News You Can Use - Special Feature

Rader's Edge: How To Pick Vendors
Sometimes the biggest successes in LBM come from something as simple as a vendor and dealer teaming up for mutual benefit
By Chris Rader

In today's LBM business, the relationship between the vendor and supplier can't be taken for granted. A strong vendor-supplier relationship can not only outflank the competition but also ensure profits. Below you will find my account of a partnership between a vendor and a dealer that has existed for more than 10 years. You will also find nine ideas regarding how to find the best vendors. This is the story of how two guys have built their business by supporting each other. To protect their identities against competitors, I will call them Victor the vendor and Larry the LBM dealer.

Victor started his career working at an airline ticket counter for a number of years. He began to understand people and how to take care of them. He had to make last-minute decisions to board or not board passengers and to turn every plane, always shooting for on-time performance. Victor then moved to a sales job at window manufacturing plant. Read more.

News You Can Use - Product Information

Chinese Drywall Caused Homes' Woes, CPSC Finds
With "strong association" made, government now will try to figure out extent of problem, possible remedies
By Craig Webb

A "strong association" exists between homes where Chinese drywall was installed and where occupants reported smells and corroded metals, the U.S. Consumer Product Safety Commission (CPSC) reported today. The finding clears the way for a federal task force to figure out how many houses have this problem and what to do about it.

The report released today (see executive summary) lends government-funded scientific support to the notion that Chinese drywall used in homes in recent years is behind complaints of rotten-egg smells, corroded metal connections, tarnished jewelry, and equipment breakdowns in homes across the United States. CPSC says it has received 2,000 reports from 32 states, the District ofColumbia, and Puerto Rico regarding problem drywall in their homes, and some liability lawsuits already have been filed.

How many homes could be affected remains uncertain, says the CPSC, which recently reached out to the governors of every state and U.S. tereritory seeking data. The agency does know that roughly 7 million sheets of Chinese drywall were imported between 2000 and 2009. What it doesn't know is how many of those sheets went into homes and what percentage of them have problems. Read more.

News You Can Use - Trends and Numbers

New US home sales rise 6.2 percent
By ALAN ZIBEL (Associated Press)
Sales of new homes rose more than expected last month to the highest level in more than a year as the housing market shows stability after its historic collapse.

The Commerce Department says sales rose 6.2 percent to a seasonally adjusted annual rate of 430,000 from an upwardly revised 405,000 in September. Economists surveyed by Thomson Reuters had expected a pace of 410,000. Read more.

Existing-Home Sales Jump 10.1%
By Big Builder Staff
The soon-to-expire $8,000 federal tax credit for first-time homebuyers sent sales of existing homes soaring in October, the National Association of Realtors reported Monday.

Sales of existing single family homes, townhouses, condominiums and co-ops surged 10.1% to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, up 23.5% from the same month last year. The NAR has not seen numbers like this since February 2007, when the annual pace was 6.55 million. Read more.

Building Material Reuse Can Pay Off
By Teresa Burney
It's happened to every builder--the windows you ordered are the wrong size and unreturnable so they sit in the warehouse for years.

And most every remodeler has shaken his head while hauling a perfectly nice set of cabinets to the landfill because the homeowner wants something different and he has no place to store them. Read more.


Builders in Atlanta Struggle to Survive
By Michelle E. Shaw, The Atlanta Journal-Constitution
When the housing market was white-hot, McCar Homes was one of the nation's leading builders.

In 2006, the Alpharetta-based company built and sold more than 2,200 homes and boasted revenues upward of $500 million. But now that the market temperature is in the Arctic region, McCar's chief executive isn't sure the company will make it into 2010. Read more.

Touched By Lumber: The World’s Most Famous Lumberyard OwnerA newly restored and remastered version of Gone With the Wind is out in Blu-Ray DVD format this Holiday season, reminding us all that Scarlett O’Hara exceeds even 84 Lumber’s Joe Hardy as the world’s most famous lumberyard owner. Scarlett, who built her business up from the ashes of a fire-ravaged, post-Civil War Atlanta, offers both good and bad management lessons for these hard times. She knew how to be tough--“The War Is Over: Don’t Ask for Credit,” one sign in her store reads. But hiring her unrequited love, the milquetoast Ashley Wilkes, to run the yard shows a serious fault in judgment. Oh well: at least when we watch the two clench in the lumberyard office, thanks to the new restoration we now can admire the moulding display in the background.

Photo courtesy of Warner Home Video.

Webinar: Year Round Strategies for Making Tax Law Work for You

W E B I N A R

Year Round Strategies for Making Tax Law Work for You

Tuesday, December 8, 2009
3:00 p.m. to 4:00 p.m. (Eastern Time)
$139 per logged on computer

Tax planning is a year-round event if you want to minimize your business’ tax bill. Whether it’s surviving an audit, capitalizing on business deductions, or finding a tax-friendly way to run your business, this webinar will help reduce your tax obligations and make paying taxes less anxiety provoking

What will the hour cover?
Business Tax Planning:
 Accelerating Depreciation
 Net Operating Less Deductions
 Project Your Income
 Manufacturer’s Deduction
 Auto Tax Breaks
 Tax Credits and Incentives

Individual Tax Planning:
 Income and Deduction to Consider at Year End
 Tax Planning for Families
 Tax Planning for Investors
 Retirement Tax Planning
 Estate Planning and Gift Tax Exclusions

And Information on Tax Document Record Retention

ABOUT THE SPEAKERS:
Elizabeth Grubb; Beth specializes in tax planning, tax compliance and business valuations for gift and estate tax planning, charitable contribution and income tax planning, buy / sell agreements, business purchase and sale, and S corporations. She has been with the firm since 1995.

Brian Schneider; Brian has more than 10 years of Big 4 public accounting experience. Brian has been involved in all aspects of state taxation planning including income / franchise tax, tax credits and incentives, property tax and sales and use tax. Brian’s experience includes working with SEC clients and privately held companies with expertise in manufacturing and distribution industries.

Beth and Brian are with Battelle & Battelle, LLP, located in Dayton, OH.

The webinar is being hosted by Turnkey Programming. Prior to the webinar, you’ll be contacted by Turnkey with the webinar phone number and password, as well as instructions for logging onto the website to view the webinar live.

Click the picture to enlarge and use the registration form.

What’s the Outlook for 2010? Help Us All Know by Taking Part in ProSales’ Latest Survey

How did America’s LBM operations fare in 2009? How will they do next year? You can get these valuable insights by taking part in ProSales’ latest online survey, just launched today. This five-minute poll is designed to help us all learn the financial and operational state of dealers from coast to coast. To get the invaluable written comments, you must take part. We’ll be collecting results through Dec. 1.

Take the Survey

Member News

Gwen Hill of Hill's Ace Hardware Honored by Barrow County Chamber of Commerce

The Barrow County Chamber of Commerce announced Gwen Hill as the first recipient for its Inaugural "Woman of the Year" recognition to be presented at the Women in Business Luncheon, to be held Nov. 11 at The Georgia Club.

"The Barrow County Chamber proudly recognizes Gwen Hill of Hill’s Ace Hardware and Lumber Center as the recipient of this award," said Chamber President Tommy Jennings.

Chosen for her continued efforts to make a difference throughout Barrow County, Gwen Hill has worked with The Tree House and Peace Place, and has been one of the driving forces for the Barrow County Cooperative Benevolence Ministries and the Food Pantry and Food distribution each month.

She has served Barrow County in the past as the chairman of numerous organizations, including the Barrow County Chamber of Commerce, the Winder First United Methodist Church, Jackson EMC Foundation, the Winder Noon Lions Club and many others. In 2001, she was recognized as the Barrow County Chamber’s Citizen of the Year.

Not mentioned in the article is the fact that Gwen has worked in the business since 1971 and has been involved in most every facet of the business including IT systems, inside and outside sales, internal accounting, and other back-office functions. Her dedication and hard work have made Hill's Ace Hardware what it is today. Gwen continues to handle the accounting while being involved in a variety of community organizations and church groups (and keeping up with three grandchildren!)

Source.

Take a ProSales Poll

ProSales wants to know which brands your company currently stocks, plans to discontinue, or may be added to your inventory in the next 12 months. In exchange, we'll put you in the running to receive a $500 American Express gift card.

Just click on this link... and you'll see a 22-question survey that will only take a few minutes to fill out. Be sure to complete the survey all the way to the end and provide contact information so that you'll be in contention to win the AMEX card. ProSales will pick a winner in mid-December.

Estimating Seminar: Register Now

CSA is once again presenting our popular Long Form Estimating and Advanced Estimating sessions. These sessions are designed for all levels of estimating and outside sales. The Long Form Estimating session is a two-day session, while the Advanced Estimating session fits into a one-day session.

Lunch is included in the seminars. Please bring a calculator, pencil and paper to each session.

Long Form Estimating - This seminar will give participants instruction and practice in taking off a material list of items usually included in an estimate made by a lumberyard or building material center. Learn the basics to get started in estimating homes, garages, remodeling jobs, and the like! The first day’s schedule runs from 8:00a.m to 6:00p.m., and the second day runs from 8:00a.m. to 5:00p.m.
February 2 & 3, 2010: Blue Linx Learning Center located in the CSA Headquarters, 120 Handley Drive, Suite 610, Tyrone, GA 30290

Advanced Estimating - This seminar is designed to assist the estimator or outside salesperson who already knows how to estimate, but wants to know shortcuts and instructions in multi-pitched roofs, and finding wall lengths/floor areas for more complicated house layouts. This seminar begins at 8:00a.m. and ends at 4:00p.m.
February 4, 2010: Blue Linx Learning Center located in the CSA Headquarters, 120 Handley Drive, Suite 610, Tyrone, GA 30290

About Keith Kluis: Keith is the author of three popular correspondence courses in wide use nationally on estimating, drafting, and selling. He has been a draftsman, estimator and manager of a building material store, as well as a classroom instructor on these topics.

DEADLINE TO REGISTER: January 25, 2010

First person from each company: Second person from each company:
MEMBER - before deadline: $330 MEMBER - before deadline: $280
MEMBER - after deadline: $380 MEMBER - after deadline: $330
NONMEMBER - before deadline: $430 NONMEMBER - before deadline: $380
NONMEMBER - after deadline: $480 NONMEMBER - after deadline: $430

Please note that any staff from a member company is considered a member.

(This seminar requires a minimum of 12 attendees, so register early!)

Click the pictures to enlarge and print the Registration Form.

NLBMDA News

NLBMDA Makes Case for Eco-Label Before American Lumber Standards Committee
On November 13, NLBMDA presented its proposal for an eco-label to the board of the American Lumber Standards Committee (ALSC) in Charleston, SC. Representing NLBMDA were Val Hanson, former LBMI Trustee, Ken Marson, NLBMDA Board Member and NLBMDA's alternate representative to ALSC and NLBMDA Counsel Frank Moore. Read more.

Health Care Bill Faces Uncertain Future in Senate
Last week, House Democratic leaders celebrated their slim victory on health care overhaul legislation (H.R. 3962), which passed by a vote of 220-215. NLBMDA, which opposed H.R. 3962 for its numerous costly tax increases and mandates on employers, has joined the Start Over Coalition of business groups urging Congress to go back to the drawing board to draft health care reform legislation which will focus on reducing the cost of health care. Read more.

Estate Tax Reform Vote Pending
While Congressional tax committee leaders have continued to indicate that votes on the estate tax would be held before the end of the year, it is not yet clear in what form those votes will take. The NLBMDA Legislative Advocacy Committee at their October meeting reiterated their preference for full repeal of the tax, and support for potential compromises only if they maintain a high enough exemption level to protect the asset-heavy nature of a family-owned building supply company. Read more.

Congress Considers Mandated Paid Sick Leave for Swine Flu
Legislation has been introduced in Congress to require employers to provide up to five days paid sick leave to workers sent home sick with swine flu or other contagious illness. Read more.

Green Things

Feud Continues Between Wood Certifiers
By Leora Broydo Vestel

United States Fish & Wildlife Service A group filed a complaint with the Federal Trade Commission last week arguing that the premier certifier of eco-friendly wood products in the United States engages in unfair trade practices.

Another shot had been fired in the battle between rival certifiers of environmentally friendly wood products.

The Coalition for Fair Forest Certification filed a complaint with the Federal Trade Commission last week charging that the Forest Stewardship Council – the premier certifier of green forestry products in the United States – engages in unfair and deceptive trade practices.

The group also asserted that the United States Green Building Council’s Leadership in Energy and Environmental Design rating system for efficient and sustainable buildings — known widely as L.E.E.D. — is anticompetitive because it only recognizes products certified by the Forest Stewardship Council and not those of other certifying bodies.

A letter submitted on behalf of the coalition by the law firm Steptoe & Johnson asks the trade commission to investigate. Read more.


Who is liable for green building performance?
As standards become more stringent, experts urge care on guarantees
By D. Ashley Furness, Business Journal Staff Reporter


Green building performance, or rather failure to perform, has long topped the list of legal risks related to sustainability-minded construction, but developers face even greater stakes this year as government-mandated LEED standards loom and achieving certification becomes more difficult.

“Whether it’s the engineer, architect contractor, builder, the biggest issue in green building is writing careful construction contracts that do not guarantee a certain level of performance,” said North Coast Builders Exchange Green Building Coordinator Hallie Fraser. Read more.

Staff Changes at CSA

By: Jim Moody, CSA President

We all have limited resources, and one of the significant challenges of our economic environment is the need to get more done with less. In that regard, CSA’s business is no different than your own.

We’ve taken a close look at the needs of our members and of the association and compared that to the work that is being conducted. The work that needed to be done in times past is not necessarily the work that needs to be done today or in the future.

For many years, we’ve had two very competent guys on staff whose primary responsibility was to serve as field agents for our Self Insured Worker’s Compensation Fund. Larry Marler and Kevin Rodgers have served ably and done good things for members and for the Fund. They’ve provided lots of insight on regulatory issues and also helped members improve safety conditions. When necessary, they’ve conducted claim investigations and they’ve both conducted more payroll audits than they care to admit. They’ve been our “relationship guys” out there keeping abreast of what’s going on.

While I would never discount the value of maintaining relationships, I also have to recognize that devoting two people full time to maintaining relationships may not be the best way for us to spend staff time. Additionally, there are important things I see going undone, and devoting more staff time to those will ultimately serve members better.

For those reasons, both Kevin and Larry will be beginning significantly different jobs by the end of this year.

Kevin’s changes are most dramatic. Kevin’s lived in Perry and served middle and south Georgia for some time. Kevin is relocating to Atlanta and will be based in the new CSA office. While he can still do safety and Fund work in a pinch, the bulk of his time will be developing, rolling out, and maintaining new programs and services. By that, I mean new products that will help you run your business better. It might be leveraging the buying power of our membership to create a discount for you on something many of you use. It might be developing a manual on how to operate more efficiently. It could be creating partnerships with similar groups to do things neither of us could do alone. The possibilities are endless. It’s very clear to the Board and to me that the association must continue to expand the things you receive in exchange for the dues you pay to CSA if we are to achieve our mission of building stronger independent dealers. Our strategic plan outlines many of those things. Kevin will be the guy to make them happen.

Larry will continue to live in Gainesville and be focused on the Fund, with some fundamental changes. Instead of serving just north Georgia, he’ll serve the entire state. While his focus in the past has been visiting every member in his territory multiple times per year, that won’t be physically possible any longer. His goal is to see every member at least once per year. Other contact will be by phone and e-mail. He’ll still do some payroll audits in person, but we’ll be doing more by mail. The bulk of his time will be spent working with the Fund members who historically have the highest losses. We have a responsibility to do all we can to educate owners about safety, help them develop adequate safety programs and ensure that those programs roll out to their employees. We know that Fund members who make safety a priority have fewer claims and smaller losses, yet there are some members who have not been as focused on it as they should be. Larry’s job is to help them achieve that focus and create safer work environments. The result will be safer workers, lower cost insurance, and an even stronger Self Insured Fund.

Do we lose some of the personal relationship with these changes? Perhaps. I’m sure many of you have struggled with the best way to get the important work done and still maintain relationships with your customers during these trying times. There are always trade-offs. On the other hand, I also recognize that relationships only get you so far if you don’t have the service to back it up. Relationships matter less than tangible value today. What are you getting in exchange for your dues? Are your worker’s comp rates as low as they can possibly be? We believe these are relevant questions for you to ask, and we want to do everything possible to ensure the answers are positive.

We’ve arrived at this decision by being honest about our resources, our needs, and our current weaknesses. The goal is to help the association and the Fund do more for you, our members.

I hope you would agree that CSA and the Fund have provided good value in the past, but we understand that what was good enough in the past won’t always cut it in today’s harsh business climate. We will continue striving to do more for you to ensure that independent dealers not only survive but thrive again.

Congress to Consider Emergency Paid Leave Bill

From SHRM (Society of Human Resources Managers)

In response to the outbreak of the H1N1 flu virus, U.S. Rep. George Miller, D-Calif., introduced emergency legislation (H.R. 3991) that would provide five paid sick days to workers with contagious diseases who are told by their employers to stay home.

Miller, who chairs the House Education and Labor Committee, told reporters that the legislation was needed to help stop the spread of the expanding H1N1 pandemic. To emphasize that point, Miller named the proposal the Emergency Influenza Containment Act.

“Sick workers advised to stay home by their employers shouldn’t have to choose between their livelihood, and their co-workers’ or customers’ health,” Miller said. “This will not only protect employees, but it will save employers money by ensuring that sick employees don’t spread infection to co-workers and customers, and will relieve the financial burden on our health system swamped by those suffering from H1N1.” Read more.

Bill Leonard is senior writer for SHRM.

Help Daniel Lumber Company Feed Savannah This Holiday Season

Daniel Lumber Company and Daniel Kitchen & Bath, in conjunction with America’s Second Harvest of Coastal Georgia are spearheading an effort to help feed the less fortunate in and around Savannah this holiday season with the Daniel Lumber Company and America’s Second Harvest Food Drive between now and December 31.

Drop off locations are conveniently located at the Daniel Lumber Company full-service lumber yard (2302 E. Gwinnett Street) in Savannah and the Daniel Kitchen and Bath Cabinet Showroom (3190 Highway 80 West) in Bloomingdale. Non-perishable meats and high protein items such as canned chicken, ham, mackerel, meat spreads, salmon, sardines, tuna, peanut butter, beef stew, canned stew and canned beans or peas are in greatest demand by Savannah’s hungry. Read more.

SCAM ALERT: Bad Checks and Bad Acts

Be on the watch for this kind of scam.....

A mid-Michigan member of the Michigan Lumber & Building Materials Association (MLBMA) regarding a $2800 check they'd received, along with a request to confirm the transaction. MLBMA researched the matter and determined it definitely is a scam.

The check was allegedly sent to the member from Bailey/Laurerman/Marketing/Communications in Lincoln, Nebraska. The check was drawn on a Tier One Bank account from Lincoln, Nebraska. It contained an official looking UPS Next Day Air tracking number. It was sent from the Kennedy Space Center making I look like the Space Center is a client of Bailey/Laurerman.

A message at the bottom of the correspondence informed the member:

"We would like you to email our secure payment department on payverifier2009@live.com. For your confirmation and more information before you continue the transaction, please don't ignore this email. Make sure you email us to the provided email and don't agree with any correspondent abuse about this email. This Payment Verification is to confirm you receive the payment successfully."

MLBMA determined this was a scam by determining the following:
1. There is a real P.R. firm in Lincoln, Nebraska by that name but it has one less letter in its name;
2. Tier One Bank is located in Lincoln but the address on the check is 20 digits off the real address;
3. The overall spelling and general approach is unprofessional and bogus. Canadian and Australian scammers have apparently been using this tactic with increasing frequency.

If you receive something like this do not respond to verify its receipt. The culprits have a way of using your response in the scam. Do not respond to the email. Delete it.

NLBMDA ALERT: FTC Delays Enforcement of Red Flags Rule Until June 1, 2010

The Federal Trade Commission has announced another delay in its enforcement of the "Red Flags" Rule, which requires creditors to have Identity Theft Prevention Programs. The FTC is now delaying enforcement of the new rule until June 1, 2010, to give creditors additional time in which to develop and implement written identity theft prevention programs. The last deadline was November 1, 2009.

On November 9, 2007, the FTC published the final Identity Theft Red Flags regulations and guidelines. The rule, promulgated pursuant to the Fair and Accurate Credit Transactions Act of 2003 (FACTA), requires creditors to develop and implement written "identity theft prevention programs." The programs must provide for the identification, detection, and response to patterns, practices, or specific activities - known as "red flags" - that could indicate identity theft.

Additional information on the rule can be found on the NLBMDA website, www.dealer.org, in the "Government Affairs" section.

See the full text of the FTC release announcing the delay in enforcement at: http://www.ftc.gov/opa/2009/10/redflags.shtm. They have also now established a compliance site for businesses at http://www.ftc.gov/redflagsrule.

Read the original here.

Senate Passes Unemployment Extension, Home Buyer Tax Break

From the Atlanta Journal Constitution
The U.S. Senate late Wednesday unanimously passed legislation extending unemployment benefits and also significantly expanding a homebuyer tax credit that was championed by Republican U.S. Sen. Johnny Isakson of Georgia.

The Senate voted 98-0 to extend unemployment benefits for the jobless by up to 20 weeks. In states with unemployment rates of 8.5 percent and above -- in Georgia the unemployment rate is 10.1 percent -- the jobless could receive up to 99 weeks of benefits, which average about $300 per week. Read more.

NLBMDA ALERT: Tell Congress to Oppose Health Care Tax Hikes on Small Business

BACKGROUND: The House Democratic leadership has unveiled their final health care reform legislation, with a vote expected before Veterans' Day - and possibly as early as this weekend. Unfortunately, the "Affordable Health Care for America Act" (H.R. 3962) contains numerous onerous provisions that will only drive up the costs for small businesses and penalize employers, rather than addressing health care costs in a meaningful way.

Some major areas of concern in H.R. 3962 for small businesses:

* Employer Mandate: Employers will be required to offer health care to full and part-time employees. All employers with a payroll of $500,000 or more will pay a payroll tax of up to 8 percent if they do not provide "qualified" health insurance to their employees.
* "Pay-or-Play": Employers who do offer benefits may still be subject to penalties if they do not offer "qualified" individual and family coverage, meet premium contribution requirements of at least 72.5% for individuals and 65% for family plans, and offer a "qualified" plan as defined by a government-appointed board. If an employee declines coverage from their employer and instead obtain coverage through the exchange, the employer will be subject to a payroll tax penalty of up to 8 percent. An employer who offers coverage other than the "qualified" plan can be assessed a penalty of $100 per employee per day, up to $500,000.
* Surtax on Small Businesses: The bill contains a surtax on individuals with incomes of $500,000 single/$1 million joint - which will also impact the 75 percent of small businesses who are structured as pass-through entities and pay their business taxes at the individual level.
* 1099 Reporting Requirements: H.R. 3962 includes increased corporate reporting requirements that will mandate that companies issue a Form 1099 to all corporations from whom they purchase goods or services, once a $600 per year per vendor threshold has been reached.

TAKE ACTION: Visit www.BuildtheVote.org to quickly send an email message to your Representative asking him/her to vote NO on H.R. 3962. You can also call your legislators through the Capitol Switchboard at 202-224-3121.

SCAM ALERT: PHONY TRUSS ORDERS

SCAM ALERT

Scammers are targeting the truss portion of the industry. More than 40 companies have been contacted by the scammers, and one company may have lost money because of it. We urge you to be extremely vigilant in screening potential customers!

Be on the watch for these warning signs:
• Emails from an individual asking for pricing on a large quantity of trusses (e.g., 200). He may attach a picture of a truss. Often, the requestor claims to be a Reverend representing the Presbyterian Church of God. However, in the most recent wave, the scammers have had normal names (e.g., Dave Weliam).
• The requestor says he is making arrangements with a freight company to pick up the order.
• At some point the requestor will ask if you accept credit cards and may even send you a credit card number. He will likely instruct you to pre-pay the freight company, and add the freight charges to his final invoice.
Please forward this email to anyone in your company that receives email and has contact with customers. The U.S. Federal Trade Commission, Better Business Bureau and the FBI have many resources on how to avoid falling victim to email fraud. You can also file a fraud complaint on any of these websites.

Rethink Your Health Insurance Benefits

Click the picture to enlarge.

Georgia Appellate Court Voids Restrictive Covenant in Employment Contract

10/5/2009
By Diane Cadrain

The Georgia Court of Appeals voided the noncompetition clause in an employment contract, finding that it was overbroad because it failed to properly limit the territory to which it applied.

Mary Squire worked as a tax professional at an H & R Block office in Gainesville, Georgia. Her job required her to prepare and file tax returns for individual Block clients. After four months of this work, Block hired her as the office manager for her office for the 2008 tax season. In her capacity as an office manager, Squire had access to Block's client database for the entire Gainesville District. Her employment contract for the office manager job contained certain post-employment restrictive covenants, including noncompetition and nonsolicitation clauses, which barred her from setting up or working for a competing business within 10 miles from Block's Gainesville district and soliciting Block clients.

In early December 2008, Squire resigned from Block, but worked for approximately two more weeks after giving her notice of her resignation.
During that time she continued to have access to the Block client database for the Gainesville District.

In early January 2009, Squire's former district manager at Block saw Squire pictured, together with other former Block employees, in an advertisement for Paramount. The ad referred to Paramount's "tax professionals, pictured above." Shortly thereafter, Paramount sent out a business-solicitation letter to almost 6,000 people, offering them $30 off on tax preparation services, and stating that many recipients of the letter may have used Paramount's professionals when they previously worked at "another company around the block." The letter then gave the names of Paramount's "Tax Preparers," each of whom was a former Block employee, and specified the Paramount location where each individual was working.

Block sued Squire and Paramount for breach of the contract covenants. A trial court ruled that the covenants were enforceable and that Squire had breached them. Squire and Paramount appealed.

The appellate court first addressed whether the restrictive covenants in Squire's employment contract were enforceable. Such covenants, the court stated, will be enforced only if they are reasonable as to: (1) duration;
(2) the capacity in which the employee is prohibited from competing against his former employer; and (3) the geographic territory in which the former employee is restricted from working.

Applying these principles, the appellate court found that the restrictive covenants were unenforceable because the noncompetition clause was overbroad in that it failed to properly limit the territory to which it applied.

To be enforceable, the court said, a non-competition clause must contain a territorial limitation sufficient to give the employee notice of what constitutes a violation by specifying the territory in which the employee's conduct is restricted.

Squire's contract barred her from working for any employer whose business included the preparation and electronic filing of income-tax returns, if that employer was located, conducted business, or solicited business in Block's Gainesville District or within 10 miles of its borders. But, the court said, the contract failed to limit the prohibited conduct to a specific geographic area. In fact, on its face, according to the court, the contract language would have prevented Squire from accepting employment anywhere in the United States, if her prospective employer engages in the preparation and electronic filing of tax returns and also either has an office or advertises in, or within ten miles of, Block's Gainesville District.

Significantly, the court stated, the restriction would apply even if Squire were not going to work at a location within ten miles of the district. It would bar Squire from accepting employment, for example, at the Atlanta, Savannah, Macon, or Columbus office of a statewide tax preparation or accounting firm, if that firm also had an office in or advertised within ten miles of the Gainesville District. Similarly, assuming that one or more of Block's national competitors has offices or advertises within ten miles of the Gainesville District, this language would prevent Squire from accepting a position with such an entity, even if she were relocating out-of-state.

In light of those provisions, the court found that the contract overprotected Block's business interest in the customer relationships Squire may have developed while at Block, and it did so at the expense of her right to earn a living and her ability to determine with certainty the area within which [her] post-employment actions are restricted.

Given its overbreadth, the noncompetition covenant contained in Squire's employment contract was unenforceable as a matter of law, the court concluded. And because the noncompetition clause was unenforceable, the nonsolicitation clause included in the agreement was likewise unenforceable.

The Court of Appeals reversed the lower court's findings.

About the author.

Diane Cadrain is an attorney who has been writing about employment law issues for more than 20 years. She is a member of the Human Resource Association of Central Connecticut.

Editor's Note: This article should not be construed as legal advice.



Paramount Tax & Accounting, LLC v. H & R Block Eastern Enterprises, Inc., Ga. Ct. App., No. A09A1542 (Aug. 6, 2009).

Special Training Program: The Forklift and You - Decrease your forklift accidents and increase your bottom line

Get the only forklift training specific to the lumber and building material industry that meets all OSHA forklift training requirements. The training program includes:

-Industry-specific video/DVD
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News You Can Use

Product Information: Stanley and Blecker Decker to Merge
The Stanley Works and Black & Decker announced today they will merge to create Stanley Black & Decker, an $8.4 billion global tool company. The deal is worth $4.5 billion, the companies said in a joint news release. Read more.

September Construction Spending Up 0.08%
Construction spending in September posted a better-than-expected performance, powered by the largest jump in housing construction in more than six years.

The advance spurred hope that the battered housing sector is starting to turn around and will provide support for the overall economy as it struggles to emerge from the worst recession since the 1930s. Read more.

Employment costs rise at slowest pace since 1982
Employment costs rose by the smallest amount on record in the 12 months ending in September, as high unemployment restrained wage and benefit growth.

The data shows that employers face little pressure to raise pay, even as the economy recovers. The weak labor market makes it difficult for people with jobs to demand higher pay and benefits. Read more.

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Pelosi Unveils House Health Care Bill
Last week, the Democratic House leadership unveiled their nearly-final draft health care reform bill. The bill makes some improvements to the employer mandate, by doubling the floor for penalties on small businesses for not providing health care benefits to employees and dependents. Previously, the penalties began at $250,000 in total wages; now, they begin at $500,000 in wages. Read more.

CPSC Issues Inconclusive Chinese Drywall Report
The Consumer Products Safety Commission (CPSC) last week issued a summary of its findings to date on the Chinese drywall investigation. An interagency task force, comprised of the CPSC, Environmental Protection Agency (EPA), Department of Housing and Urban Development (HUD), Centers for Disease Control and Prevention (CDC), Agency for Toxic Substance and Disease Registry (ATSDR) and state health departments have been coordinating research and governmental response to homeowners who have complained of health and metal and appliance corrosion in their homes. Read more.

OSHA Takes Initial Step Toward Combustible Dust Rule
The U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) just published an advance notice of proposed rulemaking (ANPR) in the Oct. 21 edition of the Federal Register as an initial step in development of a standard to address the hazards of combustible dust. Read more.

Home Builder Confidence Dips in October
With the expiration date for an important home buyer incentive approaching, builder confidence in the market for newly built, single-family homes slipped one point to 18 in October, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
Read more.