. REV. 231, 248 (2006)).

73. See Stewart J. Schwab & Randall S. Thomas, An Empirical Analysis of

CONTRACTING CORRECTNESS 19

The increasing incidence of morality clauses is no accident.

Several external factors, which we discuss in turn below, have led

to the rise of such clauses, as well as their use to terminate

agreements: (1) the rebirth of political correctness,

(2) the

ubiquity of social media and a reputation-centric economy,

and

(3) the increasing political and values-based engagement of

businesses.

1. Political Correctness and Sensitivity

In early 2016, professional boxer Manny Pacquiao ran for a

senate seat in his native Philippines.

During his campaign, he

publicly described homosexuals as “worse than animals.”

Subsequently, the sports apparel brand, Nike, terminated a

nearly eight-year endorsement agreement with Pacquiao—

presumably pursuant to a morality clause.

Today, offensive,

insensitive, and otherwise unpopular statements seem to land

celebrities and everyday people in hot water on a regular basis,

bringing about a long and widespread debate on tolerance, free

speech, and the merits of political correctness.

CEO Employment Contracts: What Do Top Executives Bargain For?, 63 WASH. &

LEE L. REV. 231, 248 (2006) (noting that 271 out of 375 terminations of

employment contracts were for moral turpitude, showing that it was part of the

“most common contractual bases” for terminating a CEO).

74. See infra Part II.B.1 (arguing that the rise in political correctness has

led to the promulgation of certain morality clauses that allow companies to

avoid guilt by association when such scrutiny arises).

75. See infra Part II.B.2 (discussing that due to the ability to reach a mass

audience much easier today via the internet and social media, which can have

severe dire consequences for both an employer and the employee).

76. See infra Part II.B.3 (stating that since businesses may also get

involved in political speech, and express values of their own, morality clauses

have been made to allow such business to terminate and separate from views or

speech that is antithetical to their stance on certain issues).

77. Darren Rovell, Nike Cuts Ties with Manny Pacquiao After Derogatory

Comments, ESPN (Feb. 18, 2016), http://espn.go.com/boxing/story/_/id/14793389/

nike-ends-endorsement-contract-manny-pacquiao (last visited Mar. 4, 2017)

[hereinafter Rovell, Nike Cuts Ties with Manny Pacquiao] (on file with the

Washington and Lee Law Review).

78. Id.

79. Id.

80. “Political Correctness” has been defined in multiple ways. See

20 74 WASH. & LEE L. REV. 3 (2017)

Political correctness has gained new momentum in the past

few years, as the American public has become increasingly

socially liberal. While a 1996 Gallup Poll found that just 27% of

Americans felt that the government should recognize same-sex

marriages, a 2016 poll found that number had risen to 61%.

But a rise in tolerance has also ushered a rise in sensitivity.

Society has become increasingly sensitive, with many now going

so far as to recognize “microaggressions” as a new form of

intolerance.

One article noted that racial discrimination now

often surfaces as microaggressions or “brief, every day, often

unconsciously delivered exchanges that send denigrating

messages to people of color because they belong to a racial

minority group.”

For example, a teacher telling a student of

Politically Correct, MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY (11th ed. 2015)

(agreeing with the idea that people should be careful to not use language or

behave in a way that could offend a particular group of people); see also Michael

Kilian, Warning on Political Correctness: Endowment Head Sees Liberal

McCarthyism on Campuses, C

HICAGO TRIB. (July 31, 1991),

http://articles.chicagotribune.com/1991-07-31/news/9103240473_1_humanities-

endowment-chairman-lynne-cheney-liberal (last visited Mar. 2, 2017) (“The

term ‘political correctness’ is used—especially by conservatives—to refer to a

liberal orthodoxy that includes support for affirmative action programs,

outlawing hate speech and downplaying European and male influence on

Western civilization.”) (on file with the Washington and Lee Law Review);

James B. Clark, III, Political Correctness and the First Amendment: An

Untenable Conflict, 8

NAT’L B. ASS’N MAG. 12, 12 (1994)

Though difficult to define precisely, “political correctness” might

accurately be described as a movement guided, indeed energized, by

the tenet that the traditional Western/European culture and values

are inherently oppressive and must be challenged at every

opportunity in an effort to lift all of its victims from their traditionally

oppressed state.

81. Marriage, G

ALLUP, INC., http://www.gallup.com/poll/117328/marriage.

aspx (last visited Mar. 4, 2017) (on file with the Washington and Lee Law

Review).

82. See Judith Shulevitz, In College and Hiding from Scary Ideas, N.Y.

TIMES (Mar. 21, 2015), http://www.nytimes.com/2015/03/22/opinion/sunday/

judith-shulevitz-hiding-from-scary-ideas.html (last visited Mar. 4, 2017)

(“[K]eeping college-level discussions ‘safe’ may feel good to the hypersensitive,

[but] it’s bad for them and for everyone else.”) (on file with the Washington and

Lee Law Review).

83. See Daniel Solórzano et al., Keeping Race in Place: Racial

Microaggressions and Campus Racial Climate at the University of California,

Berkeley, 23

CHICANO-LATINO L. REV. 15, 16 (2002) (explaining that “racial

microaggressions” are a “subtle form of racism” that “causes stress”).

84. Adina B. Appelbaum, Challenging Crimmigration: Applying Padilla

CONTRACTING CORRECTNESS 21

foreign descent that she speaks English well could potentially

make that student feel excluded, as the teacher’s underlying

assumption is that English was not her first language.

On one hand, political correctness promotes empathy and

equality for traditionally disenfranchised groups.

In the words

of one academic, “[w]e embrace the commitment to equity that

underlies political correctness, and we applaud the shifts in

norms wrought by that commitment.”

Indeed, the vast majority

of Americans would now likely agree that overt racism and

sexism are unacceptable, and it is common to object to violators of

these societal norms.

This public shaming of discrimination and

insensitivity has done a great deal for tolerance—or at least the

appearance thereof—in the workplace, politics, and the

entertainment industry, among other places.

While many

argue, likely correctly, that prejudice is still very much alive in

American culture,

something can be said for an era in which

Negotiation Strategies Outside the Criminal Courtroom, 6 GEO. J.L. & MOD.

CRITICAL RACE PERSP. 217, 241 (2014).

85. See Kathy Wyer, UCLA Ed Professors Carola Suárez-Orozco and

Daniel Solorzano Share Insights on Subtle, Often Unintentional Slights on Race,

Gender, Status, UCLA ED. & IS, (June 2, 2015),

https://ampersand.gseis.ucla.edu/micro aggressions-what-you-need-to-know/

(last visited Mar. 4, 2017) (“Oftentimes unconscious and automatic,

microaggressions (MAs) are brief, subtle verbal or non-verbal exchanges that

send denigrating messages to the recipient because of his or her group

membership (such as race, gender, age or socio-economic status.”) (on file with

the Washington and Lee Law Review).

86. See Paul Richard Kuehn, Is Political Correctness Good for Everyone?,

UBPAGES, http://hubpages.com/politics/Does-Being-Politically-Correct-Make-

Everyone-a-Winner (last updated Aug. 18, 2016) (last visited Mar. 4, 2017)

(detailing how, over the years, political correctness has manifested into “new

politically correct words” that are used “in referring to ethnic groups, races, jobs,

and people with disabilities”) (on file with the Washington and Lee Law

Review).

87. Robin J. Ely et al., Rethinking Political Correctness, 84 H

ARV. BUS. REV.

79, 80 (2006).

88. See Mike LaBossiere, Ad Baculum, Racism & Sexism, TALKING

PHILOSOPHY: THE PHILOSOPHERS’ MAG. BLOG (May 9, 2014),

http://blog.talkingphilosophy.com/?p=7932 (last visited Mar. 4, 2017) (“[O]vert

racism and sexism are regarded as unacceptable and those who make racist or

sexist claims sometimes find themselves the object of public disapproval.”) (on

file with the Washington and Lee Law Review).

89. See id. (“In some cases, making such claims can cost a person his job.”).

90. See Clark, supra note 80, at 13 (stating that the political correctness

movement embraces “simple-minded solutions to deep-rooted historical

22 74 WASH. & LEE L. REV. 3 (2017)

people are encouraged to be tolerant of others—at least at the

surface level.

Still, the political correctness movement has more than its

share of critics.

The term political correctness itself is often said

with a negative connotation, and it is frequently thought to refer

to language that is not just tolerant but excessively inoffensive.

Critics of political correctness argue that simply using different

words in everyday discourse does not solve the deep-rooted

problems of marginalized groups.

Additionally, these skeptics

claim, perhaps accurately, that by publicly demonizing the

politically incorrect, proponents of the movement leave little room

for dissent.

The political correctness movement has also been

chastised as conflicting with the spirit of the First Amendment—

that optimal solutions are the result of free public debate and the

uninhibited exchange of ideas.

problems”); Alicia Luke, Employment Discrimination Litigation: Social Science

Evidence and a Solution for the Problem of Presumptions, 29

TEMP. J. SCI. TECH.

& ENVTL. L. 75, 94 (2010) (“While it appears that discrimination is still alive and

well, it often manifests in a more nuanced kind of discrimination than that

which occurred during the Civil Rights Era.” (citing Reid v. Lockheed Martin

Aeronautics Co., 205 F.R.D. 655, 660 (N.D. Ga. 2001))).

91. See David Limbaugh, Political Correctness Doesn’t Only Threaten

Speech, P

EOPLE’S PUNDIT DAILY: INDEP. DATA JOURNALISM (Sept. 20, 2016),

https://www.peoplespunditdaily.com/opinion/2016/09/20/political-correctness-

doesnt-threaten-speech-2/ (last visited Mar. 4, 2017) (explaining that political

correctness not only adversely affects free speech, but race relations on college

campuses and the messages that it sends) (on file with the Washington and Lee

Law Review).

92. See Jonathan Chait, Not a Very P.C. Thing to Say, N.Y.

MAG.: DAILY

INTELLIGENCER/NAT’L INT. (Jan. 27, 2015, 8:00 AM), http://nymag.com/daily

/intelligencer/2015/01/not-a-very-pc-thing-to-say.html (last visited Mar. 4, 2017)

[hereinafter Chait, Not a Very P.C. Thing to Say] (discussing that individuals

such as Bill Maher, Ayaan Hirsi Ali, and Condoleeza Rice were the subject of

protests on college campuses based on their recently voiced opinions) (on file

with the Washington and Lee Law Review).

93. See Clark, supra note 80, at 13–14 (discussing that some of the

problems faced by marginalized groups are “poverty, lack of education and

societal ignorance”).

94. Id. at 12.

95. See id. (saying that political correctness is a new “insidious” challenge

to the First Amendment’s principles because “it has allied itself” with the First

Amendment’s traditional friends: “the poor, the downtrodden and the

different”).

CONTRACTING CORRECTNESS 23

Regardless of one’s personal philosophy on political

sensitivity and correctness, it is inarguable that the movement is

supported by a large and vocal portion of the American public and

that refusal to conform can lead to serious economic

consequences.

Consider once-beloved A-list actor turned

infamous anti-Semite Mel Gibson.

In 2006, Gibson was arrested

by a Los Angeles Sherriff’s Department Officer for driving under

the influence of alcohol.

During his arrest, a drunken,

belligerent Gibson demanded to know whether the officer was

Jewish and alleged that “the Jews are responsible for all the wars

in the world.”

That police report was made public, and Gibson

has since landed very few movie roles and has struggled to escape

the stigma related to those comments.

100

Or recall former Los

Angeles Clippers owner Donald Sterling, who was nationally

scorned after a recording was made public in which he

complained to his girlfriend that she spent too much time

associating with black people.

101

Sterling’s statements

96. See Conor Friedersdorf, Stripping a Professor of Tenure Over a Blog

Post, THE ATLANTIC (Feb. 9, 2015), https://www.theatlantic.com/education/

archive/2015/02/stripping-a-professor-of-tenure-over-a-blog-post/385280/ (last

updated Feb. 10, 2015) (last visited Mar. 2, 2017) (discussing a Marquette

professor that had his tenure terminated when he wrote a blog post pursuant to

a discussion between a student and another professor regarding gay marriage)

(on file with the Washington and Lee Law Review).

97. See Allison Hope Weiner, Mel Gibson Apologizes for Tirade After Arrest,

N.Y.

TIMES (Jul. 30, 2006), http://www.nytimes.com/2006/07/30/us/30gibson.html

(last updated Aug. 3, 2006) (last visited Mar. 2, 2017) (discussing Mel Gibson’s

anti-Semitic remarks) (on file with the Washington and Lee Law Review).

98. Id.

99. Id.

100. See Ethan Sacks, Mel Gibson’s Career Never Recovered, 10 Years After

Anti-Semitic Rant, D

AILY NEWS: ENT. (July 26, 2016, 6:00 AM),

http://www.nydailynews.com/entertainment/gossip/mel-gibson-career-recovered-

anti-semitic-rant-article-1.2725688 (last visited Mar. 2, 2017) (“Thursday marks

a decade since Gibson’s drunken rant . . . and his career still hasn’t recovered.”)

(on file with the Washington and Lee Law Review).

101. See Ben Golliver, NBA Investigating Clippers Owner Donald Sterling

for Alleged Racist Comments, S

PORTS ILLUSTRATED (Apr. 26, 2014),

http://www.si.com/nba/point-forward/2014/04/26/donald-sterling-nba-investigation-

racist-comments-clippers (last visited Mar. 4, 2017) [hereinafter Golliver, NBA

Investigating Clippers] (noting that Donald Sterling stated to V. Stiviano that

he did not want her to bring black people to the basketball games, including

former basketball player Earvin “Magic” Johnson) (on file with the Washington

and Lee Law Review).

24 74 WASH. & LEE L. REV. 3 (2017)

immediately became the center of attention for American news

outlets, after which the National Basketball Association banned

him for life.

102

In a society in which insensitivity and intolerance are the

subjects of widespread public shaming, the individual perpetrator

is not the only party affected.

103

Associates of the politically

incorrect often receive immense pressure to denounce the

questionable behavior, or risk being perceived as condoning it.

104

To avoid such guilt by association, companies are quick to

distance themselves from employees or corporate partners that

become the center of such scrutiny.

105

For example, in 2013,

celebrity chef Paula Deen lost a book deal as well as a contract

with the Food Network after admitting in a deposition that she

had used racist language and had tolerated racial jokes in the

past.

106

102. Dan Hirschhorn, NBA Bans Donald Sterling ‘For Life’ After Racist

Rant, TIME (Apr. 29, 2014), http://time.com/81170/donald-sterling-los-angeles-

clippers-nba-adam-silver/ (last visited Mar. 4, 2017) (on file with the

Washington and Lee Law Review).

103. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 352 (“The underlying purpose of a morals clause . . . is to protect the

contracting company from the immoral behavior of the talent with whom it

contracts.” (citing Noah B. Kressler, Using the Morals Clause in Talent

Agreements: A Historical, Legal and Practical Guide, 29

COLUM. J.L. & ARTS 235,

235 (2005))).

104. See Ten Athletes Who Lost Their Endorsements, F

OX SPORTS (Feb. 19,

2016, 2:07 AM), http://www.foxsportsasia.com/news/ten-athletes-lost-endorse

ments/ (last visited Mar. 4, 2017) (discussing Michael Phelps’s lost

endorsements when a video emerged on the internet of him smoking marijuana)

(on file with the Washington and Lee Law Review).

105. See John Santucci, The Companies that Have Dumped Donald Trump,

ABC

NEWS (July 4, 2015, 3:00 PM), http://abcnews.go.com/Politics/companies-

dumped-donald-trump/story?id=32162703 (last visited Mar. 4, 2017) (providing

that that companies such as Univision, NBC Universal, Macy’s, and others

separated ties with Trump when he made comments about Mexico during the

announcement of his running for President) (on file with the Washington and

Lee Law Review).

106. Katie Rogers, Paula Deen Faces Backlash Over ‘I Love Lucy’ Posting,

N.Y.

TIMES (July 8, 2015), http://www.nytimes.com/2015/07/09/nytnow/paula-

deen-faces-backlash-over-i-love-lucy-posting.html (last visited Mar. 4, 2017) (on

file with the Washington and Lee Law Review).

CONTRACTING CORRECTNESS 25

2. The Role of the Internet and Social Media

In addition to the public’s increased scrutiny of controversial

statements, through the rise of social media, such statements

now reach larger audiences than ever, and they are doing so

much faster.

107

This is true not only for celebrities but for the

general public as well.

108

In the third quarter of 2016, Facebook

alone had over 1.79 billion active users worldwide, continuing a

decade-long upward trend.

109

Although online connections often

“reflect pre-existing offline connections, social media also brings

together strangers with similar hobbies, interests, and political

views.”

110

Consequently, individuals’ comments, photos, videos, and

other actions on social media can often reach broad, unintended

audiences.

111

Information on Facebook, for instance, is public by

default unless the user manually increases his or her security

settings.

112

Thus, a common person’s well-timed Facebook or

Twitter comment can be seen by millions of people around the

world.

113

In fact, the Facebook post that received the most

107. See Doug Cross, 5 Ways Twitter Changed How We Communicate, CNN

(Mar. 21, 2011, 11:41 AM), http://www.cnn.com/2011/TECH/social.media/03/21/

twitter.birthday.communication/ (last visited Mar. 4, 2017) (discussing how

Twitter removed the celebrity filter and made the flow of information faster,

among other things) (on file with the Washington and Lee Law Review).

108. See id. (claiming that if it was not for Twitter, little known bloggers,

journalists, and podcasters would not have as big an audience).

109. Number of Monthly Active Facebook Users Worldwide as of 3rd Quarter

2016 (in Millions), S

TATISTA, http://www.statista.com/statistics/264810/number-

of-monthly-active-facebook-users-worldwide/ (last visited Mar. 4, 2017) (on file

with the Washington and Lee Law Review).

110. Mary-Rose Papandrea, Social Media, Public School Teachers, and the

First Amendment, 90

N.C. L. REV. 1597, 1607 (2012).

111. Id. at 1607 (citing Lance Ulanoff, Your Digital Debris Is Haunting You,

PC MAG. (June 9, 2011), http://www.pcmag.com/article2/0,2817,2386635,00.asp

(last visited Mar. 4, 2017) (on file with the Washington and Lee Law Review)).

112. Id. at 1608–09 (citing Kurt Opsahl, Facebook’s Eroding Privacy Policy:

A Timeline, ELECTRONIC FRONTIER FOUND. (Apr. 28, 2010), https://www.

eff.org/deeplinks/2010/04/facebook-timeline (last visited Mar. 4, 2017) (on file

with the Washington and Lee Law Review)).

113. See Kurt Opsahl, Facebook’s Eroding Privacy Policy: A Timeline,

LECTRONIC FRONTIER FOUND. (Apr. 28, 2010), https://www.eff.org/deeplinks/

2010/04/facebook-timeline (last visited Mar. 4, 2017) (arguing that Facebook’s

growth came from communicating with a group of your choice to “where much of

your information is public” and that there is always going to be a certain

26 74 WASH. & LEE L. REV. 3 (2017)

interaction in 2015 was not that of any celebrity at all, but a

photo of a child holding a sign reading: “Can I get 1 million likes?

I BEAT CANCER.”

114

The photo received over 10 million likes, as

well as thousands of shares and comments.

115

While there is no shortage of positive, heartfelt energy on

social media, more negative or risqué activity often receives a

great deal of attention as well—causing trouble for employees of

all levels. For example, a part-time stadium guard for the

Philadelphia Eagles dispatched the following tweet after the

team let safety Brian Dawkins sign with the Denver Broncos in

2009: “Dan is [expletive] devastated about Dawkins signing with

Denver . . . . Dam Eagles R Retarded!!”

116

He was terminated

nearly immediately after his employer was informed of the

offensive and politically incorrect comment.

117

This employee is

just one of many disciplined for posting what their employers

considered inappropriate content on social media.

118

Some

businesses have even gone so far as to conduct social media

background checks through third-party companies, which scour

the internet for, among other things, “online evidence of racist

remarks.”

119

Before the advent of social media, such activities

would likely have remained among friends and family and would

amount of information that is public) (on file with the Washington and Lee Law

Review).

114. Tessa Berenson, These Are the Top Facebook Posts of 2015, T

IME (Dec.

31, 2015), http://time.com/4164895/top-facebook-posts-2015/ (last visited Mar. 4,

2017) (on file with the Washington and Lee Law Review).

115. Id.

116. Facebook Post Gets Worker Fired, ESPN (Mar. 9, 2009),

http://espn.go.com/nfl/news/story?id=3965039 (last visited Mar. 4, 2017) (on file

with the Washington and Lee Law Review).

117. See id. (noting that the employee was fired merely days after his

comment).

118. See Papandrea, supra note 110, at 1604 (explaining that teachers in

public schools can face severe punishments if they use social media in a way

that is “otherwise inappropriate or unprofessional”).

119. Jennifer Preston, Social Media History Becomes a New Job Hurdle,

N.Y.

TIMES (July 20, 2011), http://www.nytimes.com/2011/07/21/technology/

social-media-history-becomes-a-new-job-hurdle.html?_r=0 (last updated July 25,

2011) (last visited Mar. 4, 2017) (on file with the Washington and Lee Law

Review).

CONTRACTING CORRECTNESS 27

have never have come to the attention of employers, much less

the general public.

120

Social media can be particularly risky for users because

through features such as “liking,” “sharing,” and “retweeting,”

one can be connected to statements he or she did not even

make.

121

For instance, in April 2016, former MLB All-Star pitcher

and ESPN baseball analyst, Curt Schilling, was terminated by

ESPN—likely pursuant to a morality clause—after he shared an

arguably transphobic photo on Facebook.

122

Schilling later

defended his comments by arguing that he did not post the photo

himself but merely shared it.

123

Nonetheless, the ability to be so

clearly tied to the speech or actions of another person forces social

media users to be thoughtful and defensive in all of their online

activity.

The permanence of the internet further increases the

potential for negative attention.

124

While in-person comments

120. See Mike Simpson, Social Networking Nightmares: Cyberspeak No Evil,

AT’L EDUC. ASS’N, http://www.nea.org/home/38324.htm (last visited Mar. 4,

2017) (“Thanks to Facebook . . . what used to be private is now very public.”) (on

file with the Washington and Lee Law Review).

121. See James Parsons, What Exactly Does Liking a Tweet Do on Twitter?,

FOLLOWS.COM (Jan. 23, 2016), http://follows.com/blog/2016/01/tweet-likes-twitter

(last visited Mar. 4, 2017) (stating that liking tweets can be a bookmarking tool,

used for expressing appreciation, showing acknowledgement, and even mean

automatic support) (on file with the Washington and Lee Law Review).

122. See Richard Sanomir, Curt Schilling, ESPN Analyst, Is Fired Over

Offensive Social Media Post, N.Y.

TIMES (Apr. 20, 2016),

http://www.nytimes.com/2016/04/21/sports/baseball/curt-schilling-is-fired-by-

espn.html?_r=1 (last updated Apr. 20, 2016) (last visited Mar. 4, 2017)

[hereinafter Sanomir, Curt Schilling] (“Schilling . . . was dismissed after sharing

a Facebook post . . . that appeared to respond to the North Carolina law that

bars transgender people from using bathrooms . . . .”) (on file with the

Washington and Lee Law Review).

123. See Andrew Joseph, Curt Schilling Defends His Anti-Transgender

Facebook Post: ‘I Didn’t Post That Ugly Looking Picture’, USA

TODAY SPORTS

(Apr. 19, 2016), http://ftw.usatoday.com/2016/04/curt-schilling-anti-transgender-

face book-post-denies-defends-post-espn-mlb (last visited Mar. 4, 2017)

(“Schilling may not have been the original poster of the meme—he technically

shared it. But he still posted and endorsed the message it promoted.”) (on file

with the Washington and Lee Law Review).

124. See Linda Criddle, What Teens Should Know About Online Reputations,

EBROOT, https://www.webroot.com/us/en/home/resources/tips/managing-your-

online-reputation/reputation-what-teens-should-know-about-online-reputations

(last visited Mar. 4, 2017) (“Each drop of information is collected into personal

virtual buckets. The information rarely disappears; instead, it accumulates,

28 74 WASH. & LEE L. REV. 3 (2017)

may be forgotten or explained away, Tweets can be analyzed

word-for-word and clearly displayed for the public long after they

are written, and often with little context.

125

Online activity can be

saved by others even if the original commenter later deletes a

post.

126

This concrete evidence of one’s actions adds yet another

layer of concern.

It is worth noting that in addition to social media, other

technological advances have made the public’s actions subject to

higher scrutiny than ever before.

127

For one, the ubiquity of

smartphones equips nearly everyone with a camera as well as a

high-quality recording device.

128

This caused the fall from grace

of former Los Angeles Clippers owner Donald Sterling, discussed

above, whose ex-girlfriend secretly recorded his racist comments

on her cellphone.

129

Moreover, the low prices of cameras in

general have ensured that a high percentage of our seemingly

private actions are memorialized.

130

This was a hard lesson for

former NFL running back Ray Rice, who was caught hitting his

slowly building a comprehensive picture of your identities and lives.”) (on file

with the Washington and Lee Law Review).

125. See id. (“Shedding an earlier image to move in new directions can be

harder in a digitally recorded world as your previous postings may make it

difficult.”).

126. See id. (“Comments, actions, or images once posted online may stay

long after you delete the material from your site.”).

127. See Mike Laurie, 7 Technologies Shaping the Future of Social Media,

ASHABLE (June 01, 2009), http://mashable.com/2009/06/01/social-media-future-

tech/#CkzzzOK3EkqA (last visited Mar. 4, 2017) (discussing new technologies

and that by “2019, when you look back at the social media landscape ten years

earlier, you might laugh at how hard you had to work”) (on file with the

Washington and Lee Law Review).

128. See The Impact of Technology on Your Social Media, D

IGITALSOLUTIONS,

http://ds6.net/the-impact-of-technology-on-your-social-media/ (last visited Mar.

4, 2017) (comparing an iPhone with an eight megapixel camera to a Nokia

Lumia 1020 that boasts a forty-one megapixel camera) (on file with the

Washington and Lee Law Review).

129. See Golliver, supra note 101 (detailing how Donald Sterling did not

want his ex-girlfriend to associate with black people and bring them to the

basketball games).

130. See Tom de Castella, Five Ways the Digital Camera Changed Us, BBC

(Feb. 28, 2012), http://www.bbc.com/news/magazine-16483509 (last visited Mar.

4, 2017) (explaining that the advent of the smartphone “brought digital

photography to the masses” and allowed people to take large numbers of

pictures at “almost no consequence or cost”) (on file with the Washington and

Lee Law Review).

CONTRACTING CORRECTNESS 29

fiancée by an elevator security camera.

131

Rice subsequently lost

an endorsement deal with sports equipment company

Vertimax.

132

3. Businesses’ Increased Political and Values-Based Engagement

Increasingly, companies are involved in political speech and

expressing specific values of their own.

133

They are highly

engaged in the political process and have a constitutionally

protected right to their corporate identities.

134

Like members of

the general public, they can be conservative or liberal, religious or

secular. Naturally then, those companies seek employees and

partners that will fall in line with those views and values and

want to be able to cut ties with those who contradict them.

135

Unlike the political correctness movement, which is

consistently socially liberal,

136

businesses fall all over the

131. See Daniel Roberts & Benjamin Snyder, Ray Rice and 11 Other Athletes

Who Lost Their Endorsements, F

ORTUNE (Sept. 20, 2014),

http://fortune.com/2014/09/20/ray-rice-adrian-peterson-tiger-woods-athletes-drop

ped-endorsements/ (last visited Mar. 4, 2017) (“TMZ released video of Rice

hitting his fiancé. It set off the floodgates. Dick’s Sporting Goods and Modell’s

pulled his jerseys from stores. The next day, Nike said it would end its

endorsement, and EA Sports said it would scrub Rice from the Madden NFL 15

video game.”) (on file with the Washington and Lee Law Review).

132. Id.

133. See Leighton Walter Kille, Corporate Speech and the First Amendment:

History, Data and Implications, J

OURNALIST’S RESOURCE,

http://journalistsresource.org/studies/politics/finance-lobbying/corporate-speech-

first-amendment-history-data-implications (last updated Mar. 26, 2015) (last

visited Mar. 4, 2017) (“While the First Amendment was intended to protect

individual freedom of religion, speech and assembly, as well as a free press,

corporations have begun to displace individuals as its direct beneficiaries. This

‘shift from individual to business First Amendment cases is recent but

accelerating.’”) (on file with the Washington and Lee Law Review).

134. See Citizens United v. Fed. Election Comm’n, 558 U.S. 310, 361 (2010)

(finding unconstitutional a federal law that prohibited independent corporate

expenditures for electioneering).

135. See Will Staney, How to Hire People Who Fit a Company’s Culture,

NTREPRENEUR (Sept. 2, 2014), https://www.entrepreneur.com/article/236975

(last visited Mar. 4, 2017) (“Hiring employees who understand and exemplify

company values serves to reinforce the organization’s mission and vision . . . .”)

(on file with the Washington and Lee Law Review).

136. See Amanda Hess, How ‘Political Correctness’ Went from Punch Line to

Panic, N.Y.

TIMES, (July 19, 2016) http://www.nytimes.com/2016/07/24/

30 74 WASH. & LEE L. REV. 3 (2017)

spectrum with regard to social issues.

137

One particularly

well-known example is fast-food chain Chick-fil-A, which has

long been known for its conservative leanings and traditional

stance on marriage—although the company has recently

strived to soften its appearance.

138

Similarly, in 2014, arts and

crafts retailer Hobby Lobby went to the United States Supreme

Court to defend its refusal to provide contraceptives to

employees in accordance with the company’s religious

beliefs.

139

Being that most morality clauses are broad and

subject to significant interpretation,

140

socially conservative

organizations such as these might use such a clause to break

ties with the maker of socially progressive speech.

141

Meanwhile, a company with opposing views could use an

identical clause to distance itself from a speaker advocating for

traditional marriage laws or some similarly right-wing

magazine/how-political-correctness-went-from-punch-line-to-panic.html?r=0

(last visited Mar. 4, 2017) (describing the political correctness movement as a

“shorthand for liberal politics”) (on file with the Washington and Lee Law

Review).

137. See Peter Gasca, Businesses Must Make a Stand on Important Social

Issues, E

NTREPRENEUR, (Apr. 20, 2016) https://www.entrepreneur.com/article

/274335 (last visited Mar. 4, 2017) (noticing that “corporations have been taking

a larger role in supporting and influencing popular social ideas”) (on file with

the Washington and Lee Law Review).

138. See Bruce Horovitz, Chick-fil-A Wings in New Direction After Gay Flap,

USA

TODAY (Apr. 7, 2014, 7:07 PM), http://www.usatoday.com/

story/money/business/2014/04/07/chick-fil-a-fast-food-dan-cathy/7250871/ (last

updated Apr. 8, 2017, 2:53 PM) (last visited Mar. 4, 2017) (“It wants to go from

old school to almost cool. It wants to evolve from a place where gays once

picketed to a place where they’ll feel comfortable going to eat.”) (on file with the

Washington and Lee Law Review).

139. See Burwell v. Hobby Lobby Stores, Inc. 134 S. Ct. 2751, 2785 (2014)

(finding by a five-to-four majority that the Religious Freedom Restoration Act

allows a for-profit employer to deny employees contraceptives to which they

would otherwise be entitled under the Patient Protection and Affordable Care

Act of 2010 based on religious convictions).

140. See Matthew Philips, Morals Clauses and Ms. Spears, N

EWSWEEK (Dec.

19, 2007, 7:00 PM) http://www.newsweek.com/morals-clauses-and-ms-spears-

94295 (last visited Mar. 4, 2017) (indicating that morality clauses “usually fall

along the vague lines”) (on file with the Washington and Lee Law Review).

141. See M

ICHAEL P. ZWEIG, 11 BUSINESS AND COMMERCIAL LITIGATION IN

FEDERAL COURTS §126:46 (3d ed. 2015) (noting that a morality clause “typically

gives the employer the right to terminate the contract or otherwise sanction the

[employee] if the individual behaves in a way that . . . damages the image of the

employer by association”).

CONTRACTING CORRECTNESS 31

position. On Valentine’s Day 2016, sportswear brand Adidas

shared a photo on social media featuring two woman wearing

Adidas shoes with the caption, “The love you take is equal to

the love you make.”

142

Adidas is thus one of many American

companies that have taken a stand in favor of sexual

orientation equality.

143

As discussed, Nike recently broke ties

with Manny Pacquiao over his comments against same-sex

couples,

144

and Adidas would likely use a morality clause in the

same way.

Regardless of the political position or values that a

company adopts, such a company is highly motivated to act in

accordance with that position and would want the power to do

so in a contractual relationship.

145

In sum, the resurgence of

political correctness,

146

the advent of social media,

147

and the

142. See Dominique Mosbergen, Adidas Shuts Down Homophobic

Commenters in the Best Way Possible, H

UFFINGTON POST (Feb. 18, 2016, 2:24

AM), http://www.huffingtonpost.com/entry/adidas-valentines-day-ad-same-sex-

couple_us_56c56250e4b08ffac127b0eb (last visited Mar. 4, 2017) (“After

attracting controversy for an ad featuring a same-sex couple, Adidas responded

to haters with an unequivocal message: Love is love.”) (on file with the

Washington and Lee Law Review).

143. See Phil Wahba, Corporate America Comes Out Swinging Against

‘Religious Freedom’ Laws, F

ORTUNE (Mar. 31, 2015),

http://fortune.com/2015/03/31/corporate-america-religious-freedom/ (last visited

Mar. 4, 2017) (“The recently passed ‘religious freedom’ law in Indiana has

elicited an unprecedented torrent of criticism of major companies, from Apple

and Marriott International to Indianapolis-based Eli Lilly and Angies List.”) (on

file with the Washington and Lee Law Review).

144. See Rovell, Nike Cuts Ties with Manny Pacquiao, supra note 77

(reporting that Nike terminated its endorsement contract with Manny Pacquiao

because of homophobic remarks).

145. See Lou Gerstner, The Culture Ate Our Corporate Reputation, W

ALL ST.

J., http://www.wsj.com/articles/the-culture-ate-our-corporate-reputation-147544

5084 (last updated Oct. 2, 2016, 6:29 PM) (last visited Mar. 4, 2017) (suggesting

that corporations have an interest in ensuring that employees are adhering to a

company’s culture) (on file with the Washington and Lee Law Review).

146. See Chait, Not a Very P.C. Thing to Say, supra note 92 (“After political

correctness burst onto the academic scene in the late ‘80s and early ‘90s, it went

into a long remission. Now it has returned.”).

147. See Simeon Edosomwan et al., The History of Social Media and Its

Impact on Business, 16 J.

APPLIED MGMT. & ENTREPRENEURSHIP 79, 79 (2011)

(explaining that many social media websites were created in the 1990s and

2000s).

32 74 WASH. & LEE L. REV. 3 (2017)

escalation of company values

148

have all fueled the popularity

of the morality clause.

III. Legal and Policy Challenges to Morality Clauses

Since the days of Blackstone,

149

the cornerstone of contract

law is that a competent person may make her own bargain.

150

Under common law, “[t]he general rule is that competent

persons shall have the utmost liberty of contracting and that

their agreements voluntarily and fairly made shall be held

valid and enforced in the courts.”

151

Thus, freedom of contract

doctrine provides people with the ability to bargain away

rights to which they would otherwise be entitled.

152

However, the freedom of contract has its limitations.

153

The

Restatement provides that some agreements are unenforceable

to ensure elemental fairness, protect weaker parties, and

secure social order.

154

Contracts lacking in mutual assent or

consideration are void.

155

Agreements are unenforceable when

either party lacks capacity,

156

they are tinged with

148. See David Mielach, Strong Company Culture Predicts Long-Term

Success, B

US. NEWS DAILY (May 31, 2013, 10:35 AM),

http://www.businessnewsdaily.com/4568-company-culture-benefits.html (last

visited Mar. 4, 2017) (revealing that “[c]ompanies that focus on company culture

may create not only a positive work environment; new data has also found that

those companies are also setting themselves up for long-term success”) (on file

with the Washington and Lee Law Review).

149. See 2 W

ILLIAM BLACKSTONE, COMMENTARIES *442–49 (discussing the

ability of a person to enter an agreement as long as that person has sufficient

ability to make such a contract).

150. See RESTATEMENT (SECOND) OF CONTRACTS §§ 1–3 (AM. LAW INST. 1981)

(defining what makes a contract).

151. Twin City Pipe Line Co. v. Harding Glass Co., 283 U.S. 353, 356 (1931).

152. See Robert Braucher, Freedom of Contract and the Second Restatement,

78 YALE L.J. 598, 599–600 (1969) (describing how the term bargain in contract

law means “an agreement to exchange”).

153. See R

ESTATEMENT (SECOND) OF CONTRACTS § 17 cmt. b (AM. LAW INST.

1981) (“The governing principle in the typical case is that bargains are

enforceable unless some other principle conflicts.”).

154. See id. § 178(1) (setting forth that a term of a contract will be

unenforceable on public policy grounds if the legislator so chooses or enforcing

the contract is “clearly outweighed in the circumstances by a public policy”).

155. Id. § 17.

156. Id. § 12(1).

CONTRACTING CORRECTNESS 33

unconscionability

157

or illegality,

158

and when the contract is

against public policy.

159

Non-competes are one such example.

160

For reasons of public

policy, the law limits the enforceability of covenants not to

compete,

161

in which an often-weaker party agrees not to

participate in a competing business at the end of a business

relationship.

162

When not entirely prohibited by law,

163

non-compete agreements are enforceable only if the restrictions

imposed are reasonably necessary for the protection of the

employer.

164

A restrictive covenant must also: (1) provide a

reasonable time limit; (2) provide a reasonable territorial limit;

(3) not be too harsh or oppressive on the employee; and (4) not be

contrary to public policy.

165

157. See Melissa T. Lonegrass, Finding Room for Fairness in Formalism:

The Sliding Scale Approach to Unconscionability, 44 LOY. U. CHI. L.J. 1, 9–11

(2012) (exploring both procedural and substantive unconscionability and

pointing out that both are needed to invalidate a contract).

158. See Party’s Unlawful Acts in Performance Held to Bar His Recovery

Under a Lawful Contract, 61 C

OLUM. L. REV. 119, 120 (1961) (“As a general

principle, courts will not enforce illegal bargains.”).

159. RESTATEMENT (SECOND) OF CONTRACTS, § 178 (AM. LAW INST. 1981).

160. See, e.g., Valley Med. Specialists v. Farber, 982 P.2d 1277, 1278 (Ariz.

1999) (concluding that a covenant not to compete will not be enforced against a

physician on public policy grounds).

161. See R

ESTATEMENT (SECOND) OF CONTRACTS, § 188 (AM. LAW INST. 1981)

(specifying the factors that need to bet met for non-competes to be enforced).

162. See Michael Sean Quinn & Andrea Levin, Post Employment Agreements

Not to Compete: A Texas Odyssey, 33

TEX. J. BUS. L. 71, 73 (1996) (arguing that

“enforcing covenants not to compete does not allow the weaker employee to play

on the same field as the stronger employer”).

163. See Hui Shangguan, A Comparative Study of Non-Compete Agreements

for Trade Secret Protection in the United States and China, 11

WASH. J.L. TECH.

& ARTS 405, 411 n.28 (2016) (listing California, Hawaii, North Dakota, Montana,

and Oklahoma as states that prohibit non-compete agreements altogether); id.

(“Montana and Oklahoma permit the enforcement of non-competes in certain

circumstances, while Colorado and Oregon limit non-competes to managers and

professional workers.”).

164. See Lakeside Oil Co. v. Slutsky, 98 N.W.2d 415, 419 (Wis. 1959)

(explaining that “the rule requires that a restrictive covenant not to compete

after a term of employment should be reasonably necessary for the protection of

the legitimate interests of the employer”).

165. See id. at 418–21 (setting forth the requirements that must be met for a

restrictive covenant to be valid).

34 74 WASH. & LEE L. REV. 3 (2017)

Courts have traditionally analyzed non-competes closely

along these analytical lines because of their effects on employee

mobility and freedom.

166

Where they were initially designed for

high-level employees and company founders, businesses have

broadened their reach to lower-level, low-wage, and entry-level

employees,

167

including sandwich-makers,

168

hairstylists,

169

sanitation workers,

170

and camp counselors.

171

This expansion

166. See Maureen B. Callahan, Comment. Post-Employment Restraint

Agreements: A Reassessment, 52 U.

CHI. L. REV. 703, 705–06 (1985) (advancing

that courts historically have justified examining non-compete agreements on

three grounds: restrictions on the mobility of skilled workers, employee

sophistication, and removal of a productive person from the work force).

167. See Lydia DePillis, The Rise of the Non-Compete Agreement, from Tech

Workers to Sandwich Makers,

WASH. POST (Feb. 21, 2015),

https://www.washingtonpost.com/ news/wonk/wp/2015/02/21/the-rise-of-the-non-

compete-agreement-from-tech-workers- to-sandwich-makers/ (last visited Mar. 4,

2017) (noticing that non-competes are normally reserved for executives but

lately they have been “popping up in more and more low-wage sectors too”) (on

file with the Washington and Lee Law Review).

168. A 2014 press report found that sandwich chain Jimmy John’s required

its sandwich makers and delivery drivers to sign non-compete agreements. The

non-compete agreements prohibited sandwich makers, for a period of two years

after leaving a job with Jimmy John’s, from working at any establishment

within a two-mile radius of a Jimmy John’s location that made more than 10%

of its revenue from sandwiches. In 2016, the company entered into an

agreement with New York’s Attorney General to cease the use of the contract in

New York. Press Release, Eric T. Schneiderman, N.Y. Attorney Gen. (June 22,

2016) (on file with the Washington and Lee Law Review); see also Samantha

Bomkamp, Illinois AG Sues Jimmy John’s Over Noncompete Pacts; Chain

‘Disappointed’, C

HI. TRIB. (June 9, 2016, 9:59 AM), http://www.chicago

tribune.com/business/ct-jimmy-johns-illinois-lawsuit-0609-biz-20160608-story.

html (last visited Mar. 4, 2017) (observing that Illinois’s Attorney General also

filed suit against Jimmy John’s for the same reason) (on file with the

Washington and Lee Law Review).

169. See King v. Head Start Family Hair Salons, Inc., 886 So.2d 769, 772

(Ala. 2004) (finding that a “noncompetition agreement prohibiting King from

working in the hair-care industry within a two-mile radius of any of Head

Start’s 30 locations is unduly burdensome”).

170. See DCS Sanitation Mgmt., Inc. v. Castillo, 435 F.3d 892, 897 (8th Cir.

2006) (concluding that the district court properly held that a non-compete

agreement against a sanitation worker was overly broad and unenforceable).

171. See Steven Greenhouse, Noncompete Clauses Increasingly Pop Up in

Array of Jobs, N.Y.

TIMES (June 8, 2014), http://www.nytimes.

com/2014/06/09/business/noncompete-clauses-increasingly-pop-up-in-array-of-

jobs.html?smid=pl-share (last visited Mar. 4, 2017) (reporting that Colette

Buser, a summer camp counselor, signed a non-compete agreement that forbade

her from working at a competing camp within ten miles) (on file with the

CONTRACTING CORRECTNESS 35

has caught the critical eyes of both state and federal legislatures,

and the White House, which has advocated for their further

restriction on public policy grounds.

172

In fact, morality clauses have much in common with

non-competes: they are often tangential to personal services

contracts;

173

they purport to protect the stronger party’s business

interests;

174

they restrain the subject’s rights;

175

they can be

aggressively broad and lacking in consideration;

176

and they may

sometimes be imposed in inherently-coercive settings.

177

non-competes, morality clauses have experienced a

democratization as of late.

178

However, unlike non-competes, morality clauses have thus

far escaped judicial scrutiny. They have not been the subject of

strict inquiry on legal or public policy grounds. In fact, other than

in the celebrity context,

179

they have been largely ignored. In

Washington and Lee Law Review).

172. See T

HE WHITE HOUSE, NON-COMPETE AGREEMENTS: ANALYSIS OF THE

USAGE, POTENTIAL ISSUES, AND STATE RESPONSES 3 (2016) (revealing that both

state and federal legislation is looking to further limit non-compete

agreements).

173. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 353 (pointing out that morality clauses in talent contracts have been

around since the 1920s).

174. See Kressler, Using the Morals Clause, supra note 6, at

235 (“[T]he

‘morals clause’ generally allows buyers, such as advertisers, to terminate a

talent agreement when an actor’s conduct is detrimental to the buyer’s interests

or otherwise devalues the performance due.”).

175. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 350 (“As a general proposition, talent needs to know that a morals clause is

powerful enough to impact important aspects of one’s career, ranging from one’s

compensation and continued employment to restrictions upon his or her

personal behavior.”).

176. See id. at 371 (describing how companies will try to include

broadly-worded morals clauses).

177. See Donald J. Smythe, Liberty at the Borders of Private Law, 49

AKRON

L. REV. 1, 53–54 (2016) [hereinafter Smythe, Liberty at the Borders of Private

Law] (contending that some employees that care about the restrictions imposed

by morality clauses still sign the employment contract because they need the

job).

178. See Taylor, III. et al., The Reverse Morals Clause, supra note 6, at 79–

80 (presenting the birth of the reverse-morals clause, which allows a celebrity to

bow out of a deal if the company engages in certain type of immoral behavior).

179. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 357–62 (examining seminal cases involving morality clauses and

36 74 WASH. & LEE L. REV. 3 (2017)

light of the increasing breadth and use of morality clauses across

many ranks,

180

the time is right to examine these restraints

closely, taking into account their potential legal failings and

adverse consequences on public policy grounds.

A. Mutual Assent and Definiteness

The law requires contractual terms to be reasonably certain

and definite.

181

That is, they must supply “a basis for determining

the existence of a breach and for giving an appropriate

remedy.”

182

This principle does not require absolute certainty;

rather, only the quantum that is “reasonable” under the

circumstances.

183

In general, ambiguous language will be

interpreted in favor of the non-drafting party.

184

Typically, both Bad Behavior and Reputational Impact

morality clauses are broad, indefinite, and at worst,

tautological.

185

A Bad Behavior clause might ban acts that just

generally offend notions of “decency” and “morality.”

186

Some

Reputational Impact clauses may be so indefinite as to be

illusory, effectively prohibiting any conduct that the enforcing

party deems to be unacceptable or potentially tarnishing.

187

Most

celebrities).

180. See DePillis, supra note 167 (reporting on the rise of morality clauses in

all areas of employment).

181. R

ESTATEMENT (SECOND) OF CONTRACTS § 33(1) (AM. LAW INST. 1981).

182. Id. § 33(2).

183. See id. § 33 cmt. a (explaining that for a contract to be enforceable the

terms of the contract need not be definitively certain).

184. See Raymond H. Srp, Survey of Ohio Law: 2011 Supreme Court of Ohio

Decisions: II. Contract Interpretation: A. Insurance Policies: Westfield Insurance

Co. v. Hunter, 38

OHIO N.U. L. REV. 1211, 1223 (2012) (“Both courts simply

interpreted an ambiguity in a contract by construing the language against the

drafting party.”).

185. See Philips, supra note 140 (observing morality clauses as “usually

fall[ing] along vague lines of not doing anything that might bring about public

disrepute, contempt, scandal or ridicule, or reflecting unfavorably on” the

company).

186. See Katz, Note, Reputations, supra note 6, at 201–12 (pointing out that

the earliest morals clauses “contained triggers defined by notices of ‘decency’

and ‘morality’” (citations omitted)).

187. See id. at 213–18 (mentioning that disrepute triggers in morality

clauses give companies great latitude in determining when a morals clause is

CONTRACTING CORRECTNESS 37

contracts do not define these vague terms, choosing to adopt

Justice Stewart’s “I-know-it-when-I see-it” standard.

188

By their

very nature, these concepts—and the behavior they ban—are

indistinct.

189

In practice, these concepts are relative to time,

place, and historical moment—often dependent on the code of

conduct currently acceptable to society.

190

Despite the obvious ambiguity and breadth of the actions

conceivably covered by a ban on generally immoral or even “bad”

behavior, courts have upheld even the most ambiguous morality

clauses.

191

In Knox-Pipes v. Genesee Intermediate School

District,

192

the plaintiff, who was terminated for conduct

involving moral turpitude, argued that because the term was not

defined, no legal obligation was created.

193

The court rejected the

argument, concluding that the dictionary definition of the term

could be used to ascertain the word’s plain and ordinary

meaning.

194

Similarly, in Nader v. ABC TV, Inc.,

195

ABC

terminated a soap opera star’s contract pursuant to a morality

clause after he was arrested for selling cocaine to an undercover

police officer.

196

The morality clause at issue disallowed any

conduct that “might tend to reflect unfavorably on ABC” or any of

its sponsors, licensees, series, or programs.

197

In a breach of

breached).

188. See Jacobellis v. Ohio, 378 U.S. 184, 197 (1964) (Stewart, J.,

concurring) (defining “I know it when I see it” as the threshold test when

determining whether a motion picture is obscene under an Ohio statute that

convicted people for possessing and exhibiting an obscene film).

189. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 352 (“By their very nature, morals are subjective concepts . . . .”).

190. See id. (declaring that “[a]t the very least, moral behavior refers to

behavior that comports to an existing code of conduct put forward by society”).

191. See Nader v. ABC TV, Inc., 150 F. App’x. 54, 56 (2d Cir. 2005)

(pronouncing that ABC could fire the plaintiff, and the plaintiff’s claim that

ABC’s morality clause was unenforceable because of vagueness was not

supported).

192. No. 322295, 2015 WL 5657396 (Mich. Ct. App. Sept. 24, 2015), appeal

denied, 499 Mich. 915 (2016).

193. Id. at *8.

194. Id.

195. 330 F. Supp. 2d 345 (S.D.N.Y. 2004), aff’d, 150 F. App’x. 54 (2d Cir.

2005).

196. Nader,150 F. App’x. at 55.

197. Id. at 54.

38 74 WASH. & LEE L. REV. 3 (2017)

contract claim for wrongful termination, Nader argued that the

clause was “too ambiguous or vague,” and that his actions did not

fall within its confines.

198

The Second Circuit rejected this

argument and, in affirming the district court’s grant of summary

judgment, held that Nader’s arrest and the resulting media

attention brought his conduct “well within any reasonable

interpretation of the [morality] clause.”

199

Despite these examples, it is undisputed that a party needs

to know (either implicitly or expressly) what behavior or conduct

will trigger termination under a morality clause.

200

In Dias v.

Archdiocese of Cincinnati,

201

a Catholic school fired its technology

coordinator for becoming pregnant through artificial

insemination.

202

The morality clause in her contract required the

employee to abide by Catholic doctrine,

203

even though she was a

non-ministerial employee.

204

In her suit for breach of contract, the

plaintiff claimed the morality clause was invalid and illegal

because it was a pretext for pregnancy discrimination.

205

The

court found that the contract lacked a “meeting of the minds”

because the clause did not address artificial insemination, and

there was a question of fact as to whether the plaintiff knew she

was barred from such action.

206

198. Id. at 56.

199. Id.

200. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 369–79 (discussing what talent needs to know about morality clauses).

201. No. 1:11-CV-00251, 2012 WL 1068165 (S.D. Ohio Mar. 29, 2012).

202. Id. at *1.

203. Id.

204. Id. at *8.

205. Id. at *2.

206. Id. at *6. But see Dias v. Archdiocese of Cincinnati, No. 1:11-CV-00251,

2013 WL 360355, at *1 n.1 (S.D. Ohio Jan. 30, 2013) (“Such clause stated

generally that Plaintiff would ‘comply with and act consistently in accordance

with the stated philosophy and teaching of the Roman Catholic Church.’”). In

addressing the parties’ subsequent cross motions for summary judgment, the

court did not address the plaintiff’s contract claim because it found she had

unclean hands. Although she did not know artificial insemination was

prohibited, she did know that homosexuality was, and she testified to keeping

her long-term homosexual relationship secret because she knew it was a breach

of her contract. See id. at *14 (determining the plaintiff knew this would be a

violation of the morals clause).

CONTRACTING CORRECTNESS 39

Nonetheless, there is no shortage of highly ambiguous

morality clauses between employers and employees of all

levels.

207

Although the majority of employee contracts are not

publicly available, some published employee handbooks give

guidance as to the stances employers are taking.

208

In some

situations, courts have recognized these manuals as implied

contracts, which are binding upon employers.

209

Los Angeles

County, California, which employs over 100,000 people,

210

has

included the following clause in its employee handbook: “The rule

is simple, we are accountable for what we do—we do not engage

in any behavior that would compromise the County, or be an

embarrassment to the County.”

211

In a particularly outstanding

morality clause, Lee University requires all of its administration

and staff to “mirror a Christ-like example for students on a daily

basis,” while refraining from “homosexual practices and other

forms of sexual behavior which violate Scripture.”

212

Schools,

universities, religious institutions, and other non-profit

organizations all regularly include morality provisions in

207. See supra notes 167–171, 191 (highlighting that low-level employees

and actors both sign contracts that contain morality clauses).

208. See Mike the Inkman, Hobby Lobby Adds ‘Abstinence Policy’ To

Employee Handbooks, EMPIRE NEWS, http://empirenews.net/hobby-lobby-adds-

abstinence-policy-to-employee-handbooks/ (last visited Mar. 4, 2017) (“Hobby

Lobby . . . announced that they are adding new rule to their ‘Employee Code of

Conduct,’ which will now include a passage that says the company expects all of

their non-married workers to practice abstinence.”) (on file with the Washington

and Lee Law Review).

209. See Rachel Leiser Levy, Comment, Judicial Interpretation of Employee

Handbooks: The Creation of a Common Law Information-Eliciting Penalty

Default Rule, 72

U. CHI. L. REV. 695, 701 (2005) [hereinafter Levy, Judicial

Interpretation] (“Beginning in the early 1980s, however, virtually every state

supreme court reconsidered its treatment of employee handbooks and concluded

that under the right conditions a handbook could be transformed into a

unilateral contract.”).

210. LA County Employees, C

TY. OF L.A. http://portal.lacounty.

gov/wps/portal/!ut/p/b0/04_Sj9CPykssy0xPLMnMz0vMAfGjzOItDCDAyMIk0M3

AyMfVItTT1NjIINRAvyDbUREACWv94w!!/ (last visited Mar. 4, 2017) (on file

with the Washington and Lee Law Review).

211. C

TY. OF LOS ANGELES, EMPLOYEE HANDBOOK 24 (2003),

http://file.lacounty.gov/SDSInter/lac/113484_Employee_Handbook.pdf.

212. L

EE UNIVERSITY, ADMINISTRATIVE/SUPPORT STAFF HANDBOOK 14 (2015),

https://www.leeuniversity.edu/uploadedFiles/Content/human-resources/staff-hand

book.pdf.

40 74 WASH. & LEE L. REV. 3 (2017)

employment contracts.

213

Clauses like these give an employer

tremendous discretion in determining whether an employee’s

conduct was “Christ-like” or “embarrassing.”

214

B. Subjective Enforcement and Bad Faith

The question of whether a morality clause correctly triggers

termination is one of fact, premised upon the clause’s language

and whether the allegedly offending behavior falls within its

ambit.

215

As discussed above, the breadth of morality clauses

encompasses wide-ranging behaviors that are often ill-defined.

216

Given the inherent ambiguity, how can courts distinguish

exacting, and perhaps prudish, enforcers from those using

morality clauses as a pretext to act in bad faith?

With Bad Behavior clauses, courts have the unenviable task

of assessing whether the behavior is normatively offensive

enough to the community to trigger a contractual discharge.

217

Courts commonly make these fact-intensive assessments in other

areas of law, such as obscenity,

218

privacy,

219

and tort law

213. Smythe, Liberty at the Borders of Private Law, supra note 177, at 57.

214. See Katz, Note, Reputations, supra note 6, at 202 (“Given the vast

universe of conduct this definition [of morality] might encompass, non-talent

had exceedingly broad latitude to determine when talent’s conduct failed to

meet the standard set by the contemporaneous society.”).

215. See Kressler, Using the Morals Clause, supra note 6, at 245

(“Determining whether an express morals clause is breached is a question of fact

dependent upon the wording of the morals clause and the conduct at issue.”).

216. See supra notes 185–190 and accompanying text (defining types of

morality clauses and the broad conduct they seek to regulate).

217. See Kressler, Using the Morals Clause, supra note 6, at 246

(highlighting that under California and New York law, a breach of an express

morals clause is proper when an “actor’s conduct is viewed by a large segment of

the public as shocking, insulting or offensive”).

218. See Jacobellis v. Ohio, 378 U.S. 184, 187 (1964) (“We are told that the

determination whether a particular motion picture, book, or other work of

expression is obscene can be treated as a purely factual judgment on which a

jury’s verdict is all but conclusive . . . .”).

219. See J

ULIA LANE, VICTORIA STODDEN, STEFAN BENDER & HELEN

NISSENBAUM, PRIVACY, BIG DATA, AND THE PUBLIC GOOD 9 (2014) (clarifying that

privacy law in the realm of intrusion upon seclusion and the public disclosure of

private facts is a factual determination based on the activities of “both subjects

and acquirers of personal information”).

CONTRACTING CORRECTNESS 41

(emotional distress cases).

220

In the case of Reputational Impact

clauses, the assessment of a breach often depends on public

perception and awareness, which is less subjective but no less

slippery a concept.

221

For instance, in the 2012 case of Mendenhall v.

Hanesbrands,

222

a North Carolina district court had to determine

if an athlete’s tweets plausibly caused sufficient uproar to cancel

an endorsement deal.

223

There, former Pittsburg Steelers running

back Rashard Mendenhall entered into an agreement with

clothing manufacturer Hanesbrands, Inc., in which he promised

to promote the company’s athletic apparel branded Champion

Apparel.

224

The agreement included the following clause:

If Mendenhall commits or is arrested for any crime or becomes

involved in any situation or occurrence . . . tending to bring

Mendenhall into public disrepute, contempt, scandal, or

ridicule, or tending to shock, insult or offend the majority of

the consuming public or any protected class or group thereof,

then [Hanes] shall have the right to immediately terminate

this Agreement.

225

Mendenhall was an active user of the social media platform,

Twitter, where he commonly expressed views on many issues

ranging from Islam to parenting.

226

At one point he even

compared the NFL to the slave trade.

227

Hanesbrands never

commented on Mendenhall’s tweets, nor did it ask him to limit

his controversial comments.

228

When President Barack Obama

announced the death of Osama bin Laden, Mendenhall posted

220. See Richard W. Wright, Causation in Tort Law, 73 CAL. L. REV. 1735,

1741 (1985) (discussing that causation in tort law is a factual inquiry).

221. See Katz, Note, Reputations, supra note 6, at 214–15 (“The Court of

Arbitration for Sport (CAS) . . . has defined bringing a person into disrepute as

lowering the reputation of the person in the eyes of ordinary members of the

public to a significant extent.” (internal quotation marks omitted)).

222. 856 F. Supp. 2d 717 (M.D.N.C. 2012).

223. See id. at 727–28 (denying Hanesbrands’ motion for summary judgment

and finding that there was a dispute of facts that existed between the parties to

the public’s response to Mendenhall’s tweets).

224. Id. at 719.

225. Id. at 720.

226. Id.

227. Id.

228. Id.

42 74 WASH. & LEE L. REV. 3 (2017)

various comments on Twitter.

229

One such tweet read, “What

kind of person celebrates death? It’s amazing how people can

HATE a man they never even heard speak. We’ve only heard one

side.”

230

Within two weeks, Hanes terminated Mendenhall’s

agreement pursuant to the morality clause and issued a

statement on ESPN that it did not agree with his controversial,

but legitimately-held, beliefs.

231

Mendenhall brought a claim for breach of contract, and

Hanes later moved for judgment on the pleadings.

232

Interpreting

the clause narrowly, the court concluded that Mendenhall could

be terminated only if he created a public scandal, as specified by

the agreement.

233

Because the pleadings alone did not establish

any actual scandal and even included facts suggesting that the

comments garnered some positive responses, the court denied

Hanes’s motion.

234

However, in ruling as such, the court simply

found that discovery was necessary to determine whether Hanes

could prove that Mendenhall’s statements did create a scandal.

235

The parties settled prior to any further ruling.

236

If employers and other contracting parties are given

unlimited discretion to interpret broad, all-encompassing morals

clauses, they could quite easily use these clauses to terminate an

economically disappointing relationship under the pretense of

moral objection. Consider a situation in which a company enters

into a two-year contract with an independent marketing

consultant, hoping for a large increase in profits. Therein, the

consultant agrees to a broad morality clause prohibiting, among

other things, “all behavior likely to offend the company’s

229. Id. at 720–21.

230. Id. at 721.

231. Id.

232. Id. at 719.

233. Id. at 726.

234. Id.

235. Id. at 727–28.

236. Marc Edelman, Rashard Mendenhall Settles Lawsuit with

Hanesbrands Over Morals Clause, F

ORBES (Jan. 17, 2013, 12:02 PM)

http://www.forbes.com/sites/marcedelman/2013/01/17/rashard-mendenhall-settles-

lawsuit-with-hanesbrands-over-morals-clause/#16a1021c6c87 (last visited Mar.

4, 2017) (on file with the Washington and Lee Law Review)

CONTRACTING CORRECTNESS 43

customers.” Although the consultant performs as promised, after

six months, the company realizes that returns have been modest.

The company subsequently discovers that the consultant recently

made an insensitive comment regarding affirmative action on an

online political forum. Should the retailer now be entitled to

terminate the agreement? And should the law permit contract

language that is so clearly ripe for abuse? That is, with such

unlimited discretion to terminate an agreement, has the

contracting party really bound itself to anything at all? Situations

like these illustrate the lack of predictability surrounding the

broadly-drafted morality clauses seen in so many modern

agreements.

237

In this way, such clauses essentially grant a blank

check for abuse by the imposing party.

238

C. Concerns of Free Speech and Expression

Broad morality clauses chill speech and free expression,

239

particularly when applied expansively through all levels of

employees and corporate partners. And these repercussions could

be significant.

240

If all of the Fortune 500 companies were to bind

their employees and agents to morality clauses, the speech and

behavior of over 17% of the nation’s workforce would be

constrained and controlled.

241

At first blush, forcing almost a fifth

237. See supra notes 167–171, 191 and accompanying text (observing the

growing trend of morality clauses in employment contracts).

238. See supra notes 140–141 and accompanying text (contending that broad

morality clauses give employers the right to unilaterally terminate an

employment contract).

239. See Patricia Sánchez Abril, Avner Levin & Alissa Del Riego, Blurred

Boundaries: Social Media Privacy and the Twenty-First-Century Employee, 49

M. BUS. L.J. 63, 90 (2012) (“Employer restrictions on off-duty speech and

conduct are troubling in that they squelch expression and individual autonomy

and may compromise the employee’s right to a private life . . . .”).

240. See Marka B. Fleming, Amanda Harmon Cooley & Gwendolyn

McFadden-Wade, Morals Clauses for Educators in Secondary and Postsecondary

Schools: Legal Applications and Constitutional Concerns, 2009 BYU

EDUC. &

L.J. 67, 67–68 (noting that discipline for violation of a morality clause by a

teacher can result in suspension or revocation of a teaching certificate).

241. Claire Zillman & Stacy Jones, 7 Fortune 500 Companies with the Most

Employees, FORTUNE (June 13, 2015, 10:00 AM), http://fortune.com/2015/06/13/

fortune-500-most-employees/ (last visited Mar. 4, 2017) (on file with the

Washington and Lee Law Review).

44 74 WASH. & LEE L. REV. 3 (2017)

of the country to behave in accordance with the prevailing social

norms would not be harmful. However, the consequences can be

ill and far-reaching.

If the clauses used in the hypothetical were Bad Behavior

clauses, 17% of American workers would then be required to keep

both their on and off-duty actions in line with the undefined and

ever-changing public morals and social norms.

242

A large portion

of the populous would thus be held to perpetual, innocuous

boardroom behavior. The result would be widespread uniformity

and a significant reduction of free expression and challenges to

the status quo. Similarly, if those same businesses imposed

Reputational Impact clauses, employees would all need to refrain

from offending the community at large.

243

One could therefore

expect the same result under either clause, both of which would

essentially serve as a ban on unpopular speech.

244

To be clear, most American workers are employed on an

at-will basis outside of any express contract.

245

The at-will

doctrine relies on the assumption that absent a contract

specifically stating otherwise, an employment relationship is

mutually consensual, and an employee may resign or be

terminated at any time for any or no reason without liability to

either party, unless an enumerated statutory or judicially-created

exception applies.

246

Courts have long examined cases in which

242. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 352 (arguing that morality clauses are largely governed by the prevailing

societal values at the time).

243. See Katz, Note, Reputations, supra note 6, at 213–19 (discussing how

Reputational Impact morality clauses usually ban conduct by an employee that

brings disrepute as perceived in the public eye to a company).

244. See Fleming, Cooley & McFadden-Wade, supra note 240, at 89

(specifying that the freedom of speech is implicated in cases enforcing morals

clauses on teachers).

245. See The At-Will Presumption and Exceptions to the Rule, N

AT’L CONF.

ST. LEGISLATURES, http://www.ncsl.org/research/labor-and-employment/at-will-

employment-overview.aspx (last visited Mar. 4, 2017) (“Employment

relationships are presumed to be ‘at-will’ in all U.S. states except Montana.”) (on

file with the Washington and Lee Law Review).

246. See Stanley J. Brown & Henry Morris, Jr., Employment at Will, 10

DISTRICT LAW. 42, 42 (1985) (mentioning that “[u]nder the traditional

‘employment-at-will’ doctrine, employers had an absolute right to terminate

their employees absent violation of a statute” and further noting that many

state courts have recently found exceptions to the “at-will” rule).

CONTRACTING CORRECTNESS 45

at-will employees seek relief for termination based on their

speech, and those courts have generally found that free speech

protection is guaranteed only from government and not private

employers.

247

With regard to employees under contract, however,

a morality clause should not serve as a “get out of jail free card,”

turning a contractual relationship into at-will employment

248

and

here, courts should consider how the unfettered use of broad

morality clauses can significantly chill free expression.

Admittedly, some states do already impose some limits on

how much an employer can intrude on the off-duty actions of an

employee.

249

For instance, sixteen states and the District of

Columbia have enacted statutes prohibiting employers from

punishing employees for off-duty tobacco use.

250

Meanwhile, eight

states protect employees’ use of any legal products, and four

states protect all legal off-duty activities.

251

However, these latter

247. See Griffith v. Bell-Whitley Cmty. Action Agency, 614 F.2d 1102, 1110

(6th Cir. 1980) (applying Kentucky law to dismiss employee’s claims against

their employer when they were discharged for opposing the election of a certain

individual as the agency’s executive director); Korb v. Raytheon Corp., 574

N.E.2d 370, 372–73 (Mass. 1991) (concluding that an employee’s free speech

rights did not protect him from discharge when he spoke out against his

company’s economic interests); Shovelin v. Cent. N.M. Elec. Coop., Inc., 850 P.2d

996, 1009–10 (N.M. 1993) (finding that an employer did not violate an

employee’s free speech rights when it terminated him for running for local

office); Charles Glick, Note, Free Speech, the Private Employee, and State

Constitutions,

91 YALE L.J. 522, 525–26 (1982) (pointing out that neither the

common law nor statutes provide freedom of speech protections for employees).

But see Novosel v. Nationwide Ins. Co., 721 F.2d 894, 898–99 (3d Cir. 1983)

(administering Pennsylvania law to find that when an employer terminated an

employee for refusing to lobby state congress in favor of no-fault insurance

reform, the employee could establish a case for wrongful discharge, as the

termination violated a recognized public policy created by the First

Amendment).

248. Even with regard to at-will employees, an employer may be bound to

the terms of a morality clause included in an employee handbook or code of

conduct. See Levy, Judicial Interpretation, supra note 209, at 696 (explaining

that the terms of an employee handbook can form an implied contract between

an employer and an employee).

249. See Kayleigh McNelis, Off-Duty Statutes and Social Media: The Need

for Protection Regardless of Whether Speech Is Concerted, 33

REV. LITIG. 219,

237–42 (2014) (listing and analyzing states that have off-duty statutes that

protect employees).

250. Id. at 237.

251. Id.

46 74 WASH. & LEE L. REV. 3 (2017)

statutes are drafted somewhat vaguely and have been applied

quite narrowly.

252

As to speech specifically, the National Labor Relations Board

has held that concerted complaints about an employer (those

made with an intention to enact change) on social media may be

protected.

253

Thus, an employer may not make a broad rule

prohibiting all negative speech against an employer, which would

necessarily include protected concerted activity.

254

The problem

with these limited protections, however, is that they do little to

protect employees and other contracting parties from the

potential abuses discussed above.

255

Essentially, unless the

employee is protesting her employer

256

or smoking a cigarette,

257

she is on her own.

D. Bargaining Power and Unilaterality

The typical justification for a morality clause is preventative:

businesses want to avoid any situation in which their associates

embarrass them or tarnish their products.

258

Additionally, in

such an event, they want a solid justification to terminate the

252. See id. at 240–42 (noticing that a New York court interpreted their

off-duty statute narrowly and that Colorado’s off-duty statute is overly vague).

253. See id. at 229 (“In recent years, the NLRB has extended further

protection to employees making online comments about work.”).

254. See id. at 226–27 (declaring that the NLRA restricts an employer’s

right to restrict an employee’s concerted speech efforts).

255. See Fleming, Cooley & McFadden-Wade, supra note 240, at 67–68 (“In

general, morals clauses in employment contracts allow an employer to terminate

employment when an employee’s conduct is potentially detrimental to the

employer’s interest.”).

256. See McNelis, supra note 249, at 227 (“[T]he employer must ensure the

company’s social media policy is carefully crafted to prevent discriminatory

conduct and unauthorized revelations without ‘chilling’ speech to which

employees have a right under the NLRA.”).

257. See id. at 237 (writing that a certain level of protection is offered to

employees in states that have off-duty statutes that prevent employers from

discriminating against the use of tobacco).

258. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 352 (“The underlying purpose of a morals clause in an agreement is to

protect the contracting company . . . .”).

CONTRACTING CORRECTNESS 47

offending associate—whether it is an employee, an independent

contractor, or a business partner.

259

Nonetheless, the ambiguous nature of many morality clauses

combined with their presentation in the context of unequal

bargaining power may lead to situations in which the weaker

party accepts without knowing the boundaries of the prohibited

behavior or, perhaps more commonly, accepts without knowing

the implications or intended enforcement of the clause.

260

Research in the area of non-competes suggests that the

overwhelming majority of employees blindly accept employment

restrictions without front-end negotiation or understanding of

their potential implications.

261

The same is likely true for

morality clauses, whose inherent ambiguity lends them to

confusion.

Moreover, most morality clauses do not provide a mutuality

of obligation.

262

In the majority of clauses canvassed, the business

imposed a duty on the other contracting party, but the duty to be

moral, or more specifically, the duty to refrain from embarrassing

was not reciprocal.

263

Consider a situation in which a business is

tainted by massive recall or a corporate scandal. It is foreseeable

259. See ZWEIG, supra note 141 (divulging that morality clauses usually

allows the employer to unilaterally terminate a contract if an employee’s acts in

a way that damages the employer).

260. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 352 (unveiling that morality clauses are highly subjective).

261. See OFFICE OF ECON. POLICY, U.S. DEP’T OF THE TREASURY, NON-COMPETE

CONTRACTS: ECONOMIC EFFECTS AND POLICY IMPLICATIONS 13 (2016),

https://www.treasury.gov/resource-center/economic-policy/Documents/UST%20

Non-competes%20Report.pdf (“[O]nly 10% of workers with non-competes report

bargaining over their non-compete, with 38% of the non-bargainers not realizing

that they could even negotiate.”).

262. See Oliver Herzfeld, Why Jay-Z and Other Talent Should Seek Morals

Clause Mutuality, F

ORBES (Jan. 2, 2014, 9:24 AM), http://www.forbes.com/

sites/oliverherzfeld/2014/01/02/why-jay-z-and-other-talent-should-seek-morals-

clause-mutuality (last visited Mar. 4, 2017) (asserting that with the rise of

corporate scandals high-profile people should seek a reverse morals clause) (on

file with the Washington and Lee Law Review).

263. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

6, at 353–57 (outlining various contracts with morality clauses). But see Taylor,

III. et al., The Reverse-Morals Clause, supra note 6, at 80 (clarifying that in

some high-profile agreements, individuals have negotiated for “reverse-morals

clauses,” protecting them from the bad actions of the company, but these clauses

are less common than traditional morality clauses and likely require high

bargaining power).

48 74 WASH. & LEE L. REV. 3 (2017)

that an endorser or even an employee would want to sever ties

with the company based on its diminished reputation.

264

In most

morality clauses today, a company can terminate an agent for bad

behavior, but the individual cannot do the same.

265

As a result,

the stronger parties benefit from morality clauses in that they

can control the other party’s behavior and terminate for a broad

and vague range of reasons, but the other party receives no

benefit.

266

Due to the lack of mutuality, many morality clauses,

standing alone, may be void for lack of consideration.

267

Consideration may also be lacking when the clause contains a

promise to perform an existing legal obligation, or to forgo

illegality.

268

The pre-existing duty rule holds that a promise to do

what one is legally obligated to do is not valid consideration.

269

The rule is grounded in the notion that courts will not suppose

that the promisor had any alternative but to conform to the law,

and that therefore his promise to do so involves no detriment or

forbearance.

E. Privacy Rights

By their very nature, Bad Behavior clauses restrict some

legal acts that are deemed private.

270

Assessing their breach will

264. See Herzfeld, supra note 262 (highlighting several examples of

corporate scandals).

265. See id. (setting forth that there is a need for reverse morality clauses in

which a high profit person can hold a company accountable for immoral

behavior).

266. See Epstein, An Exploration of Interesting Clauses in Sports, supra note

6 at 75

(“[A] morals clause allows the contracting company to swiftly sever its

relationship with troublesome talent . . . .”).

267. See R

ESTATEMENT (SECOND) OF CONTRACTS § 71 (AM. LAW INST. 1981)

(instructing that the formation of a contract requires an exchange of

consideration).

268. See id. § 73 (“Performance of a legal duty owed to a promisor which is

neither doubtful nor the subject of honest dispute is not consideration . . . .”).

269. See Edwin W. Patterson, An Apology for Consideration, 58 COLUM. L.

REV. 929, 938 (1958) (“The rule that the consideration for a promise cannot be

legally sufficient if it consists merely of the performance of, or a promise to

perform, a pre-existing contractual duty to a third person is likewise

indefensible as a part of the doctrine of consideration.”).

270. See Czarnota, supra note 6, at 461–62 (discussing implicit waiver of

CONTRACTING CORRECTNESS 49

also necessarily involve intrusion into the subject’s private life.

271

Did the athlete commit adultery? Did the employee post a racist

meme on his private Facebook page? Did the donor have a

substance abuse problem?

Although the spirit of morality clauses prevents the ill-effects

of a negative association, on their face many Bad Behavior

clauses prohibit off-duty conduct and speech regardless of

ensuing public impact.

272

It is not inconceivable that an employer,

acting on rumor or suspicion or nothing at all, could peer into the

private life of an employee to search for something “objectionable”

to toll the morality clause. Recall the use of social media

background checks discussed above.

273

In light of the breadth of

most morality clauses, he who seeks will likely find some skeleton

to trigger the morality clause in most cases. Allowing powerful

contracting parties—especially employers—unfettered access into

the lives of others is unsound policy.

Reputational Impact clauses, on the other hand, may be less

invasive because they are premised on the notion that the

offending act is public or otherwise known. This will certainly

affect non-public figures more than public ones, as the law is

clear that anything that occurs in the public eye is not private. At

least one scholar has argued that it is an open question whether

traditionally-worded morality clauses contain an implicit waiver

of privacy rights.

274

Although they purport to limit immoral behavior and protect

reputation—which at first glance are good things—morality

clauses can be socially harmful and should be duly scrutinized.

The following section offers a framework for their analysis that

balances their legitimate justifications against their potential for

abuse.

privacy rights by athletes).

271. See id. at 462 (considering public prying into personal lives of athletes).

272. See Katz, Note, Reputations, supra note 6, at 209–11 (describing the

exceedingly low bar required to breach a morals requirement).

273. See supra Part II.B.2 (discussing social media background checks).

274. See id. at 471 (noting it remains unsettled whether morality clauses

carry express or implied waivers of privacy).

50 74 WASH. & LEE L. REV. 3 (2017)

IV. A Model Test for Morality Clauses

Scrutiny of morality clauses will necessarily involve a

two-step determination. First, courts should analyze the clause

itself to see if it is enforceable. Morality clauses might be deemed

unenforceable for vagueness, lack of consideration, duress, or any

other contract fault.

275

We contend that they should also be

vetted for public policy considerations, such as restraint on legal

speech and the burden on the promisee. Second, courts must

determine whether, in the case of an otherwise enforceable

morality clause, such clause was violated by the acts of the

allegedly offending party. This is a highly subjective assessment,

involving a keen understanding of dominant mores, the impact

(or foreseeability of the impact) of the offending behavior, and the

terminating party’s true intent.

Because the determination of the validity and applicability of

morality clauses is fraught with legal, normative, and moral

issues, we offer a factored approach to their analysis. The

following five factors will guide courts in establishing the

enforceability and fair disposition of morality clause cases.

276

Each factor, as well as the rubric’s structure, is influenced by

well-established legal tests in other comparable areas, such as

employment law, the law of non-competes, intellectual property

law, and psychology. Employment law informs the proper

balancing of employer and employee rights with regard to

employee off-duty behavior. The common law limitations on

restraints of trade provide a relevant logic and structure in

assessing morality clauses.

277

Finally, concepts borrowed from

trademark law and psychology instruct on the reasonableness of

associations between an individual and a business or product.

278

Like other legal factor tests, we propose that each factor is

assessed on a sliding scale. Although the preponderance of factors

can be determinative, a sliding scale approach allows for

275. See RESTATEMENT (SECOND) OF CONTRACTS §§ 33(2), 71, 174–77 (AM.

LAW INST. 1981) (identifying foundational principles of contracts).

276. See infra Part IV (outlining a five-factor test).

277. See infra Part IV.C (comparing to non-compete agreements).

278. See infra Part IV.B (relating brand association of trademarks to brand

associations with immoral behavior).

CONTRACTING CORRECTNESS 51

increased reliance on a single factor at the discretion of the

courts.

The following framework submits that a valid morality

clause must be justified by a business interest and that there

must be a reasonable connection in the public’s minds between

the restricted party and the imposing party.

279

A strong public

association between the individual and the business can

legitimize a morality clause; a weak one should not. We propose a

practicable standard for its measure. Next the test considers the

scope and definiteness of the restriction, with the logic that

contracting parties should be aware of the behavior that will toll

the clause’s termination rights.

280

A third factor explores the

impact of the offending behavior to study whether a termination

is warranted and in good faith.

281

Finally, the rubric gauges the

burden on the contracting party.

282

A contract restricting legal

rights and speech should be carefully balanced against the

business’s rights and take into account the mutuality of the

obligation and the role and relative bargaining power of the

parties.

A. Nexus Between Misconduct and Business Interest

A basic tenet of agency law is that the nature of the business

and the position of the agent determine what conduct can be

expected from him.

283

It follows that a morality clause should be

reasonably tailored to protect a legitimate interest or mission of

the business. Of course, every business has a general interest in

maintaining a good reputation. While reasonable, this alone

should not be enough to restrict the legal behavior and speech of

279. For purposes of clarity, our framework will use the term “imposing

party” to refer to the party the morality clause is designed to protect, usually a

business. We will use the term “restricted party” to refer to the party whose

behavior is controlled by the clause, usually an individual. While these terms

are not commonplace in the law, their use will avoid confusion here.

280. See infra Part IV.C (considering the scope of definiteness requirement).

281. See infra Part IV.D (discussing impact of offending behavior).

282. See infra Part IV.E (considering burden upon restricted party).

283. See R

ESTATEMENT (SECOND) OF AGENCY § 380 cmt. a (AM. LAW INST.

1958) (“The nature of the business and the position of the agent

determine . . . what conduct can be expected from [the agent].”).

52 74 WASH. & LEE L. REV. 3 (2017)

its agents. Businesses seeking the enforceability of their morality

clauses should further justify the nexus between the misconduct

and their business interest or mission.

Our proposed nexus requirement is consistent with the

standards reflected in state wrongful discharge statutes and

federal government employment.

284

While these laws do not

involve private contracts and the federal rules do not govern the

private sector, their spirit, which is to prevent capricious and

pretextual acts, is instructive.

285

Some employment-at-will states have wrongful discharge

statutes to protect employees from being fired for legal, off-duty

conduct that is unrelated to their job.

286

Similarly, the federal

government prohibits removal from a civil service position where

private misconduct does not implicate “official responsibilities in

any direct and obvious way.”

287

A federal agency may remove an

employee “only for such cause as will promote the efficiency of the

service.”

288

Before removing an employee for off-duty misconduct,

an agency must make two determinations: (1) that the employee

actually committed the conduct; and (2) that removal will

promote the efficiency of the service.

289

The agency must show

284. See, e.g., 5 U.S.C. § 7513(a) (2012) (“[A]n agency may take

action . . . against an employee only for such cause as will promote the efficiency

of the service.”); C

OLO. REV. STAT. § 24-34-402.5 (2016) (requiring relation to a

bona fide occupational requirement).

285. See, e.g., 5 U.S.C. § 7513(a) (2012) (omitting private contracts); COLO.

REV. STAT. § 24-34-402.5 (same).

286. By way of example, Colorado statute provides:

(1) It shall be a discriminatory or unfair employment practice

for an employer to terminate the employment of any employee

due to that employee’s engaging in any lawful activity off the

premises of the employer during nonworking hours unless such

a restriction: (a) Relates to a bona fide occupational

requirement or is reasonably and rationally related to the

employment activities and responsibilities of a particular

employee or a particular group of employees, rather than to all

employees of the employer; or (b) Is necessary to avoid a

conflict of interest with any responsibilities to the employer or

the appearance of such a conflict of interest.

OLO. REV. STAT. § 24-34-402.5 (2016).

287. Brown v. Dep’t of the Navy, 229 F.3d 1356, 1360 (Fed. Cir. 2000).

288. 5 U.S.C. § 7513(a) (2012).

289. Sherman v. Alexander, 684 F.2d 464, 468 (7th Cir. 1982) (citing Young

v. Hampton, 568 F.2d 1253, 1257 (7th Cir. 1977)).

CONTRACTING CORRECTNESS 53

that the off-duty conduct has some connection to the employee’s

or agency’s overall performance.

290

To determine whether such

nexus exists, courts and arbitrators focus on (1) harm to an

employer’s reputation or product, (2) the ability of an offending

employee to perform assigned duties or to appear at work, or

(3) the refusal or reluctance of other employees to work with the

person charged with off-duty misconduct.

291

Cases are the

hardest when a good, low-level employee does something off-duty

of which the employer disapproves.

Reported cases add flesh to these rules. Where there is little

connection between the agency’s mission or the job description

and the misconduct, courts generally reject discharges for

off-duty conduct. In one case, a NASA employee who was fired for

homosexual off-duty conduct was reinstated because the record

established no “ascertainable deleterious effect on the efficiency

of the service.”

292

In another, a court found that the Postal

Service’s dismissal of a letter carrier after his conviction of

possession of a small amount of illegal drugs in no way affected

his job.

293

Courts have even required a nexus in cases involving

grossly immoral conduct. In one case the Navy dismissed a

civilian diesel mechanic with strong on-the-job performance after

his conviction of child molestation.

294

The Navy contended that,

even though it had not been a source of notoriety or public shame,

the former employee’s behavior dampened the Navy’s “confidence

in his judgment” and cast doubts on his moral standards.

295

finding insufficient nexus, the Ninth Circuit concluded that

“[c]onclusory statements of distrust fall far short of the

290. See id. (“The nexus determination requires a showing of ‘that vital

connection between the employee’s complained of activities and some

identifiable detriment to the efficiency of the service . . . .”).

291. Carlton J. Snow, The Long Arm of the Boss: Employee Off-Duty Conduct

and the Reputation of the Employer, 15 LERC M

ONOGRAPH SER. 9, 12 (1998)

[hereinafter Snow, The Long Arm of the Boss] (citing W.E. Caldwell Co., 28 Lab.

Arb. 434 (1957)).

292. Norton v. Macy, 417 F.2d 1161, 1165 (D.C. Cir. 1969).

293. See Grebosz v. U.S. Civil Serv. Comm’n, 472 F. Supp. 1081, 1089

(S.D.N.Y. 1979) (“[The employer] has failed to offer any evidence whatsoever

that its discharge of [employee] will promote the efficiency of the service.”).

294. D.E. v. Dep’t of the Navy, MSPB, 721 F.2d 1165, 1165 (9th Cir. 1983).

295. Id. at 1169.

54 74 WASH. & LEE L. REV. 3 (2017)

substantial evidence required to remove” the employee.

296

A Fifth

Circuit case with similar facts reached the same conclusion: A

postal worker charged with indecency with a child kept his job

because it did not involve interaction with children and the

agency could not prove more than the generalized

reprehensibility of the conduct.

297

Courts reach a different conclusion in cases in which the

offending conduct undermines the mission of the agency. The

Federal Circuit found that the Marine Corps was justified in

firing a recreational manager for having an affair with a

serviceman’s wife.

298

Since the manager’s job involved supporting

military personnel and their families, his off-duty misconduct,

although personal, affected the very mission of his division and

lessened the confidence that departing military spouses might

have in the program.

299

The Seventh Circuit determined that the

Department of Housing and Urban Development (“HUD”) could

legitimately fire an otherwise effective employee who was a

known slumlord.

300

In a commonsensical evaluation arguing that

behavior inconsistent with mission justifies termination, Judge

Posner stated as follows:

If an employee of a manufacturer of safes moonlighted as a

safe cracker, his days as an employee of that manufacturer

would be numbered, even if he scrupulously avoided cracking

safes manufactured by his employer. If an officer of a

musicians’ union owned a nightclub that employed non-union

musicians, because their wages were lower, his days as an

employee of the union would be numbered. A customs officer

caught smuggling, an immigration officer caught employing

illegal aliens, an IRS employee who files false income tax

returns, a HUD appraiser moonlighting as a “slumlord”—these

are merely the public counterparts of a form of conflict of

interest that is not less serious for not being financial, that

would not be tolerated in the private sector, and that we do not

believe Congress meant to sanctify in the public sector.

301

296. Id.

297. Bonet v. U.S. Postal Serv., 661 F.2d 1071, 1079 (5th Cir. 1981).

298. Brown v. Dep’t of the Navy, 229 F.3d 1356, 1364 (Fed. Cir. 2000).

299. Id. at 1363.

300. Wild v. U.S. Dep’t of Hous. & Urban Dev., 692 F.2d 1129, 1134 (7th Cir.

1982).

301. Id. at 1133.

CONTRACTING CORRECTNESS 55

Measuring the nexus between the nature of the misconduct

and the business interest or mission is easiest when the interest

or mission is definite. A law firm has a business interest in

ensuring that its lawyers do not embezzle client funds or cheat

the government. However, it has less of a business interest in

meddling into the extramarital affairs of its lawyers because

absent an office scandal, the nexus is significantly attenuated.

B. Degree of Meaning Transfer: What is the Likelihood of

Association?

Not every agent has the same degree of representative

power. In assessing the fairness and enforceability of a morality

clause, courts should examine the degree that the agent is or can

be associated with the business in the minds of the public. We

referenced this theory above as “meaning transfer,”

302

or the

attachment and flow of cultural meanings from one person to a

product or organization.

303

An individual with little or no public

association with a business is unlikely to have the power to

publicly shame it. In this case, restrictions on off-duty conduct

are less justifiable.

We can measure the degree of association by borrowing a

tenet of trademark law. Like morality clauses, trademark law

looks to protect a business’s established goodwill and reputation

from those who may tarnish it.

304

Trademark law assesses

infringement by asking “what is the likelihood of consumer

confusion?”

305

Here, we may determine the legitimacy of the

morality clause by asking “what is the likelihood of consumer

association?” That is, would the consuming public associate the

individual and his off-duty antics with the business? A high

likelihood of consumer association is direct evidence of a

protectable business interest in reputation and also indicative of

302. McCracken, Culture and Consumption, supra note 38, at 71–84.

303. See supra Part II.B (discussing meaning transfer).

304. See Eric A. Prager, The Federal Trademark Dilution Act of 1995:

Substantial Likelihood of Confusion, 7

FORDHAM INTELL. PROP. MEDIA & ENT.

L.J. 121, 124 (1996) (discussing the purpose of trademark protections).

305. See id. at 122–23 (discussing consumer confusion and trademark law).

56 74 WASH. & LEE L. REV. 3 (2017)

the potential negative impact of the misconduct. We elucidate

with categorization and examples.

In a class by themselves are professions with inherent

morality requirements, which the public recognizes. Individuals

charged with the care of children, money, and the public trust

have a heightened morality requirement implicit in their

professional duties; they are caretakers and must demonstrate

good sense and judgment.

306

Journalists must maintain the

appearance of neutrality.

307

Lawyers, judges, and police officers

must respect the law. Religious leaders must practice what they

preach.

308

Simply put, the misdeeds of those in certain

professions are subject to higher public scrutiny because of their

inherent symbolism, whether or not they are public figures.

Judges represent the law as preachers represent the church. A

rupture in any of these social performances diminishes the

effectiveness of the individual and casts a negative light on both

the associated establishment and the general institution.

309

Endorsement or sponsorship relationships are another

category of a heightened consumer association, as their very

purpose is to create a positive meaning transfer. Athletes, artists,

and other celebrities entering into these agreements are

sophisticated contracting parties with high degrees of bargaining

power and representation.

310

It is worth noting that endorsement

relationships can also be found in company to company

agreements. For instance, before the 2002 Winter Olympic

Games, several corporate sponsors of the global event voiced

306. See, e.g., MODEL RULES OF PROF’L CONDUCT r. 1.1 (AM. BAR ASS’N 1983)

(requiring competent representation by attorneys); AICPA Code of Professional

Conduct, AICPA, http://www.aicpa.org/Research/Standards/CodeofConduct/

Pages/default.aspx (last visited Mar. 4, 2017) (describing professional standards

for accountants) (on file with the Washington and Lee Law Review).

307. See SPJ Code of Ethics, S

OCIETY OF PROFESSIONAL JOURNALISTS,

https://www.spj.org/pdf/ethicscode.pdf (promoting fair and honest reporting

practices).

308. See, e.g., MODEL RULES OF PROF’L CONDUCT r. 8.3 (AM. BAR ASS’N 1983)

(requiring attorneys to not engage in criminal activity).

309. See Donald Nicolson, Mapping Professional Legal Ethics: The Form and

Focus of the Codes, 1 L

EGAL ETHICS 51, 52–53 (1998) (discussing the role and

motivations for adopting professional codes).

310. See Robert S. Adler & Elliot M. Silverstein, When David Meets Goliath:

Dealing with Power Differentials in Negotiations, 5 HARV. NEGOT. L. REV. 1, 23

(2000) (identifying celebrity status as a form of power in negotiation).

CONTRACTING CORRECTNESS 57

concerns regarding a prior bribery scandal.

311

As a result, those

sponsors and the International Olympic Committee included

morality clauses in each of their agreements.

312

Other relationships carrying associative power are less clear,

perhaps because their representative role is secondary to other

duties. A CEO, for example, runs a company but also often serves

as its public face.

313

A particularly charismatic or famous

executive (like Martha Stewart, Lee Iacocca, or the late Steve

Jobs) becomes synonymous with her or his company. An on-air

personality’s primary role is to entertain or report, but he can

also be said to represent his employer. Recall the case of baseball

analyst Curt Schilling, who was fired from ESPN for sharing an

offensive photo about transgender people on Facebook.

314

Similarly, board members and major donors, when public, have

the potential of high meaning transfer. Cases abound in which

donations have been returned or naming rights revoked in fear of

a negative association.

315

Finally, there is the lowest level of meaning transfer: the

low-profile agent. Businesses may legitimately have an interest

in ensuring the decent, lawful behavior of all of their employees

to ensure a good culture or to avoid negative press. However,

when the behavior restriction constrains the legal off-duty

conduct of agents with low meaning transfer, it may not be

justifiable because there is a negligible foreseeable impact on the

311. See Pinguelo & Cedrone, Morals? Who Cares About Morals?, supra note

3, at 366 (discussing bribery concerns).

312. See id. at 366 (discussing inclusion of morality clauses).

313. See Z. Jill Barclift, Corporate Governance and CEO Dominance, 50

ASHBURN L.J. 611, 612 (2011) (discussing charismatic and dominant CEO

figures).

314. Sanomir, Curt Schilling, supra note 122 and accompanying text.

315. Seton Hall University named buildings and funds after Dennis

Kozlowski, former CEO of Tyco International. In 2005, Kozlowski was convicted

of grand larceny, conspiracy, securities fraud, and falsifying business records.

Kozlowski voluntarily accepted the removal of his name, suggesting the

presence of a morality clause. Similarly, prior to the Enron scandal, the

University of Missouri named an economics chair position after Enron Executive

Kenneth Lay in exchange for a large donation of Enron stock. The University

subsequently removed his name from the position. See Adam Scott Goldberg,

When Charitable Gift Agreements Go Bad: Why a Morals Clause Should Be

Contained in Every Charitable Gift Agreement, 89

FLA. BAR J. 48, 49 (2015)

(discussing the return of charitable gifts).

58 74 WASH. & LEE L. REV. 3 (2017)

business’s reputation. In other words, if the public does not

associate a disgraced individual with his company, his bad

behavior or its fallout should not be grounds for dismissal. This is

necessarily a fact- and context-specific analysis because

depending on the circumstances, agents at all levels can have

representative power. Consider the fast food worker who appears

in a shocking YouTube video in company uniform, or the delivery

driver identified as a company employee in news reports detailing

his drug arrest.

316

C. The Scope and Definiteness of the Restrictive Clause

Next, an enforceable morality clause should be sufficiently

narrow and definite so as to allow a party to predict with

reasonable certainty what conduct will trigger the clause. As

discussed above, to be enforceable, a contract must be reasonably

definite in its terms.

317

Beyond this relatively low standard, when

a particularly restrictive clause is involved, there is a general

interest in ensuring that parties have the ability to actually

understand what it is they are agreeing to. For example, courts

generally require that exculpatory clauses meet a higher level of

clarity to be enforceable.

318

Likewise, in inspecting a morality

clause, a party should be able to reasonably predict what conduct

would violate the agreement.

A problem arises, however, when the majority of morality

clauses are drafted very broadly and give the imposing party the

power to interpret the clause. Recall the Los Angeles County

morality clause, which prohibits any behavior that would “be an

embarrassment to the County.”

319

The handbook gives no

316. Snow, The Long Arm of the Boss, supra note 291, at 13–14 (citing Delta

Beverage Group, Inc. and General Truck Drivers, Chauffeurs, Warehousemen

and Helpers, Teamsters Local 270, 96 LA 454 (1991)).

317. See RESTATEMENT (SECOND) OF CONTRACTS § 33(2) (AM. LAW INST. 1981)

(requiring a contract to have reasonably definite terms).

318. See Mark Seiberling, “Icing” on the Cake: Allowing Amateur Athletic

Promoters to Escape Liability In Mohney v. USA Hockey, Inc., 9

VILL. SPORTS &

ENT. L.J. 417, 429 (2002) (explaining the high level of scrutiny placed on

exculpatory clauses by courts).

319. CTY. OF LOS ANGELES, EMPLOYEE HANDBOOK 16 (2003),

http://file.lacounty.gov/lac/cms1_113484.pdf.

CONTRACTING CORRECTNESS 59

direction as to what type of behavior would embarrass the county.

Would commissioners be embarrassed by an employee’s

solicitation of a prostitute? What about an employee’s gender

reassignment surgery? Would an employee’s extramarital affair

be an embarrassment? Clauses of such breadth make this

determination very difficult, if not impossible.

Further, while public morals are already quickly changing

and difficult to follow, the morals of an individual company or

supervisor could be even more fleeting. This requires the

restricted party to determine at any given time who at the

company would make the decision to terminate and whether that

particular person would be offended by some certain action. By

contrast, a morality clause that is interpreted under a community

or reasonable person standard would be more concrete and

predictable.

With regard to covenants not to compete, the majority of

states have found that to be enforceable, the clause must be

“narrowly tailored” to protect a legitimate business interest.

320

Similarly, businesses should be required to draft morality clauses

in sufficiently definite terms so as to allow the restricted party to

predict violating behavior with relative ease.

1. Legal Behavior

Courts should analyze morality clauses that prohibit legal

behavior with higher scrutiny than those that are triggered only

by unlawful activity. Simply put, there is minimal public interest

in preventing parties from discouraging illegal conduct. Note that

as a basic tenant of contract law, a restricted party’s promise not

to engage in illegal behavior cannot even constitute valid

consideration, as he is not giving up any existing rights.

321

On the other hand, most employees and contracting parties

would likely agree that while they are off the clock, their

320. See Norman D. Bishara, Fifty Ways to Leave Your Employer: Relative

Enforcement of Covenants Not to Compete, Trends, and Implications for

Employee Mobility Policy, 13

U. PA. J. BUS. L. 751, 780 (2011) (discussing the

level of specificity required of morality clauses).

321. See Patterson, supra note 269, at 938 (discussing clauses concerning

illegal behavior).

60 74 WASH. & LEE L. REV. 3 (2017)

employer’s control over their legal conduct should be greatly

limited, if not nonexistent. It is under this rationale that four

states have made it unlawful for an employer to terminate an

employee based on legal, off-duty conduct.

322

For instance, a

California statute broadly prohibits adverse employment action

“for lawful conduct occurring during nonworking hours away

from the employer’s premises.”

323

In enacting the law, the

California legislature recognized the public policy of “protecting

the [civil] rights of individual employees . . . who could not

otherwise afford to protect themselves.”

324

Overall, there is considerable worth in upholding the division

between the home and the workplace, as employees should

generally be free from their employers’ restrictions outside of

working hours. However, where a morality clause merely

prohibits illegal behavior, the policy supporting this division is

much more limited.

2. Prohibiting Speech

As to morality clauses prohibiting speech, courts should

apply a heightened scrutiny. In a difficult economy, the need for

gainful employment can make an employee quite willing to give

up certain rights. But when a person seeks to surrender a right

as paramount as the freedom of speech, public policy supports

giving the agreement a closer look.

It is of course true that while the First Amendment protects

the free-speech rights of government employees, no such

protection exists as to private employees and contractors.

325

This

322. See McNelis, supra note 249, at 238 (discussing state limitation on

adverse action based on off-duty conduct).

323. C

AL. LAB. CODE § 96(k) (West 2016); see also N.Y. LAB. LAW § 201–d

(McKinney 2016) (making it illegal for an employer to terminate an employee

based on off-duty political and recreational activities).

324. Marisa Anne Pagnattaro, What Do You Do When You Are Not at Work?:

Limiting the Use of Off-Duty Conduct As the Basis for Adverse Employment

Decisions, 6 U.

PA. J. LAB. & EMP. L. 625, 647 (2004) (quoting CAL. LAB. CODE

§ 98.6 note (West 2003) (historical and statutory notes)).

325. See David C. Yamada, Voices from the Cubicle: Protecting and

Encouraging Private Employee Speech in the Post-Industrial Workplace, 19

ERKELEY J. EMP. & LAB. L. 1, 20 (1998) (noting the lack of free speech

protections in private workplaces).

CONTRACTING CORRECTNESS 61

would likely come as a surprise to a great percentage of American

workers who believe their freedom of expression is more

inclusive.

326

Some legal scholars have gone so far as to argue that

First Amendment protections should be extended to employees of

corporations.

327

The policy supporting free speech is especially strong when

the speech is political or religious in nature. Regardless of its lack

of private protection, the First Amendment still gives valuable

insight into the public policy surrounding free speech,

328

and as

stated by former Supreme Court Justice Sandra Day O’Connor,

“political speech [is] at the core of what the First Amendment is

designed to protect.”

329

Accordingly, some states already explicitly

recognize this public policy in protecting a private employee’s free

speech rights.

330

It is important to reiterate here that this Article does not

argue that the mere fact that a morality clause restricts speech

makes that clause invalid. Again, like all factors under this

proposed test, the scope of the clause is part of a sliding scale.

Still, a broad clause that prohibits significant legal activity and

speech, particularly political speech, should slide ever closer

towards unenforceability.

326. See Aaron Kirkland, Note, “You Got Fired? On Your Day Off?!”:

Challenging Termination of Employees for Personal Blogging Practices, 75

UMKC L. REV. 545, 550 n.45 (2006) (citing Pauline T. Kim, Bargaining with

Imperfect Information: A Study of Worker Perceptions of Legal Protection in an

At-Will World, 83

CORNELL L. REV. 105, 133 (1997) (reporting that employees

surveyed “reveal[ed] a striking level of misunderstanding among respondents of

the most basic legal rules governing the [at-will] employment relationship”)).

327. See, e.g., Adam S. Mintz, Note, Do Corporate Rights Trump Individual

Rights? Preserving an Individual Rights Model in a Pluralist Society, 44

COLUM.

J.L. & SOC. PROBS. 267, 309 (2011) [hereinafter Mintz, Note, Do Corporate Rights

Trump Individual Rights] (discussing free speech rights in the private sector).

328. See Novosel v. Nationwide Ins. Co., 721 F.2d 894, 898–99 (1983)

(holding that concern for rights of political expression under the First

Amendment is sufficient to state public policy applicable to private employers

under Pennsylvania law).

329. Virginia v. Black, 538 U.S. 343, 365 (2003).

330. Mintz, Note, Do Corporate Rights Trump Individual Rights, supra note

Error! Bookmark not defined., at 273–74.

62 74 WASH. & LEE L. REV. 3 (2017)

D. Impact of Offending Behavior

Whether it is worded as a Bad Behavior or a Reputational

Impact clause, fairly enforcing a morality clause should require a

showing that the offending behavior (a) actually occurred, (b) is

known or likely to be known, and (c) is likely to cause damage to

the imposing party.

331

We address each assessment in turn.

1. Actual Occurrence

A grave injustice would ensue if the law allowed for the

termination of an agent who was merely the victim of defamation.

However, a rumor can cause reputational damage whether true

or false—and companies can be quick to the trigger to distance

themselves from possible scandal.

332

In the event that credible

evidence contradicts allegations of misbehavior, the enforcement

of a morality clause is weakened. After all, most morality clauses

are premised on the actual happening of the offending event and

even in circumstances where a falsity might injure an employer’s

reputation, it should be assumed that publication of the truth will

repair any damage.

2. Known or Likely to be Known

If a tree falls in the forest and no one is around to hear it,

does it make a sound? If a consultant tries cocaine and only his

boss knows it, does it affect the business enough to justify

termination? The answer to the second question depends in part

on the publicity—or the publicity potential—of the information.

In today’s world, this is relatively easy element to prove, as

anything posted online for more than one person to see would

certainly meet the publicity requirement. Like established

principles in defamation law, broad dissemination should not be

331. See Infra Part IV.D (discussing different impacts of immoral employee

behavior).

332. See Robert D. Highfill, The Effects of News of Crime and Scandal upon

Public Opinion, 17 CRIM. L. & CRIMINOLOGY 40, 40–41 (1926) (discussing the

impact of scandal on public opinion).

CONTRACTING CORRECTNESS 63

required.

333

Even knowledge spreading to one client can affect a

business. Private misbehavior should be beyond the reach of

meddling employers, but the more the information spreads, the

more likely that it will have a noxious impact on the employer.

3. Likely to Cause Damage to the Imposing Party

A general morality clause should only be enforceable if the

imposing party can prove that the offending behavior caused

harm or that reputational harm is reasonably foreseeable given

the facts. This is consistent with principles of employment law

and with the spirit of most morality clauses.

It is often difficult for imposing parties to prove the negative

impact of publicity. In some cases, the terminating party can offer

evidence of customer complaints, adverse media coverage, a

chorus of backlash on social media, or even a decrease in sales or

a boycott. Mendenhall v. Hanesbrands, discussed above, involved

this quantum of proof.

334

When the company’s endorser—a well-

known athlete—posted politically unpopular social media

comments, Hanesbrands fired him immediately under a

Reputational Impact clause giving it the right to terminate for a

public scandal.

335

The athlete’s arguments defeated the motion

for judgment on the pleadings because, while there was evidence

that the post offended some, there was also evidence that others

supported his thinking.

336

With this in mind, the court held that

it was necessary for the company to prove the existence of a

verifiable public scandal in order to defeat a claim of breach of

good faith and fair dealing.

337

Given the realities of modern business and communications,

requiring the showing of an actual adverse impact is too difficult

a burden. Direct proof of adverse reaction or reputational harm is

333. See DAN B. DOBBS, PAUL T. HAYDEN & ELLEN M. BUBLICK, THE LAW OF

TORTS § 519 (2d ed. June 2016 Update) (discussing the elements of a defamation

claim).

334. See 856 F. Supp. 2d 717, 720 (2012) (discussing reputational harms

from social media postings).

335. Id. at 720.

336. Id. at 727–28.

337. Id.

64 74 WASH. & LEE L. REV. 3 (2017)

always difficult to prove. In fact, most employment arbitrators

generally reject such a requirement in the federal employment

context.

338

Firms should not have to wait for negative

consequences before firing an agent who is a ticking time bomb.

But how far should a court go in inferring reputational damage?

Weighing the likelihood of disclosure, courts should assess

the potential for future adverse impact by asking: If the public

discovered the information, would the imposing party’s

reputation be negatively affected? This analysis hinges on the

particular facts of the case and reasonably-based public

perception.

E. Burden on the Restricted Party

Finally, in analyzing a morality clause, courts should

consider the burden the clause places upon the restricted party,

balancing it against the interests of the imposing party. As

discussed in detail with regard to scope and definiteness,

339

morality clauses often significantly restrain an employee’s or

associate’s freedom of expression and freedom to engage in other

legal activity outside of the workplace. Further, they can blur the

already fading line between work and home life, when employees

are constantly under the scrutiny of their employers.

1. Parties’ Relative Bargaining Power

An additional concern for restricted parties is their relative

lack of bargaining power when considering agreements

containing morality clauses, particularly in the employment

context.

340

While an employee could theoretically negotiate the

terms of her employment to limit or eliminate the clause, in

reality, most prospective employees lack such power.

341

As of

338. Snow, The Long Arm of the Boss, supra note 291, at 14.

339. See supra Part IV.C (discussing scope and definiteness).

340. See Daniel D. Barnhizer, Inequality of Bargaining Power, 76 U.

COLO.

L. REV. 139, 143 (2005) (arguing that courts look to limited circumstances in

regards to bargaining power, often failing to consider certain asymmetries like a

constructive lack of choice rather than actual lack of choice).

341. Id.

CONTRACTING CORRECTNESS 65

early 2017, the U–6 rate (economists’ preferred measure for

unemployment in the United States) remained at around 9.4%.

342

In most cases today, employment is a buyer’s market. While

estimates vary, sources have reported that somewhere between

59 and 250 potential employees apply for the average job

opening.

343

Most people who have looked for work in recent years can

attest that the process is lengthy.

344

One must search for position

openings, draft cover letters, submit applications, attend

interviews, wait for the completion of background checks,

complete human resources documentation, etc. When considering

the process and the above-cited employment statistics, it is not

surprising that only around 10% of those offered jobs turn them

down.

345

For most, it seems unlikely that after finally obtaining a

sought-after position, the candidate would contest a contractual

provision requiring him to exercise good behavior or avoid

causing embarrassment. Most peoples’ optimism bias would

certainly convince them to believe they are not likely to behave

badly—or suffer the ill-effects of a harshly-enforced morality

clause.

As a general contract principle, such limited bargaining

power can at times lead to the invalidation of agreements.

346

When invalidating agreements on the grounds of

342. Nicholas Wells, Unemployment Rose Slightly in January, but a More

Realistic Rate is Even Higher, CNBC (Feb. 3, 2017, 9:16 AM),

http://www.cnbc.com/2017/02/03/jobs-unemployment-rose-slightly-but-more-realistic-

rate-is-higher.html (last visited Mar. 4, 2017) (on file with the Washington and

Lee Law Review).

343. See How to Increase Your Odds of Getting an Interview, U. M

ICH.

CAREER CENTER, https://careercenter.umich.edu/article/how-increase-your-odds-

getting-interview (last visited Mar. 4, 2017) (“Some say 118 applicants per job

opening and others say up to 250.”) (on file with the Washington and Lee Law

Review); Martha C. White, Here’s How Long It Really Takes to Get a Job, T

IME

MAG. (Oct. 22, 2015), http://time.com/money/4053899/how-long-it-takes-to-get-

hired/ (last visited Mar. 4, 2017) (illustrating that on average fifty-nine people

will apply for an open position, while only twelve perent will receive an

interview) (on file with the Washington and Lee Law Review).

344. See White, supra note 343 (determining that the average job search

process takes just over six weeks).

345. See id. (“[R]oughly one in 10 people who are offered a job turn it

down.”).

346. See Lonegrass, supra note 157, at 5 (discussing the unconscionability of

standardized forms between large corporations and consumers).

66 74 WASH. & LEE L. REV. 3 (2017)

unconscionability, courts look to whether the contract was

procedurally unconscionable, “indicating that the transaction

lacked meaningful choice on the part of the complaining party.”

347

In terms of morality clauses, this highlights the important

distinction between a high-profile party to an endorsement

agreement (who has significant bargaining power) and the

average employee (who has very little).

348

2. Employee’s Reputation

While the purpose of a morality clause is to protect the image

of the imposing party, it is also necessary to consider the

reputation and future opportunities of the restricted party. While

it is certainly true that any harm to the employee’s reputation is

the result of events she herself set in motion, in some situations,

the employee should be entitled to repose.

However, a morality clause may cause an ill-advised action

or statement to follow an employee much longer than it would

absent the clause.

349

An employee who is terminated from a

long-term position pursuant to a morality clause based on some

insensitive off-duty statement will likely be required to disclose

this statement to his next potential employer, thereby harming

his chances of future employment.

350

In some jurisdictions, the law of defamation recognizes this

concern in the employment context. In order to establish a claim

for defamation, a plaintiff must show that the defendant made a

statement tending to harm the plaintiff’s reputation.

351

The

plaintiff must also show that the defendant somehow “published”

347. Id. at 9.

348. See id. at 5 (emphasizing that form contracts may be inherently unfair

because consumers are “virtually powerless to find better terms elsewhere in the

market”).

349. See infra note 359 and accompanying text (discussing that actions

taken by employees, when made on social media, may follow the employee after

termination).

350. See infra note 359 (citing sources examining how insensitive

statements made on social media may harm an employee’s future prospects).

351. See James B. Lake, Restraining False Light: Constitutional and

Common Law Limits on a “Troublesome Tort”, 61 FED. COMM. L.J. 625, 628

(2009) (citing R

ESTATEMENT (SECOND) OF TORTS § 577 (AM. LAW INST. 1938)).

CONTRACTING CORRECTNESS 67

the statement or made it available to the public.

352

Over the past

few decades, however, courts have begun to recognize the

doctrine of compelled self-publication.

353

That is, a

plaintiff/employee can establish the publication element if it is

foreseeable that he himself would have to repeat the defamatory

remarks when applying for future positions.

354

For instance, in Brown v. M. Caratan, Inc.,

355

an employer

terminated an employee, claiming she had lied on application

documents.

356

In deciding that “it was foreseeable that [the

employee] would be compelled in future interviews to explain her

former employer’s proffered justification for firing her,” the

Eastern District of California held that the employee had

presented sufficient evidence to survive summary judgment on

her self-defamation claim.

357

The doctrine of self-publication thus recognizes that

employees will likely be required to divulge details of a

termination to future potential employers.

358

With regard to

morality clauses, in the modern economy where businesses of all

kinds are highly protective of their images, disclosure of a

termination for some past unwise statement could significantly

impact one’s employment prospects, even if that statement was

relatively minor and made years earlier.

359

In sum, there are

352. Id. at 627.

353. See Laureen K. Kuzur, Torts—Defamation—Compelled

Self-Publication, Sullivan v. Baptist Memorial Hospital, 995 S.W.2d 569 (Tenn.

1999), 68

TENN. L. REV. 395, 395–96 (2001) (directing that a minority of courts

have adopted the doctrine of compelled self-publication).

354. Id.

355. 142 F. Supp. 3d 1007 (E.D. Cal. 2015).

356. Id. at 1032–34.

357. Id. at 1035.

358. See id. at 1035 (noting that an employee who had previously been fired

would have to self-publish a company’s defamatory statements in order to

explain in interviews to potential employers the reason the employee had been

terminated).

359. Particularly when considering the permanent nature of social media

and the internet, it could be unduly burdensome on an employee to hold him

accountable for statements made years earlier. The harm to the employer would

likely be reduced based on the now minimal relevance of the statement. See

Mendenhall v. Hanesbrands, Inc., 856 F. Supp. 2d 717, 726 (M.D.N.C. 2012)

(denying Hanesbrands’ motion to dismiss Mendenhall’s claim that Hanesbrands

impermissibly terminated Mendenhall pursuant to a morality clause in

response to Mendenhall’s controversial tweets). The case was subsequently

68 74 WASH. & LEE L. REV. 3 (2017)

certain situations where the potential harm to an employee

greatly outweighs the likely harm to her employer.

360

F. Application of the Model Test

An exercise in applying the factors is instructive in proving

their logic and practicability. What follows are five illustrations

based loosely on documented case law, media reports, and

existing morality clauses. An analysis based on the five factors

supplements.

LLUSTRATION 1

361

A marketing firm for lawyers hires a famous actor as its

spokesperson. The morality clause provides that the firm can

terminate the relationship if the endorser does anything to

embarrass it. Later, the firm learns that the actor appeared on

the internet in a comedy skit making fun of plaintiffs’ attorneys.

A quick internet search uncovers that he has recently engaged in

a bar fight.

settled without discussion, on the merits, of the relationship between morality

clauses and the use of social media. See Marc Edelman, Rashard Mendenhall

Settles Lawsuit with Hanesbrands over Morals Clause, F

ORBES (Jan. 17, 2013),

http://www.forbes.com/sites/marcedelman/2013/01/17/rashard-mendenhall-settles-

lawsuit-with-hanesbrands-over-morals-clause/#5a322b076c87 (last visited Mar. 4,

2017) (“Just three days later, L. Lynette Fuller-Andrews, the acting general

counsel for Hanesbrands, informed Mendenhall that Hanesbrands was

terminating his endorsement contract. As grounds for termination, Fuller-

Andrews referenced the morals clause in Mendenhall’s contract . . . .”) (on file

with the Washington and Lee Law Review); see also Jacquelyn Smith, How

Social Media Can Help (or Hurt) Your Job Search, F

ORBES (Apr. 16, 2013, 4:20

PM), http://www.forbes.com/sites/jacquelynsmith/2013/04/16/how-social-media-

can-help-or-hurt-your-job-search/#cf8eb8e24fdb (last visited Mar. 4, 2017)

(detailing that about fifty percent of companies look to social media to determine

whether a candidate is a good fit for the company) (on file with the Washington

and Lee Law Review).

360. See supra notes 355–357 and accompanying text (citing sources to

suggest the potential harm to employees for being fired pursuant to morality

contracts because employees may be forced to disclose to new employers the

reason for termination).

361. This illustration is loosely based on the facts of Bernsen v. Innovative

Legal Marketing, LLC, 885 F. Supp. 2d 830 (E.D. Va. 2012).

CONTRACTING CORRECTNESS 69

• Nexus: The actor’s participation in the skit has a strong

nexus to his role as a proponent of legal services. That negative

association undermines the purpose of the contract. The nexus is

significantly more tenuous as it relates to the bar fight.

• Meaning Transfer: The primary purpose of an

endorsement agreement is to achieve meaning transfer, thus

meeting this factor.

• Scope of Clause: The wide breadth of the clause prohibits

legal speech and expression; however, this may be justified in

light of the party’s bargaining power and purpose of the

endorsement agreement.

• Impact: The offending acts are known because they were

posted on the internet. The well-known actor is likely to garner

attention on the internet due to his fame. Humiliating lawyers is

reasonably going to embarrass legal marketers.

• Burden: This endorsement agreement is not the actor’s

primary employment and he enjoys a high degree of bargaining

power.

• RESULT: The factors weigh heavily in favor of the

enforceability of the clause.

LLUSTRATION 2

362

The employment contract between a college football coach

and a major university provides that he will not engage in

conduct “that brings the University into disrepute; or that reflects

dishonesty, disloyalty, willful misconduct, gross negligence, moral

turpitude or refusal or unwillingness to perform his duties.” The

police arrest the coach for domestic battery. ESPN’s cameras

record the moment the coach was booked, and the network

broadcasts these images nationally.

• Nexus: While highly reprehensible, the football coach’s

private domestic dispute has little to do with his primary role as

a coach, which is to train his athletes and lead his team to

success.

362. The illustration is loosely based on the facts of Haywood v. University of

Pittsburgh, 976 F. Supp. 2d 606 (W.D. Pa. 2013).

70 74 WASH. & LEE L. REV. 3 (2017)

• Meaning Transfer: Though secondary to his athletic

responsibilities, as the head of a football program at a major

university, the coach is high-profile figurehead and a leader and

role model to players and fans alike. His private actions do

represent his institution.

• Scope of Clause: As enforced here, the morality clause

attempts to terminate the employee over allegations of illegal

behavior, actions that deserve the lowest protection.

• Impact: As the subject of indisputable national media

coverage, the coach’s actions will certainly impact the university,

which will presumably receive strong pressure to distance itself

from one of its most high-profile (and highly paid) employees. If it

does not, the school could be perceived as condoning the actions

and become the subject of further negative attention or even

boycotts.

• Burden: The coach’s high-level success in sports likely

granted him significant bargaining power when signing the

agreement with the university. Further, any negative impact on

his reputation would be the result of the domestic battery itself,

rather than from the termination of his contract.

• RESULT: The factors weigh heavily in favor of the

enforceability of the clause.

LLUSTRATION 3

363

A small private university hires a married man as an

assistant director of financial aid. The employment contract

includes a clause stating, “as a Christian institution, the

university requires all administrators to exercise strong family

values.” During the term of the contract, the director’s wife files

for divorce after she discovers he has had multiple recent affairs.

The director’s home life becomes the subject of gossip among

school employees and students, and the university terminates his

employment pursuant to the clause.

• Nexus: The administrator’s private life does not have a

nexus to his daily professional responsibilities, nor is he a role

363. The illustration is based loosely on the Lee University morality clause.

Supra note 212.

CONTRACTING CORRECTNESS 71

model or figurehead. However, the institution’s clear mission is

articulated and clear and it is reasonable for it to require its

employees to exercise and model it, even in their private lives, if

they freely agree to it in advance.

• Meaning Transfer: As the subject is a relatively low-profile

employee, meaning transfer is likely to be limited. Still, the fact

that employees and students became privy to the information

could create the impression on-campus that the small university

does not in fact uphold Christian family values.

• Scope of Clause: The clause in this case is broad but clear:

it requires the exercise of “strong family values,” and cites

Christianity as the framework for determining such values. The

employee could have quite easily predicted that adultery would

be a violation of the clause.

• Impact: Although major economic consequences seem

unlikely, with regard to those who know the on-campus gossip,

the director’s conduct may undermine the mission of the school.

This climate could affect employee culture and student morale.

• Burden: In this case, the low-profile employee likely had

minimal power to negotiate the terms of the agreement. On the

other hand, an employee’s past infidelity is not likely the type of

behavior that would prevent him from obtaining future

employment, at least at secular universities and businesses.

• RESULT: Due largely to the morality clause’s clarity and

ease of predictability, the factors weigh in favor of enforceability.

LLUSTRATION 4

364

An employment agreement between ABC insurance company

and a claims adjuster includes the following provision: “Team

Members should avoid off-duty behavior that would have a

negative impact on their job performance at the Company,

conflict with their obligations to the Company, or in any way

negatively affect the Company’s reputation.” ABC discovers that

the claims adjuster, an employee of five years, recently created

364. The illustration is loosely based on a combination of (1) a morality

clause found in T

YSON FOODS, INC., CODE OF CONDUCT (2016),

http://media.corporate-ir.net/media_files/irol/65/65476/govDocs/codeofconduct.pdf;

and (2) ESPN’s termination of Curt Schilling. Sanomir, Curt Schilling, supra

note 122.

72 74 WASH. & LEE L. REV. 3 (2017)

and posted a racially-insensitive meme on his personal (but not

private) Facebook page that poked fun at Asian-American

drivers. The meme, which went viral, received significant

negative online feedback.

• Nexus: The employee’s behavior, although potentially

offensive, has a weak nexus to his role as an insurance adjuster.

The company’s best argument (and one that is often attempted) is

that the act shows overall poor judgment and that this, by

extension, can affect his professional performance. This is a

tenuous proposition.

• Meaning Transfer: Although the claims adjuster acts as

the face of the company with individual clients, the general public

is unlikely to transfer his bad behavior onto his employer.

• Scope of Clause: The wide breadth of the clause effectively

pokes a hole in the contract, allowing unilateral termination and

overuse over something relatively minor.

• Impact: The offending acts are known because they

garnered significant online attention. However, nothing in the

post suggests an association with the employer, so it is unlikely

that it will have a negative effect on its reputation. Given the

ease of posting feedback online, the fact that the comment got

much online feedback does not mean that it created a scandal.

• Burden: Like most rank-and-file employees who sign form

employment contracts, the employee had little bargaining power

over this ambiguous clause. A termination would have a negative

impact on the employee of five years, who almost certainly would

have to disclose the cause for termination to future employers.

• RESULT: The factors weigh against the application of the

clause to terminate the employee.

LLUSTRATION 5

365

A freelance cellphone application developer enters into an

independent contractor agreement to create an educational app

for a children’s television show. The contract includes a clause

that generally prohibits the developer’s “moral turpitude.” During

365. This illustration is loosely based on the facts of Jarry v. Southington

Bd. of Educ., No. 3:08CV954(WWE), 2009 WL 179817, at *1 (D. Conn. Jan. 22,

2009).

CONTRACTING CORRECTNESS 73

the engagement, the app developer competes in a bikini contest

broadcast nationally on raunchy late night television show. On

the show, she mentions that she creates children’s apps, but does

not mention for whom.

• Nexus: At first blush, appearing scantily-clad on television

has little to do with developing software. The company may argue

that because she was engaged to develop content relating to

children’s education, a nexus is present.

• Meaning Transfer: This relationship has a very low degree

of meaning transfer. App developers work behind the scenes and

are not generally known to the public. She is not a fulltime

employee. These factors militate against a finding of meaning

transfer.

• Scope of Clause: A party should be able to reasonably

predict what conduct would violate the agreement. This a

temporary engagement and the clause does not state or reference

the mission of the company with regard to children. Moreover,

while not necessarily professional or prudent, the app developer’s

conduct was neither illegal nor ignominious.

• Impact: Even though this segment was broadcast

nationally, the general public is not likely to associate the

subject’s identity with the company’s, and therefore there will

likely be little to no impact.

• Burden: The freelance developer has relatively little

bargaining power, but it must be noted that any burden on her

future reputation may have been caused by her own appearance

on the show.

• RESULT: The factors weigh against the application of the

clause to terminate the app developer.

By taking into account the role of the employee, the

predictability and breadth of the clause, and its foreseeable

impact on the company and burden on the individual, morality

clauses can be tailored to attend to the legitimate business

interests of the imposing party while at the same time respecting

the liberty and privacy of the individual.

74 74 WASH. & LEE L. REV. 3 (2017)

V. Conclusion

In a pre-internet case examining the fairness of a

non-contractual termination for off-duty conduct, Judge Posner

commented that, “where an employee’s off-duty behavior is

blatantly inconsistent with the mission of the employer and is

known or likely to become known, most any employer, public or

private, however broadminded, would want to fire the employee

and would be reasonable in wanting to do so.”

366

While, in certain

circumstances, imposing parties should be able to employ and

enforce morality clauses, the law must have a balanced standard

for analyzing their enforceability.

367

The unfettered use of

morality clauses can be socially harmful and unjust.

368

Remaining unchecked, these restrictions can be loopholes for

terminations in bad faith, pretexts for discrimination, and vague,

unilateral limitations enforced at the imposing party’s whim and

subject to the ever-changing social and political tides.

369

The internet and social media have blurred the boundary

between on- and off-duty conduct, leading individuals of all ranks

to be subject to public scrutiny and potential scandal.

370

While

this provides an additional incentive to companies seeking to

deploy such clauses, this Article argues that it is not always a

justification for a blanket restraint on legal behavior and speech.

After canvassing the various legal and public policy pressure

points inherent in morality clauses, this Article establishes a

rubric for their analysis. Our framework proposes examining

366. Wild v. U.S. Dep’t of Housing & Urban Dev., 692 F.2d 1129, 1133 (7th

Cir. 1982).

367. See supra note 209 and accompanying text (citing sources comparing

non-disclosure agreements and morality clauses to argue that morality clauses

should face the same level of judicial scrutiny).

368. See Brown v. M. Caratan Inc., 142 F. Supp. 3d 1007, 1035 (E.D. Cal.

2015) (determining that an employee can sue an employer for self-defamation

because an employer should have a reasonable expectation that the fired

employee will need to disclose the circumstances of his expulsion—breaching a

morality clause—to his prospective employer).

369. See supra note 359 and accompanying text (discussing how morality

contracts can occasionally provide issuers with fodder to act arbitrarily and in

bad faith).

370. See supra Part II.B.2 (discussing how employers constantly check social

media throughout the application process).

CONTRACTING CORRECTNESS 75

morality clauses and their enforceability along five factors: nexus,

meaning transfer, scope, impact, and burden.

Simply put, morality clauses should be enforceable only when

(1) there is a reasonable nexus between the offending activity and

the imposing party’s legitimate business interests, (2) those

business interests are definite enough so as to assist a reasonable

person in predicting what is prohibited, and (3) the offending

activity causes or will foreseeably cause a reputational backlash

against the imposing party. In addition, courts should examine

(4) the degree of meaning transfer, or associative power that the

restricted party has with the company in the public’s esteem. For

instance, the private, moral failings of low-level employees may

be unlikely to mar an employer, but when the purpose of the

contract is to create an association or endorsement, the scales tip

in favor of the imposing party. Finally, courts should scrutinize

(5) the burden imposed on the restricted party, as morality

clauses can especially harm individuals with little bargaining

power.

An ex ante restriction on any behavior or speech that is

“potentially embarrassing” forces people into an imagined

conformity and “press conference” behavior both on and off the

job.

371

This chills speech, innovation, and challenges to the status

quo, not to mention forcing employees to check many of their

legal rights at their employer’s door.

372

Analyzing morality

clauses through the five-pronged analysis allows for their more

efficient, balanced, and just use and enforcement.

371. See Clark, supra note 80, at 13–14 (discussing the potential chilling

effect of speech that might be encountered by those subject to morality clauses).

372. Supra notes 203–206 and accompanying text.