Morality Clauses & Employment Agreements: What Employers Need to Know

Employers take risks every day with the people that the company hires - including top level managers and CEOs.  So do brands and sports teams when they hire spokespeople or athletes on multi-year, multi-million dollar contracts.  Anytime there are significant dollars committed to a single person over a long period of time, real risk exists.  

One of the most impactful traits of the people you hire is their moral character.  This is especially true when the person you hire is your spokesperson, or your chief executive, or otherwise is the face of your organization.  One of the most impactful tools you have to control your contractual relationships are called morality clauses.

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Copyright Law Update: All About Fair Use

(The following is an excerpt from my book risk, create, change: a survival guide for startups & creators, now available here at

    One of the key doctrines of copyright law is the concept of fair use.  Fair Use is, simply stated, a defense to a copyright infringement claim.  This doctrine allows for, in certain, limited circumstances, the unlicensed use of copyrighted works. 

    The Copyright Act provides provides the statutory framework for determining whether something is a fair use and identifies certain types of uses—such as criticism, comment, news reporting, teaching, scholarship, and research—as examples of activities that may qualify as fair use. 

    Generally speaking, only a federal court after a copyright infringement case has been filed can really determine if one’s actions in using a copyrighted work constitutes Fair Use and is thus permissible.  From a startup or entrepreneur’s standpoint, if you are in the educational space or publishing space involving artistic criticism, Fair Use becomes a significant debate at the office.  For the purposes of this paragraph, “publishing” could include not only the written word but also video blogging and related content production. 

    There are four factors that courts will consider in determining if the unlicensed use of a copyrighted work constitutes Fair Use:

  1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  2. the nature of the copyrighted work;
  3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. the effect of the use upon the potential market for or value of the copyrighted work.

    Since Fair Use is such a generally applicable topic, it bears some additional explanation.  The first factor in the fair use analysis focuses on what the purpose and character of the use is, including whether the use is of a commercial nature or is for nonprofit educational purposes.  A key part of the analysis here is how the party claiming Fair Use is using the copyrighted work.  Courts are much more likely to find that nonprofit organizations using copyrighted material for educational and noncommercial uses qualify as Fair Use.   One should not automatically assume, however, that all nonprofit education and noncommercial uses are automatically fair and all commercial uses are not fair.  This first factor is only part of the four part analysis, and it is the court’s analysis of all of the factors as a whole that will determine the outcome.

    “Transformative” uses are more likely than not to be considered fair.   Transformative uses are those that add something new, furthering the purpose of the original work or imbuing the original work with a different character.

    The second factor focuses on the nature of the copyrighted work.  This can be a slippery concept.  The analysis here is the degree to which the copyrighted work that was used relates to the overarching purpose of copyright law in encouraging creative expression.  In other words, when someone uses a copyrighted work that is a novel, movie or song - all forms of creative expression - that person is less likely to be entitled to argue the Fair Use doctrine.  If the copyrighted work was a news story or a technical article, the it is more likely that Fair Use could be found in that circumstance.

    The third factor focuses on the amount and substantiality of the portion used in relation to the copyrighted work as a whole.  In short, how much of the copyrighted work was used?  Here courts would look at both the quantity and quality of the copyrighted material that was used.  Not surprisingly, the larger the portion of the copyrighted work used, the less likely it will be that Fair Use will be found.  Also, the converse is also true.  The smaller amount of the copyrighted work used, the more likely that a court would determine Fair Use was applicable in the situation.  In some contexts, using even a small amount of a copyrighted work was determined not to be fair because the selection was an essential part—or the “heart”—of the work.

    The fourth and final part of the Fair Use analysis focuses on the effect of the use upon the potential market for or value of the copyrighted work.  Does the use harm the copyright holder’s asset?  The court would have to examine the existing or future market for the copyright owner’s original work. Does the use  harm the copyright owner by displacing sales of the original owner’s work that would have happened but for the infringing user’s activities? This is probably the last place on earth where you would want the monetary value of your property to be determined, especially if your work is avant garde or there is no clearly established market (yet) for your product.  

Have questions about your creative work and copyright law?  CONTACT US


Employment Law Update: U.S. Supreme Court Upholds Employers' Contractual Rights to Require Individual Claims Via Arbitration

In a significant and far-reaching decision, the U.S. Supreme Court ruled that employment agreements that require the arbitration of certain employment claims brought by employees on an individual basis will be enforced as written.  Employees may not band together to form a quasi-class action against their employer in an arbitration setting if the employment agreement specifically prohibits it. 

Today's decision in the case of Epic Systems Corp. v. Lewis addressed an issue that has been unresolved in employment law for decades.  It also potentially affects every employer and every employee in the United States.

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Employment Law Update: Philadelphia Ordinance on Wage History Blocked

The Chamber of Commerce for Greater Philadelphia was awarded a preliminary injunction in the US District Court for the Eastern District of Pennsylvania against the implementation of a City of Philadelphia Ordinance which purported to: 1) prohibit an employer from inquiring about a prospective employee's wage history and 2) make it illegal for an employer to rely on wage history "at any stage in the employment process" to determine a salary for an employee.

The Court held that the "Inquiry Provision" of the City Ordinance violated the free speech clause of the First Amendment. The Court allowed the "Reliance Provision" to stand. 

The City's rationale was that relying on salary history arguably could perpetuate a perceived wage gap between genders.  

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Capital Gains Tax, Explained

The tax filing deadline is approaching, and there are quite a few new wrinkles in the Tax Code for individuals to consider.  Recently, I have fielded quite a few questions about the recent changes in how capital gains tax is calculated.  Here are the basics you need to know this tax season:

A capital gain is realized when a capital asset is sold or exchanged at a price higher than the price paid for that asset (or its “basis”). Basis is defined as an asset’s purchase price, plus commissions and the cost of improvements (if any), minus depreciation. 

A capital loss happens when an asset is sold for less than its basis. Capital gains and losses are not adjusted for inflation. 

Long term capital gains and losses occur if the asset was held for more than one year.  

Short term capital gains and losses occur if the asset was held for less than one year.  

So what are the capital gains tax rates?

The Tax Cuts and Jobs Act of 2017 changes things up quite a bit from the prior methods of capital gains taxation.  

Let’s first address an easy concept:  Short term capital gains are taxed at the same rate as ordinary income.  If you have bought and sold a capital asset within one year, you just pay your normal federal income tax rate on that gain.  

For long term capital gains, however, it not that straightforward. The long term capital gains tax rate is either 0%, 15% or 20%, depending on your income level. This is most easily described by the following chart:


Gains on the sale of artworks and collectibles are taxed as ordinary income up to a maximum 28 percent rate.