Non-Compete Agreements in California

With the proliferation of wineries in California, it’s not uncommon for an owner to find one of its winemakers deciding to leave and set up shop on their own. Is there anything you can do up front to prevent them from taking the craft they’ve honed at your winery elsewhere? The short answer is, in most cases, no. But as with almost everything in the law, there are some exceptions you should know. California public policy strongly favors free and open competition in the marketplace. Business and Professions Code section 16600 states clearly that contractual restraints on competition or trade are void, except as otherwise provided. California courts interpreting this statute emphasize that it protects the right of Californians to pursue any business, occupation, or lawful employment of their choosing. Contract provisions which attempt to place restrictions on a person’s ability to work for a competitor, or open a competing enterprise, are generally unenforceable. That said, you should be aware of the “as otherwise provided” part of the Code. The primary exceptions to the prohibition on non-compete agreements apply to “owners” of a business and arise in the following contexts. First, if you are selling all of your ownership interest, or all of most of the operating assets together with the goodwill of the business, you can agree…

TTB Update: Return of Wine to Bonded Premises

The TTB is catching up on some regulatory house-keeping. Effective October 15, 2015, TTB regulations governing the return of taxpaid wine to bonded premises will be amended to conform to provisions of the Taxpayer Relief Act of 1997, and the Internal Revenue Service Restructuring and Reform Act of 1998. The Internal Revenue Code provides that if wine is removed from bonded premises, and subsequently returned, any tax paid on the wine returned to bond shall be refunded or credited (without interest) to the proprietor of the bonded premises. If tax has not yet been paid, then any prior tax liability is relieved. Whereas it used to be that wine returned to bond had to be “unmerchantable,” that is no longer the case under the Taxpayer Relief Act of 1997. The TTB is now amending its regulations to conform to that Act, by removing the word “unmerchantable” from provisions relating to the return of wine to bond. It also used to be that wine returned to bond had to be produced in the United States. That is no longer the case, under the Internal Revenue Service Restructuring and Reform Act of 1998. Wine returned to bond must only have first been removed from a bonded wine cellar. TTB regulations pertaining to the return of wine to…

2015 Grape Escape – Cancelled After Vendors Refuse to Participate in Event Sponsored by Retailer

We recently posted about how social media is advertising, and the care wine manufacturers need to take to ensure they do not run afoul of state tied-house laws. The impact of those laws is being felt locally here in Sacramento, where organizers of the “Grape Escape” – an annual showcasing of local food and wines – have canceled this year’s event which was to be held in early June. Articles about the cancellation indicate that only four wineries signed up to participate this year, down from 47 a year ago. The primary reason appears to be fears over potential citations from the ABC. Last year, eight participants were investigated and put on probation (but not fined) for mentioning the event’s retail sponsor, Save Mart, in their social media postings, or directing consumers to the retailer to purchase tickets. Because manufacturers may not give anything of value to a retailer without violating tied-house restrictions, and because advertising constitutes a thing of value, social media mentions of a retailer by a manufacturer (i.e. “advertising”) runs afoul of the law. Wine and food events such as the Grape Escape have a long and wonderful history. It’s a shame that retail sponsorship of such events can make vendors so nervous they choose not to participate, rather than develop specific guidelines or practices to ensure their promotion of the…

Going Green: Labeling Organic Wine

Labeling of wine is subject to regulation by the TTB, and requires a certificate of label approval (COLA). Basic information that must be included on all labels include the brand name, class or type of wine, alcohol content, appellation, the bottler’s name and address, contents by volume, a sulfite declaration, and the government health warning. Previously, Uncorked ran a post about font and sizing requirements, accessible here. If you want include “organic” claims on your label, you must satisfy USDA organic regulations for production and handling of your wine. Those requirements are beyond the scope of this post, but suffice it to say they are extensive. And, the type of “organic” claims you can make on your label are dependent upon a few key factors. To label your wine “Organic” and to use the USDA Organic seal on your label, your wine-making operations must be overseen by a third-party accredited certifying agent (ACA) to ensure compliance with organic production and handling requirements. The yeast used in your wine, and all agricultural ingredients (i.e., grapes) must be certified organic, with the exception of those ingredients on the National List of Allowed and Prohibited Substances, information about which can be found here. Non-agricultural ingredients must be on the National List, and are limited to a certain percentage…