Trade secret and Confidentiality Agreements vs. Non-Compete Agreements

A non-compete agreement prohibits an employee from working with a competitor for a reasonable period of time after leaving employment. In most states, the non-compete agreement has to be limited in duration (not more than a couple of years) and geographic scope (limited area that would be reasonable necessary to protect the employer’s interests). For a brewpub, this geographic area might be the city in which it is located or for a small brewery maybe the home state. In contrast, a mere confidentiality agreement permits work for a competitor but the employee cannot disclose your trade secrets or confidential information to the new employer. This could last potentially forever, so long as the information remains a trade secret or otherwise confidential and proprietary.

Non-Competes for Craft Beverage Producers

With the boom of craft breweries and now craft distilleries and cideries, competition is ever increasing. Businesses must think long term of how to protect their small share of the market. Non-compete agreements are an important consideration. Craft beverage professionals typically come in two forms: experienced professionals hired away from another operation and the inexperienced entrepreneur looking to learn at an established operation.

It is important to vet any experienced professional to ensure that they are not subject to a non-compete or non-disclosure agreement before you hire him or her.  It is also important to bind the professional to a NDA and non-compete so he or she cannot learn your trade secrets and move on to directly compete in his own business or at a competitor down the street.

Many inexperienced professionals are looking to learn the industry so they can open their own place or move on to another facility and larger role. Because you as the employer are expending the time and money to train this person, it is important to have in place an NDA and non-compete to prevent this person from walking down the street and opening a competing facility. You do not want to be training grounds for your competitors. You want to recoup the rewards for your investment in training a newbie.

Nationwide Approaches to Enforcing Covenants Not to Compete

Most states will moderately enforce non-competes using the standard reasonableness test. Approximately 35% of the states have some sort of law concerning non-competes. Because there is wide variance between the laws of each state, enforceability of a post-employment non-compete agreement can be uncertain depending on the jurisdiction in which the provision is being enforced. If you find yourself in this situation, you’ll want to consult an experienced attorney.