Brewery compensation series part 1: How to pay your brewers

Bonuses

As a way to supplement pay, many breweries incentivize their brewers through bonus structures. There are essentially two different kinds of bonuses: discretionary and non-discretionary. Discretionary bonuses are determined after the fact; for example, an end-of-year bonus just because. Non-discretionary bonuses that are used to incentivize future behavior are part of the employee’s pay package and must be paid when earned as defined by the employer.

Be cautious because determining whether an employee has earned a bonus based on the often subjective standards can be complicated. Therefore, it is highly encouraged (and even required in some states) that legal counsel be sought to memorialize all terms of the bonus in writing prior to the bonus plan being implemented. The employee should also sign a copy of the proposed comp plan acknowledging the understanding of the terms to avoid future debate over clarification of poorly stated terms.

Ownership

Many brewers are seeking a piece of the action for the talent contribution. While it might seem like a good idea to provide ownership in lieu of pay (i.e. sweat equity), be cautious! We are seeing more and more cases in which a brewer who parts way with the employer (either voluntary or by force) begins seeking financial records, wants a valuation for the consideration given, and/or forces buy-out or dissolution under the entity’s operating agreement based on remaining a hostile member of the entity, even after separation.

Confidentiality and intellectual property

Brewers are often the creative drivers of a brewery, with access to a variety of information regarding recipes, techniques, branding and supplies. Much of this information has a value to the business only if it is kept within the business, so take particular care with protecting the business’ confidential information from being exposed or taken elsewhere.

Confidentiality and intellectual property agreements cover a wide range of issues from trade secrets (like recipes and account lists) to processes and procedures developed for the business. In addition to the employment agreement and compensation structure, have a separate agreement addressing what kinds of information the brewer should keep confidential, under what circumstances and with whom he or she can share the information. In addition, include possible consequences for revealing information without your permission.

If the brewer comes up with a new recipe while on the clock in the brewery, using the brewery’s ingredients, something should be in place stating the brewery’s ownership of the creation. In general, the employer owns the rights to something an employee creates while on the job. However, if the head brewer is an independent contractor, the contract should spell out explicitly that any beers made on the brewery premises with brewery products and processes, are assigned to the brewery from the beginning. Even if the brewer is an employee, your contract should reiterate that any new beers or products developed for the brewery are owned by the business. On the flip-side, that agreement should also note ownership of recipes that an employee may come up with at home not using brewery supplies. Lastly, the contract should also set out, for clarity, any inventions or creations that the brewer previously created and that do not belong to the brewery that may be assigned based on obtaining a job with the brewery. This avoids any mix-ups or confusion in the future about who owns what.

Compensation plans can be flexible, within the parameters provided by the state and federal governments, so weigh the factors that are important to the business and the brewer together. One type of compensation plan may not fit every type of brewery or every brewer, so try, when possible, to keep the lines of communication open with your employee. If possible, consult an employment lawyer to make sure all the bases are covered and the compensation plan is compliant.

This in-depth feature was contributed by the big brains of Jessica M. Hardacre-Gianas, Esq and Alicia M. Altenau, Esq., attorneys with The Original Craft Beer Attorneys. If you haven’t yet, check out their new book.