Five business-minded tips to avoid brewing up a lawsuit

It’s an exciting time for the craft brewing industry. Favorable legislation has allowed breweries to increase production and create jobs. With expanding payrolls, however, comes a compliance obligation. Employment laws at the federal, state, and local level can often be confusing and sometimes seem contradictory. With careful planning and consideration, however, compliance is manageable. To avoid seeing your investment, hard work and passion go down the drain, consider these five common potential pitfalls.

1. Keep your recipes bottled up.

After countless trial and error, that recipe you developed for a knockout Double IPA isn’t just a potential award winner, it’s a trade secret. Treat it that way. Limit access to recipes and ensure that anyone who has access to them signs enforceable confidentiality, non-disclosure, non-recruiting and assignment of inventions agreements at the time of hire. That way, if someone misappropriates your proprietary information, you can take action.

2. Don’t mislabel employees as independent contractors.

Misclassification of employees as independent contractors can impose devastating costs. Worse, the Department of Labor (DOL) has recently announced an initiative to actively seek out instances of misclassification. The DOL’s new guidance essentially declares war on the independent contractor classification by significantly narrowing the qualifications for independent contractor status under an “economic realities” test. Be absolutely certain that anyone classified as an independent contractor – even someone who prefers to be classified in this manner – meets the DOL’s guidance.

3. Don’t underserve your employees: the overtime debate.

A common mistake many employers make is the assumption that paying an employee a salary makes him or her exempt from the overtime pay requirements of the Fair Labor Standards Act (FLSA). In reality, many overtime exemptions also carry a duties requirement that focuses on the employee’s core job responsibilities. Job title is irrelevant. Review all claims of exemption to make sure the employees at issue meet not only the minimum salary requirement but also the duties requirement.

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Also, keep in mind that the DOL has proposed rule changes that will increase the minimum salary requirement for administrative, professional, and executive exemptions (i.e. the so-called “white collar” exemptions) from a minimum of $455 per week, or $23,660 annually, to $970 per week, or $50,440 annually. Assuming these proposed rules take effect, anyone for whom these exemptions are claimed will need to earn at least the new minimum salary, or otherwise be reclassified as non-exempt and paid for overtime worked. If you must reclassify employees as non-exempt, there are options that could help you stay compliant yet reduce costs, such as implementing a fluctuating workweek.

4. Nobody works just for beer.

If you have a tasting room, or if you showcase your beers at a release party or some other event, keep in mind that volunteers who agree to help out are performing compensable work under the FLSA. To avoid a wage-hour lawsuit or scrutiny from the DOL, be certain to pay everyone who performs work for your brewery at least the minimum wage.

5. Filter potential candidates and avoid hiring a lawsuit waiting to happen.

It goes without saying, yet it often happens: A casual hiring process can lead to questionable employment decisions and problematic employees. Don’t hire the “walking lawsuit.” Instead, use a detailed and legally compliant employment application and review it for red flags. Conduct in-person interviews and ask meaningful questions. Always check references. Don’t just hire a warm body. It’s a better idea to leave a position open until you find the right candidate.

Joseph W. Gagnon is a partner of the Houston office of Fisher & Phillips LLP, a national labor and employment law firm representing management. He has extensive experience advising and defending employers in all phases of labor and employment matters, including defense of lawsuits across the state, matters before the DOL, and preventive auditing and planning that reduces the employer’s legal risks and liabilities in work-related matters. You can reach Joe at [email protected].