August 1, 2018
By now, many of you may have heard that Toppling Goliath Brewing Co. in Decorah, Iowa has sued its former head brewer, seeking to enjoin (or prevent) the former brewer from working at Thew Brewing in Cedar Rapids, Iowa. The breweries are roughly 100 miles from one another. Toppling Goliath filed the lawsuit on July 26, 2018 and there is a hearing scheduled for a temporary injunction set for August 31, 2018. This type of injunction is an order that a court can issue to enjoin a party from taking certain action while the lawsuit is pending. In other words, Toppling Goliath is asking the court to prohibit its former brewer from working at Thew Brewing while the case proceeds over the course of the next several months or more.
According to the Associated Press, the non-compete that the brewer alleged entered into prohibits him from working for a competitive business within 150 miles of Decorah for a period of two years after he left Toppling Goliath. Toppling Goliath has also alleged that the former brewer had access to proprietary formulas, techniques, and trade secrets.
The enforceability of non-competes depends on the applicable state law – the laws vary from state to state. Generally, if properly drafted and executed, post-termination non-competes are enforceable (except in California). Including them in employment agreements may, however, result in an inability to obtain the most talented employees. Additionally, there are often less restrictive means to protect a business’s legitimate interests.
When breweries approach us about the possibility of including non-competes, we often propose alternative provisions to ensure the brewery is protected, but that allows the employee to take a job elsewhere without too much restriction. For example, confidentiality and non-solicitation agreements can provide most of the protections a company seeks through a non-compete (such as keeping beer recipes and processes confidential), but in a manner that provides employees with a greater degree of freedom. It is, however, important that a brewery knows how to ensure such provisions are enforceable (e.g., taking steps to maintain the confidentiality of certain information). Alternatively, a brewery could seek a relatively limited non-compete to prevent an employee from going to work for the brewery across the street (e.g., a one or two mile radius).
Companies have to balance the importance of finding and retaining the best talent with the importance of protecting their business information. Whether a non-compete is right for your company is something that you need to consider from the start – you cannot incorporate a non-compete into someone’s agreement after hiring them unless you provide separate compensation (e.g., a bonus). In deciding whether to subject employees to non-competes, it is not only a question of business concerns, but also of company values. The balancing act is one you should discuss with an attorney that has experience enforcing and defending against non-competes to get a more holistic view of the benefits and problems associated with them.
If you have any questions about protecting your business’s confidential information or about non-competes, give us a call at 612-259-4800 or contact us here for a free consultation.