Recently, the CEO of Tapestry, Inc., parent company to luxury brands like Coach and Kate Spade, abruptly resigned in part because of allegations of personal misconduct. The CEO, Jide Zeitlin’s, employment contract contained the following clause:
You hereby represent and warrant that you are not currently, and have never been, the subject of any allegation or complaint of harassment, discrimination, retaliation, or sexual or other misconduct in connection with prior employment or otherwise, and have not been a party to any settlement agreement or nondisclosure agreement relating to such matters (the “Representation”).
While Mr. Zeitlin vehemently denied the allegations against him, the clause in his employment contract is still problematic. Merely being “the subject of any allegation or complaint of harassment, discrimination, retaliation or sexual misconduct” is much broader than a typical morals clause. It covers individuals who are accused of such conduct even if they are ultimately vindicated. Further, the term “in connection with prior employment or otherwise” expands the breadth and depth of the clause even more. If an individual has been accused of misconduct in school, arguably the clause would cover that behavior. It is also not subject to any temporal limitation.
The overwhelming majority of employees in Virginia are “at-will,” meaning they can be discharged at any time and for any reason subject to some limited exceptions. Many executive level employees have agreements which state that they may be terminated for cause. Being untruthful about previous allegations of misconduct or harassment could constitute cause depending on how the agreement is written.
What would a clause like Mr. Zeitlin’s mean for your average employee in Virginia? It depends. If you are already “at-will,” your employer does not need a reason to terminate you. Being less than forthcoming with respect to a clause like that would give your employer more ammunition when it comes to coming up with a legitimate, non-discriminatory reason for taking an adverse employment action against you. If your employer terminated you for being in violation of a morals clause like the one in Mr. Zeitlin’s employment agreement, however, it could have an impact on whether or not you would qualify for unemployment benefits. Generally, employee misconduct is a bar to unemployment compensation. In Virginia, an employee’s misconduct is sufficient to disqualify them from receiving unemployment benefits “when [they] deliberately violate[] a company rule reasonably designed to protect the legitimate business interests of [their] employer…” An employer has a legitimate interest in keeping its workplace environment free from discrimination so lying about a prior accusation of harassment could potentially constitute misconduct depending on the nature of employment.
Executive employees should also be wary. If you are negotiating an employment agreement that contains a similar clause, it is best to err on the side of over disclosing. Let your employer know if you have been subject to any allegation or complaint of harassment, discrimination, retaliation, or sexual or other misconduct. Let your employer know how those accusations were resolved so that if you are hired and someone contacts your employer about prior misconduct, your employer cannot say that you failed to disclose anything.
In the wake of large-scale, social justice movements like #metoo and #BlackLivesMatter, forward thinking companies will no longer hire alleged sexual harassers, abusers, misogynists or racists. Employers will be wary of putting their employees, and therefore their companies, at risk.
