Tiger Woods earned an estimated $105 million from sponsorships last year. Could his future earnings from endorsements be at risk? Not at present. Even with Tiger's recent admission of marital infidelity, Tiger's endorsees, Nike, Gatorade, Pepsi and Gillette, have all decided to stand with him (http://money.cnn.com/2009/12/02/news/companies/tiger_woods_sponsorships/ and http://www.reuters.com/article/domesticNews/idUSN3051777520091202).
Despite the fact that Tiger is likely to go into hiding until sometime next year, the story of his marital infidelity will be major news for the near future. The gossip websites have made it clear that they are actively searching for more women who claim to have had relationships with Tiger, and at least one gossip website claims they already know of several more women who are willing to claim they had affairs with the world's most recognizable athlete. Is it possible that sponsors might have second thoughts about having Tiger promote their products? Is marital infidelity even a legitimate basis for cancelling an endorsement contract?
Given the number of athletes who are regularly involved in public scandals, any major endorsement contract is going to contain a morals clause. Typical morals clauses contain broad language allowing the endorsee to terminate the contract if the athlete engages in "acts of moral turpitude" or becomes involved in "any situation or occurrence involving fraud, moral turpitude or otherwise reasonably tending to bring the endorser into public disrepute, contempt, scandal or ridicule."
But a contract involving Tiger Woods would not be a typical contract. There is no other athlete who has greater bargaining power than Tiger, and it is extremely unlikely that any contract involving Woods would contain a typical morals clause. The morals clauses in Tiger's contracts probably require that he actually be convicted of a major criminal offense before the contract could be terminated (obviously his traffic ticket would not qualify). Indeed, those familiar with the terms of Nike's endorsement contracts state that they require a felony conviction before the contract can be terminated. Thus, when the criminal allegations against Michael Vick became public in 2007, Nike was unable to terminate him immediately. Nike put Vick on suspension while the criminal case was pending, but formally terminated Vick's endorsement contract when he pleaded guilty later that year.
But let's assume that one of Tiger's many attorneys and agents messed up and allowed a broad morals clause to find its way into one of Tiger's many endorsement contracts. Could a spate of marital infidelity be enough to terminate a contract under a morals clause? There are few modern court cases involving enforcement of morals clauses because those accused of immoral conduct are unlikely to want air those allegations in a courthouse.
Most of the cases involving morals clauses are from the 1950s, when studios used morals clauses to discharge or suspend directors and screenwriters who were accused of being communists. As could be expected during the McCarthy era, courts held that the studios had properly discharged these individuals for violating morals clauses. But these causes are of doubtful continued vitality. It's highly unlikely that a modern court would be willing to authorize the termination of a contract under a morals clause for protected First Amendment activity.
There are no court decisions involving a termination under a moral clause for adultery. Most commentators have stated that to justify an discharge under a morals clause, the employer must prove that the employee's conduct would have resulted in actual losses to the employer if the employment continued. Thus, the endorsee would have to show that the alleged marital infidelity would have effected the endorsee's bottom line. Given the popularity of an athlete like Tiger Woods, it would be difficult to prove that marital infidelity could actually effect an entire business. Tiger can rest assured that his millions of dollars in endorsement contracts are secure.
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