Tuesday, December 8, 2009
The Law doesn't take a Holiday, so during this Holiday season we examine legal issues surrounding office parties. We'll also discuss some of the constitutional issues surrounding bankruptcy law and in all the media circus surrounding the Tiger Wood story, just what do "morals" clauses mean in endorsement contracts? We'll discuss it all with These Days legal analyst Dan Eaton.
MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh. You're listening to These Days on KPBS. A simple holiday office party is not so simple when it's followed up by a New Year's lawsuit. On this legal update, we'll discuss legal issues surrounding holiday parties. Plus, if you go overboard this holiday, we'll get an update on a case about bankruptcy before the Supreme Court. And the ubiquitous flap-doodle about Tiger Woods made us curious about whether morals clauses are enforced in endorsement contracts. Joining us with this mixed holiday bag is These Days legal analyst Dan Eaton. Happy holidays, Dan.
EATON: Happy holidays to you, too, Maureen.
CAVANAUGH: Well, of course this is the season of office parties.
EATON: It is.
CAVANAUGH: And you have the opportunity for co-workers to get together but that apparently brings about the potential for legal trouble. You last addressed this topic three years ago…
CAVANAUGH: …on These Days and yet people are still getting into trouble…
EATON: Still getting into trouble, haven’t learned the lessons.
CAVANAUGH: Bring us up to date on some of the…
EATON: Sure. When…
CAVANAUGH: …case law.
EATON: When I talked about in December of 2006, Maureen, I said, look, the number one way you can get into trouble is to drink excessively if you’re an employee. Well, it turns out employers, whom I of course represent in my practice, the number one way they can get into trouble is to allow or encourage or in any way sort of give the opportunity for employees to drink excessively. That is the number one way they can get in trouble legally.
CAVANAUGH: And, of course, in March of this year, though, a New York appeals court dismissed a case brought by a national home improvement store—this is a really wild story…
CAVANAUGH: …this particular one. It’s tragic but at the same time it’s hard to see how it traces back to the employer.
EATON: Well, and that’s really the key question…
EATON: …isn’t it, Maureen? In that case, which was just decided in March of this year by a New York appeals court, it was the case of an overnight stock associate, a clerk, most of us would call him, at a national home improvement store. He was attending his office’s annual holiday Christmas party, I think it was called, and the store prohibited, pursuant to national company policy, prohibited the serving of alcohol so no alcohol was served. But, of course, when no alcohol is served at the event, there is the inevitable after party and an after party was held at a local inn. And what happened was this particular associate got a little drunk and was driven home by a co-worker. Well, when the co-worker’s boyfriend tried to rouse the employee, the stock associate took a box cutter than had been given to him, that he’d received in the course of his business, and cut the boyfriend’s face and back. And so, of course, the boyfriend sued the national home improvement chain and others, including the local inn, for damages, saying, look, because you didn’t give the employee a place to store his box cutters, that contributed to the accident and you should have to pay.
CAVANAUGH: And what did the courts decide?
EATON: Well, the trial court actually agreed with the boyfriend and said the case ought to be allowed to proceed. But the appellate court reversed and said, and this is always the critical question, Maureen, for the purposes of employer liability, look, this was not – this attack was done purely out of personal motive. It was not within what’s called the course and scope of the stock associate’s employment and, therefore, the national home improvement store could in no way be liable. This was a personal attack. It did not further the employer’s business interest.
CAVANAUGH: However, there was another case in May of this year in Puerto Rico. They said an employer could be held liable for injuries in the aftermath of a holiday party under certain circumstances. What was that case about?
EATON: Actually, the party was actually held at a place where my mother used to have a winter home. But – So it was really funny when I saw it.
CAVANAUGH: Close to home.
EATON: Yeah, it really was. But this was a case that was decided by the U.S. Court of Appeals that decides appeals from Puerto Rico federal courts and it involved a holiday party that a pharmaceutical company threw. And what happened was one of their employees had a car crash after leaving this party at what’s called Palmas del Mar, beautiful place, by the way, but he had the car crash while drunk and he injured another driver. And so the question was whether the pharmaceutical company could be held liable for that. And the court ultimately held that, yeah, there was enough in the victim’s complaint to say that if it’s true, to establish that the use of the car to leave the company’s party was really more for the employer’s benefit and therefore the case could be allowed to proceed. They didn’t find any liability, it just said it couldn’t be thrown out at an early stage.
CAVANAUGH: Let’s bring this really back to home.
CAVANAUGH: What does California law – what kind of liability does California law impose on employers for injuries employees may cause following an office party?
EATON: Well, Maureen, let’s take it one step back for a second.
EATON: California law is very clear that there is no social host liability. You don’t get in trouble if you’re serving drinks in the home and so on. But here’s the thing. California did in 1981, in a case called Harris versus Trojan Fireworks Company, represent a form of what’s been called in the literature ‘business host liability.’ In the Harris case, an employee became intoxicated at a company holiday party and he was involved in a car accident that killed one person and injured two others. The Court of Appeal ruled that the employer could be held liable because there was enough of a connection between the employer and the party and the employee’s continued employment.
CAVANAUGH: I see. Okay, so that was the court’s reasoning in that case.
EATON: Well, the court’s reasoning and the reason why there was this sufficient nexus because the party was held on company premises, it was held during work hours between noon and four o’clock, and the employee who caused the accident, since he was on the clock, was paid to attend the party. Now that would be enough…
EATON: …said the Court of Appeal, to prove that the employee’s intoxication occurred—again this phrase—within the scope of his employment.
CAVANAUGH: And, therefore, what is – how do employers therefore limit their liability at an office party situation?
EATON: Well, of course you could always decline to serve alcohol, which seems to be the root of a lot of these problems but if you’re not going to go that far, you can still take three prudent steps that the employer in Harris did not. First, you should make sure that attendance is purely voluntary and not in any way, even implicitly, mandatory or would have any affect on the employee’s employment. That’s not to say, by the way, you can’t encourage people to attend, just make sure there’s no connection to their employment. Second, while the – second, it is very important to hold the party during non-work hours. Workers should not be on the clock while they are attending, particularly if you’re serving alcohol. And, third, consider holding the party off company premises. Now that may not be practical in today’s economic times but the fact is, a presence of one or more of these things could limit, if not eliminate, the employer’s potential exposure if something bad does happen in the aftermath of what should be a very festive celebration for employees to get together.
CAVANAUGH: So that’s something that all employers and even employees should take into mind while they’re going to their office holiday parties this year.
EATON: Very much so, yes.
CAVANAUGH: Let’s move on to a case that everybody’s heard something about whether or not they wanted to. Everyone knows, I think, that on the morning of November the 27th, the day after Thanksgiving, golf superstar Tiger Woods was involved in a minor traffic accident near his home. Since then, in the aftermath of tabloid revelations about his private life, Woods admitted in a statement that he – to unspecified transgressions in his private life. Now, what are morals clauses and how do they come into play in Tiger’s situation? We know that Tiger Woods is perhaps the most famous athlete and certainly the one with the most endorsements that we know of.
EATON: Right, and it is just by way of a very strange coincidence that we happened to be talking about this when there was a completely unrelated development that just occurred with his mother-in-law this very morning, as a matter of fact. But this is the story that just won’t go away no matter how resolute you want to look away. Look, let’s talk about morals clauses. Moral clauses are standard provisions in celebrity endorsement contracts and what they do is, they generally permit the sponsoring company to pull the plug on the endorsement deal if the celebrity does anything to bring him or herself into public disre – disrepute or scandal. A compelling case, by the way, can be made, and I need to say this, that is what is happening to Mr. Woods and his family is really none of the public’s business whatsoever. That said, it’s also important to realize that all of the companies that are paying him an estimated $92 million, according to the July issue of Sports Illustrated magazine, making him the number one…
EATON: …sports endorser. They’re all publicly standing behind him. But if those endorsement contracts include morals clauses, Maureen, it’s important to realize that these sponsors may have the right to drop Mr. Woods as a pitchman. The advertisers generally reserve to themselves the right of determining whether something has reached the point of bringing a celebrity endorser into public disrepute to trigger that clause.
CAVANAUGH: So there isn’t actually any list of things you can’t do. It’s really up to the employer to decide what is going to trigger that morals clause.
EATON: Well, that’s right. It says if there’s public disrepute, scandal, it goes against moral conventions, there’s all sorts of buzzwords in these but not a list of specifics. And why do they have these clause? Well according to a 2005 article in the Columbia Journal of Law and the Arts, they explain that, quote, advertisers worry that once a celebrity’s image is connected with a product, it may become an albatross if it is besmirched by allegations of impropriety. Consequently, advertisers use the morals clause in an attempt to quickly disconnect the celebrity product association in the consumers’ mind, close quote. A USA Today story suggested that companies may be looking at their morals clauses but so far the companies are saying, really, it’s none of anybody’s business and we stand behind Tiger Woods.
CAVANAUGH: Have morals clauses factored into any dismissals of celebrities of any kind in recent years?
EATON: Well, certainly, in recent years as well but it’s important to realize here in California that they had a big play in the 1950s in connection with the McCarthy era…
EATON: …and that was when a lot of people, of course, were blacklisted. They were called before the Congressional Un-American Activities Committee and asked whether they were communist. Some of them refused to answer. Well, studios have morals clauses in the contracts of these producers, directors and writers and so forth, and some of them did not name names and some of them refused to answer questions about even their own activities and, as a result, the studios did pull the plug on their deals and California state and federal courts uniformly backed them during this era. Now you asked the question about more recently, yes, as a matter of fact, even just this year there was a case involving a contract between Fruit of the Loom and NASCAR driver Robby Gordon arising out of an ugly confrontation that he had with a fellow driver in which he threw something at the driver’s passing car and then called him a profane name, as a matter of fact. But that case was decided, ultimately, on issues other than the morals clause. But actually, though, in July of this year, a police beat reporter in Texas was just – in a San Antonio affiliate of ABC, was just fired for breaching the morals clause because of well-publicized domestic disturbances that…
EATON: …had gotten in the press. And her contract said that – gave the station the right to fire her on 24 hours notice if she, quote, failed to conduct herself with due regard to public morals and decency or if she committed any act or became involved in any situation or occurrence tending to degrade the reporter in the community or which brought the reporter into public disrepute, contempt or scandal, close quote. Maureen, that clause is fairly typical of the breadth of these kind of clauses. And the station decided to exercise it, and the court upheld the station’s right to do so.
CAVANAUGH: That’s fascinating. You know, for this third topic, we’re hardly going to have time to explore it the way we should but let’s go for it.
EATON: All right.
CAVANAUGH: We have – the U.S. Supreme Court heard oral arguments last week in a case challenging the constitutionality of a federal law that limits the advice a lawyer may give a client who is contemplating bankruptcy. Tell us about that.
EATON: Sure. This was a case arising out of a 2005 Congressionally passed law called the Bankruptcy Abuse Prevention and Consumer Protection Act, Maureen. And basically the provision in question suggested that attorneys could not advise clients who were contemplating bankruptcy to assume more debt. A client walks in and says I’m thinking about assuming more credit card debt. If I do and I file bankruptcy, will that be discharged? This law seems to prevent them from doing that. The question from a constitutional perspective was whether that violated the attorney’s first amendment rights and…
EATON: …unduly interfered with the attorney’s broad rights to give full advice and options to their clients. And the Supreme Court seemed fairly skeptical of the argument that it was unconstitutional but we’ll see. Chief Justice Roberts anyway seemed not to like the intrusiveness in the relationship between attorney-client that this provision seems to impose.
CAVANAUGH: Well, let’s hope none of our listeners have to deal with that in any way, shape or form.
EATON: Let’s hope they’re safe and prudent for this holiday season.
CAVANAUGH: After the holiday season, right.
CAVANAUGH: Thank you so much, Dan.
EATON: Sure, thank you, Maureen. Happy holidays to you and all of our listeners.
CAVANAUGH: Thank you so much. I’ve been speaking with These Days legal analyst Dan Eaton. If you’d like to post a comment, go online, KPBS.org/TheseDays. Stay with us for hour two of These Days coming up in just a few minutes here on KPBS.