A few friends and I were recently enjoying a couple ofcold beers at a local brewery – which shall remain nameless to avoid playing favorites! We discussed how the craft brew movement has been such a positive force not only in Massachusetts, but across the country. We marveled over the crowds that breweries draw, the diversity and selection of beers (and ciders), and the seemingly endless list of IPAs we need to try. The consensus was that, if we ever found ourselves in a position to be part of such a venture, we would all jump at the opportunity.
On my drive home that night, the employment lawyer in me took over. Given the significant commitment it takes to establish and operate a brewery, and how quickly breweries can grow, I thought – what employment related issues would a brewery need to address to protect its interests? Several issues immediately came to mind.
Protecting the Brewery’s Confidential Information and Trade Secrets Through a Non-Competition Agreement
If not an owner, one of the most essential employees at a brewery is the head brewer or brewmaster – a complex role likely responsible for managing the brewery’s overall operations including hiring and onboarding employees, checking inventory, managing tanks, scheduling, and forecasting production. Given the number of breweries in the Commonwealth, it is easy to foresee a situation where your head brewer/brewmaster might leave your brewery for a competitor. Such a departure could expose your brewery’s confidential information and trade secrets to a rival brewery. Fortunately, you may be able to prevent such a scenario from playing out and protect your confidential information and trade secrets by putting a non-competition agreement into place with the head brewer/brewmaster.
As many of you may know, on October 1st, a new law governing the use of non-competition agreements went into effect in Massachusetts. The law – which sets parameters for how an employer may lawfully enter into a non-competition agreement with certain employees – defines a non-competition agreement as:
[A]n agreement between an employer and an employee, or otherwise arising out of an existing or anticipated employment relationship, under which the employee or expected employee agrees that he or she will not engage in certain specified activities competitive with his or her employer after the employment relationship has ended.
It is important to note that the law contains many nuances and, for that reason, does not lend itself to a “one-size-fits-all” approach. In fact, given its intricacies, some breweries might opt to forego non-competition agreements altogether and, instead, choose to use other agreements (discussed below) to protect their interests. Nonetheless, when carefully drafted, non-competition agreements can significantly protect a brewery’s competitive interests.
Maintaining the Confidentiality of The Perfect IPA Recipe
Perhaps nothing is more sacred to a brewery than its recipes and formulas and the particulars of its brewing process. To ensure that such information remains private, a brewery should strongly consider having all of its employees who have direct access to such information sign confidentiality agreements.
Confidentiality agreements, in a nutshell, prohibit an employee from using or disclosing to any individual outside of the company, whether during the course of his/her employment or at any time thereafter, any information the company designates and maintains as confidential, except as necessary to perform his/her job duties. Thus, in addition to its brewing recipes, a brewery can use a confidentiality agreement to protect a brewery’s trade secrets, other confidential or proprietary information regarding its existing and/or future products, customer lists and/or customer information, business plans, marketing plans and other financial information. Aside from a confidentiality agreement, breweries should also generally limit access to such information to only those employees who have a business need access to it.
Protecting Against a Raid of Your Employees and Customers
A brewery can also take steps to prevent departed employees from trying to take the brewery’s remaining employees, and/or its customers through non-solicitation agreements. Non-solicitation agreements are more narrow than non-competition agreements as they focus on specific activities.
If your head brewer or any other employee decides to take a job with another brewery, it is easy to envision how the departing employee might attempt to recruit or solicit other employees to join him/her at the new brewery. To prevent such a situation from happening, breweries should enter into an agreement with their employees that, for a specific amount of time after an employee leaves his/her employment (regardless of the reason), prohibits the employee from recruiting or soliciting for hire any of the brewery’s employees, agents, representatives or consultants.
A brewery may have an exclusive arrangement with several local restaurants (i.e., customers) that serve its beer/cider on tap. Breweries should consider a provision that prevents a sales professional who leaves to join a competitor from using his/her relationship with those restaurants to solicit or do business with them.
Any of the above scenarios can happen in the craft brew industry. Incorporating the above provisions into your hiring process (or even adopting after the fact) will help protect your business interests, including that secret IPA recipe everyone is trying to get their hands on.
These are just a few employment-related issues to consider – there are many others out there! I look forward to regularly submitting articles to the Mass Brewers Guild Newsletter to discuss additional issues as they may relate to craft brewers. Please feel free to reach out if you have questions on anything mentioned above, or if you want to discuss any other employment related matters. And, of course, I am always around to grab a beer too!
 Notably, the law prohibits an employer from using non-competition agreements for those employees who are classified as non-exempt under the Fair Labor Standards Act. Thus, before entering into a non-competition agreement, you must analyze whether the employee, including your head brewer/brewmaster, is lawfully classified as exempt or non-exempt. It is recommended that brewers contact counsel to assist them with this analysis.