Three Commonly Overlooked Legal Issues for Breweries

By: Brian D. Kaider, Esq.

Breweries have to deal with many legal issues, including licensing requirements from various federal and state agencies, formation of a corporate entity, negotiating contracts, and registering trademarks. With so many new skills and requirements to learn, it can be easy to miss something. Below are examples of three legal issues that are often overlooked.

Failing to Require Employment Agreements

There are a million things to do when starting a brewery. Finding and hiring staff checks off a significant box on the list and it can be easy to overlook the need for an employment agreement for these early hires. Later, there is little enthusiasm to impose these agreements retroactively or to apply them to new hires when they were not required for original employees. Yet, employment agreements serve a variety of functions that are so essential that their omission can cause substantial problems down the line.

As a preliminary matter, an employment agreement defines the relationship between the parties. Often breweries will try to categorize workers as independent contractors as opposed to employees, because this distinction allows the brewery to avoid providing certain benefits that are required for employees. But, the IRS does not care about the brewery’s characterization, it cares how the worker is treated, and the key determination is control. An independent contractor is hired to provide a function, but has significant autonomy to perform that function when, where, and how they see fit. Often they will provide their own equipment and set their own hours. By contrast, if the brewery exercises control over the worker by imposing certain work hours, requiring the job to be performed in a certain way, and providing the equipment used, the worker is considered an employee.

There are many important sections of an employment agreement, including designation of at-will employment, requirement to abide by rules set forth in the employee handbook, etc. But two often-overlooked sections relate to confidentiality and assignment of intellectual property. Although the brewing industry is far more collaborative and congenial than most, it is still a competitive business and certain information should be treated as confidential and/or trade secret. Employees should be made aware that unauthorized disclosure of business plans, growth plans, customer and supplier lists, recipes, and marketing ideas, to name a few, can cause harm to the business. This section of the employment agreement not only serves that notice function, but can set up more enforceable consequences if the terms of the agreement are breached.

Breweries generate a significant amount of material that can be protected by trademark or copyright registration. Label designs, beer names, domain names, and social media accounts are all valuable assets that should belong strictly to the business. An assignment of intellectual property section in an employment agreement sets forth the understanding that anything created during the term of employment is the sole property of the business. As an example, if an employee has artistic talents that are used to develop designs for labels, those artistic designs should be assigned to the company. Otherwise, the employee would have the right to sell the same designs to other companies or individuals who may use them in a way that is detrimental to the brewery’s brand.

Failing to Secure Music Licenses

Music is such a common part of the brewery experience that many people take it for granted. However, breweries must obtain the proper licensing to play copyrighted music in their establishments or they could face a copyright infringement suit and potentially crippling statutory damages that could be as much as $150,000 per instance.

Under U.S. copyright law, the owner of a piece of music has the exclusive right to control its use,