By: Daniel Abramson
Managing Lead of HRSource

Guidelines by the Equal Employment Opportunity commission (EEOC), as well as federal and state law, prohibit asking job applicants certain questions, whether on the application form or during the job interview.

It is also illegal for an employer to discriminate against a job applicant due to race, color, religion, age, national origin, disability, or sex (including gender identity, sexual orientation, and pregnancy).

With those in mind, here are some prime examples of interview questions that are illegal to ask, along with alternative inquiries that are permissible.  (Please note:  if you have questions or require clarification, it’s probably best toc heck with your attorney or legal department.)


Unlawful:  It is illegal to ask whether the applicant is married, divorced, separated, engaged, or widowed, or for any details about their relatives.  “What is your marital status?”  “What is the name of your relative/spouse/children?”  “How old are your children?” – these are all no-no’s.

Lawful:  You may ask, “What are the names of relatives already employed by the company or a competitor?”  Anything other than this specific question is off limits.


Unlawful:  All questions relating to pregnancy, or medical history concerning pregnancy, are verboten, including “Do you plan on having more children?”

Lawful:  It’s okay to ask how long the applicant plans to remain in the job, and to inquire about anticipated absences that apply to males and females alike.


Unlawful:  You can’t ask questions that seek to determine whether applicants are 40 years old or older, which smacks of age discrimination.

Lawful:  You may, however, ask, “Are you at least 18 years of age?” or, “If hired, can you furnish proof of age?”


Unlawful:  Any inquiries related to this topic are prohibited.  “What is your nationality?”  “What language is spoken in your home?”  “What is your mother tongue?” – these are all illegal to ask.

Lawful:  You may ask, “Which languages do you speak, read, or write fluently?” but only when the inquiry is based on a job requirement.


Unlawful:  Any inquiries that aren’t based on actual job requirements are off the table.

Lawful:  Inquiries about the ability to perform a particular job are permissible.  A specific weight or height range will not be considered a job requirement unless the employer can show that no employee outside those parameters could do the work.


Unlawful:  You cannot ask which organizations, clubs, societies, or lodges the candidate belongs to.

Lawful:  Rather, your inquiry must relate only to the applicant’s professional qualifications, such as, “Do you belong to any professional organizations?”


Unlawful:  All inquiries relating to arrests are off limits.  For example, it is illegal to ask, “Have you ever been arrested?”

Lawful:  However, it is legal to inquire about convictions.  For example, it’s okay to ask whether the candidate has ever been convicted of a crime, and to inquire about the disposition of the case.  Also allowable is, “Have you been convicted under criminal law within the past five years, excluding minor traffic violations?”


Unlawful:  Any question that directly or indirectly relates to race or color is illegal, period.

Lawful:  None!


Unlawful:  It is illegal to ask any question that relates directly or indirectly to a religion.

Lawful:  In fact, the only question you may ask on this topic is, “Can you work on Saturdays or Sundays?” – and then only if this is a requirement of the job.

By |2023-09-26T13:05:44-04:00September 26th, 2023|Categories: Articles|

CEOs are having their worst year in decades!

Nicole Goodkind, CNN
Analysis by Nicole Goodkind, CNN
Published 8:26 AM EDT, Wed September 13, 2023
CNN New York

Chief executives have left their posts at an alarming rate this year.

It’s been a bad year for CEOs.

Chief executives have left their posts at an alarming rate as their performance — and their behavior — come under increased scrutiny by corporate boards.

What’s happening: Well over 1,000 CEOs have left their companies this year, according to a Challenger, Gray & Christmas report. That’s 33% more than last year and the highest total in the first seven months of the year since the staffing research company began tracking exits in 2002.

The average CEO tenure has significantly decreased from an average of 12 years to between 5 and 7 years now, according to analysts who focus on CEO succession for talent management company Ferguson Partners.

“While specific details regarding these exits are typically undisclosed, it is evident that more CEOs are exiting due to the new pressures of their roles, the relentless pace of change, and, in some cases, their own actions,” they wrote.

The role of the CEO is changing rapidly, they said, and executive boards have been struggling to keep shareholders happy.

September’s exits: At least three major CEOs have stepped down in the first two weeks of September alone.

BP CEO Bernard Looney resigned on Tuesday “effective immediately” after admitting that he had not been “fully transparent” about “historical relationships with colleagues,” according to a statement from the oil giant.

Looney had spent less than four years on the job but was a company man through and through — he was a BP lifer, joining the company in 1991 at the age of 21 as a drilling engineer and working his way up to the top position.

But ethical infractions aside, investors were disappointed with his performance well before his resignation.

On Looney’s watch, BP became the only major oil company with goals to reduce oil and gas output this decade. Shareholders weren’t too happy with the decision -— or with BP’s share price (BP), which has lagged that of its competitors.

Looney recently trimmed BP’s emission reduction goals and increased spending on crude oil and natural gas. Still, BP missed profit expectations last quarter. Shares of the company fell 1.3% on Tuesday.

Meanwhile, clothing company Express announced on Saturday that former Tyson Foods executive Stewart Glendinning would become its next CEO, replacing Timothy Baxter, effective September 15.

Baxter’s resignation was announced just one day after the company released its second-quarter results, with net sales of its Express brand and its lifestyle line UpWest decreasing 15% compared to last year. The company’s sales in retail stores were down 21%, and its e-commerce sales were down 1%. Express reported a net loss of $44.1 million, compared to a net income of $7 million in the same quarter of 2022.

Express said Baxter’s departure was not related to the company’s financial performance. Still, shares of the company are down by about 85% since Baxter joined Express in June 2019 after spending 11 years with Macy’s.

Earlier in September, Walgreens Boots Alliance said that CEO Rosalind Brewer stepped down less than three years after taking the helm at the pharmacy chain.

Brewer’s expertise is in retail, and her exit comes as Walgreens aims to focus more on health care, said Neil Saunders, managing director of GlobalData. Retail, he said, hasn’t been a driver of growth for the company.

Shares of Walgreens are down 32% so far this year. Walgreens slashed its full-year profit guidance in June, warning of softening consumer spending and a pullback in demand for Covid vaccines.


Typically, companies don’t provide detailed reasons for why a CEO exits. Of the leaders tracked by Challenger, Gray & Christmas this year, 266 CEOs have left this year without reason. Another 182 retired, 168 either stepped down or resigned, 40 took a new opportunity, 37 had their interim positions come to an end, 32 took new positions within their companies, and 17 left for personal reasons.  Economic uncertainties and “a much faster rate of change in the business environment are  causing companies to desire new approaches, new innovations, and new strategies to compete more vigorously.

By |2023-09-14T12:28:29-04:00September 14th, 2023|Categories: Articles|

A New Tool for Scammers: AI

While technology has empowered humans to do some incredible things, it’s also contributed to a rise in scams. According to the Federal Trade Commission (FTC), 2.4 million consumers filed fraud complaints in 2022, with over $8.8 billion lost to scams (an increase of more than 30% compared with 2021).

Though there are many types of fraud, imposter scams were the most frequently reported scam, with artificial intelligence (AI) making it easier than ever to pretend to be someone you’re not. A global study conducted by computer security company McAfee revealed that one in four people worldwide had either experienced a voice cloning scam or knew someone who had. With the prevalence of AI scams growing every day, it’s more important than ever to stay informed and take precautionary steps to protect yourself and those around you from AI scams.

How scammers are using AI

Though fraud has been around for centuries, today’s scammers are increasingly using artificial intelligence to carry out even more sophisticated scams. Common examples of AI scams include:

Voice cloning

Voice cloning uses AI to replicate someone else’s voice. Scammers may pose as relatives or friends over the phone, fabricating a story about an emergency and asking their victim to send money immediately. Scammers can also use AI voice cloning to try and gain access to victims’ financial accounts at institutions that use voice recognition prompts for security.

CEO scam

In a CEO scam, a scammer impersonates a business’s CEO and asks an employee to make a payment or share confidential information. Since these emails or texts appear to come from the CEO, some employees won’t think twice about questioning the head of the company.


Phishing is a common impersonation scam where the attacker aims to steal sensitive information by pretending to be a trustworthy source. Scammers may utilize AI to add personalized greetings and perfect the company’s language, which can make phishing messages seem even more legitimate and convincing.

Malicious computer codes to crack passwords

Hackers may use malicious computer codes (aka malware) to try and steal passwords and gain access to bank accounts and other confidential information. Under the guise of a legitimate software program, scammers will trick computer users into downloading programs containing malicious code. The scammers will then run these codes on the victim’s computer, which can use different methods to steal passwords.

Ways to Protect Yourself from AI Scams

The best ways to protect yourself against AI scams are to be prepared, understand these scams and be on the lookout for them. If you suspect an AI scam, use these cybersecurity tips to help keep your information safe.

Create a “safeword” to share with family and friends to help authenticate phone calls.

Scammers can use AI to replicate the sound of someone’s voice, which can be very convincing. A safeword is a quick and easy way to verify a person’s identity.

Strengthen passwords by using two-factor authentication.

Some companies require two-factor authentication before granting you access to your email or financial accounts. A two-factor authentication code can help stop scammers in their tracks, keeping you safe in the event your passwords are compromised.

Let unknown calls go to voicemail, then call back to verify identity.

Scammers only need to record you speaking for a few seconds to clone your voice. If you receive a call from an unknown number, let it ring through to voicemail. Then, if you decide it seems legitimate, you can call back to verify the identity of the person who called.

Know most banks will never initiate conversation and ask for your personal information.

Never give your personal information over the phone to someone claiming to be your bank. Most banks will never initiate a conversation over the phone to ask for your personal information. If you’re ever in doubt, hang up the phone and call your local bank branch to verify any requests.

Educate yourself.

Taking time to educate yourself about AI and how criminals use it to scam people is one of the most important things you can do to keep your money and confidential information safe. By understanding how scam artists can trick people, you’ll be in a better position to recognize AI scams and avoid falling victim to these deceptive techniques.

Terms to know.

  • Deepfakes: Artificial videos or photos that synthetically replicate someone doing or saying something by using AI.
  • AI Chatbots: Software programs designed to communicate with people and have full, human-like conversations.
  • Natural Language Processing (NLP): Linguistics-based AI enabling computers to process human language similarly to how humans understand it.
  • Machine Learning: A subset of artificial intelligence, machine learning is a computer’s ability to replicate human thinking and behavior.
  • Voice Cloning: Also known as an audio deepfake, voice cloning artificially replicates someone else’s voice to make it sound nearly identical to the real person’s tone, pronunciation and intonation.
  • Two-Factor Authentication (2FA): Also known as multi-factor authentication (MFA), two-factor authentication is a security method that requires two forms of identification (such as a password or fingerprint and an email or text authentication code) to access information.
  • ChatGPT: ChatGPT is an AI chatbot that uses natural language processing to intelligently respond to user prompts and questions. ChatGPT was originally released in November 2022 and was developed by OpenAI, a California-based research organization.


The rise of publicly available AI tools like ChatGPT offers scammers a way to leverage AI to create even more sophisticated scams. While these scams can be convincing, you have the power to prevent them by recognizing the signs of an AI scam and following best practices for protecting your information.

By |2023-09-12T09:32:09-04:00September 12th, 2023|Categories: Articles|

Best Practices for Effective Onboarding of New Senior Executives

Starting a new phase in one’s career, whether it’s local talent or a relocation hire, is a mix of excitement and stress. This sentiment is amplified for senior executives, as the transition to a higher position or the C-suite brings both new opportunities and challenges. To ensure a successful journey for these key hires, a comprehensive onboarding process is paramount. Effective onboarding not only fosters employee retention but also speaks volumes about a company’s culture.  As experts in recruiting for senior-level positions in these industries, including roles like CEO, CMO, CFO, and COO, Brooke Chase Associates understands the critical role that effective onboarding plays in shaping the success of these executives.

  1. Create a Personalized Orientation:
  • Design a tailored orientation to introduce executives to the company’s culture, values, and mission.
  • Arrange meet-and-greets with leadership and key team members to help them understand the organizational structure.
  • Incorporate casual settings with food and beverages, such as in-house happy hours, to enhance engagement.
  1. Identify Support and Growth Areas:
  • Recognize that every executive, like any employee, doesn’t need to possess all skills but should have a balance.
  • Identify gaps during the selection process and collaborate on a plan to fill those gaps through development or team support.
  1. Offer Targeted Training and Development:
  • Provide specialized training and development opportunities for continuous learning.
  • Show commitment to executives’ personal and professional growth, strengthening their onboarding experience.
  • In-house mentorship programs aid integration and demonstrate the organization’s investment in their potential.
  1. Implement a Year-long Onboarding Plan:
  • Successful onboarding should span a year from the hire date.
  • Regular check-ins at 30, 60, 90 days, six months, nine months, and one year ensure mutual expectations are met and provide continuous feedback.
  1. Leverage Executive Search Firms:
  • Utilize executive search firms that guarantee candidates’ success for a year.
  • These firms can identify and resolve any potential concerns due to their strong relationships with both candidates and clients.

Additional Considerations for Relocation Hires:

  • Relocation is a significant life change that affects the employee and their family.
  • HR involvement at every step, offering support and resources, is crucial.
  • Providing relocation assistance, temporary housing, or rent stipends eases the transition and reduces stress.
  • Be prepared to reimburse candidates for all approved and IRS-compliant expenses, even if they exceed estimates.

Sustaining Engagement Beyond Onboarding:

  • The onboarding program is the foundation of an executive’s tenure.
  • Maintain an open-door policy for feedback, questions, and concerns after the one-year onboarding process.
  • Demonstrate excitement to have executives onboard and show gratitude for their contributions to the organization.

In conclusion, Brooke Chase Associates understands that successfully onboarding new senior executives in the Bath, Kitchen Cabinet, HVAC, Plumbing, and Building Products industry requires a tailored approach that reflects the unique challenges and opportunities of these sectors. With their expertise in recruiting for positions like CEO, CMO, CFO, and COO, Brooke Chase Associates recognizes the significance of effective onboarding in fostering employee retention and building a positive company culture. By adhering to these best practices and enlisting the support of executive search firms, companies in these industries can create a solid foundation for their new leaders and maximize their potential for success. To learn more about our expertise in recruiting senior executives in these industries, click here to learn more.

By |2023-09-12T09:28:59-04:00September 12th, 2023|Categories: Articles|

More Remote Workers are Willing to Move in Order to Find Affordable Housing

By Anna Bahney, CNN
Washington, DCCNN

Housing is less affordable than it has been in about four decades. But buying or renting a home might be even less affordable now if it weren’t for the continuing impact of remote and hybrid workers that resulted from the pandemic, according to a recent study by Fannie Mae.

The study, which was an analysis of Fannie Mae’s monthly National Housing Survey, with questions asked among more than 3,000 mortgage holders, owners, and renters between January and March this year, looked at how remote and hybrid work has changed over the past few years and its impact on housing.
More people are willing to move to less expensive areas further away from offices in city centers than a few years ago, according to the report. Continuing remote and hybrid work, at levels remarkably unchanged from two years ago, is enabling people to move toward housing affordability, the study found.

The report also revealed that “affordability” is the most important factor in finding a place to live, both for renters and homeowners.

At the beginning of the year, 22% of remote and hybrid workers said they would be willing to relocate to a different region or increase their commute. Only 14% of such workers were willing to do so in the third quarter of 2021, which is used as a comparison throughout the study and was when many workplaces attempted a “return to work” until the Omicron variant of Covid-19 pushed many employers’ plans back that winter.

Home affordability is the worst it has been since 1984

Workers who are able to break their ties to living in an area because of its proximity to work are able to spread out, reducing the competition for a historically low number of homes for sale that could push prices even higher.

The research showed that among remote workers, all age and income groups have grown more willing to relocate or live farther away from their workplace since 2021. But younger workers – those between 18 and 34 – are significantly more willing than those older than them to live or commute a further distance from their work, with the share willing to do so jumping from 18% in 2021, to 30% in 2023.

“We believe this greater willingness to live farther from the…workplace may be an indication that some workers are feeling more secure about their remote work situation…or their ability to find another job if their current employer were to change its policies,” wrote the researchers, in a summary.

This is good news for remote workers during a time of crushingly low levels of home affordability.

Where we work now

Remote and hybrid work may be here to stay. Or, it’s here long enough for people to buy or rent a new home because of it, the researchers found.

Despite the demands by leaders of some prominent companies that workers need to head into the office or head out the door, the share of fully remote and hybrid workers has remained surprisingly constant in the post-pandemic era, according to the study.

In the first part of the year, 35% of respondents worked fully remote or worked a hybrid mix of sometime at a workplace and sometime at home. That was only slightly down from 36% in 2021.

While the share of workers going to a work site or office every day was unchanged at 49% in both 2021 and in 2023, the share of people working fully remote ticked up to 14% this year from 13% in 2021.

Return-to-office mandates won’t magically improve young employee’s career development.

Homeowners continue to be slightly more likely to work from home than renters. And those with more education and higher incomes are also more likely to have a work-from-home situation, which is consistent with 2021,the study found.

Only 30% of lower-income people, earning 80% of the area median income, could work remotely or hybrid in 2021, and that dropped to 27% by this year. Meanwhile 42% of upper-income people, those making 120% of the area median income, were able to work from home in 2021 and that number did not change in 2023.

Lower-income people – who are in most need of access to lower-cost housing, found further away from a city’s core – are also those least likely to work remotely, according to the survey.

‘Affordability’ has become most important

With housing affordability taking a hit over the past few years as rents rose, home prices stayed elevated and mortgage rates soared to a 22-year high, it is not surprising that “affordability” was the top factor for people when picking a new home, at 36%. This was a big jump from 2014, the last time the question was asked, when the top consideration was “neighborhood” at 49%.

Homeowners and renters both showed growth in prioritizing “affordability,” but the increase was greatest among renters, shooting up from 21% in 2014 to 46% in 2023.

“The change in preference for renters is truly remarkable, since not only did it more than double, but it represented a complete reversal of the relative importance of neighborhood cited by consumers as the top consideration in 2014,” wrote the researchers.

In addition, despite the talk about moving for more space, “home size” as a factor for picking a next home was unchanged and still outweighed by “affordability.”

Shopping for a home? There’s a lot working against you right now

“The striking shift toward affordability as the top consideration among overall survey respondents for their next move substantiates the need of households to find ways to manage around the significant rise in mortgage rates, home prices, and rents of the past few years,” the researchers wrote.

And this is impacting where people look for a home and what they prioritize when they are searching.

“Home affordability may also be a reason why we saw an increase in remote workers’ willingness to relocate or live farther away from their workplace, particularly given that, historically, a shorter commute to denser job markets was considered a premium amenity,” the researchers wrote.

The suburbs are increasingly where people want to be, the report found, which is part of an ongoing trend since 2010. And that share has grown between 2021 and 2023.

The researchers say the change to the housing market brought about by remote workers holds broader implications for the link between housing and the labor market.

The growing share of remote-working renters and homeowners willing to live farther from their work location gives employers access to a wider labor market, which could be useful if a downturn in economic activity led to greater rates of job loss.

“Having access to a larger labor market may also reduce the adverse effect on local home prices when a major employer or industry contracts,” the researchers wrote.

About Brooke Chase Associates, Inc.
Brooke Chase Associates, Inc. is the premier executive search firm specializing in the recruitment of executive management professionals within the building materials, plumbing and kitchen/bath industries. Established in 1980, our list of clients has grown to become a virtual “Who’s Who” of both domestic and international firms for whom we have successfully recruited professionals. A testament to our success is that many of our clients have utilized our services for over 43 years. We have one of the best “Completion” and “Retention Rates” in the industry. At Brooke Chase Associates, Inc., a strong emphasis is placed on our client relationships. A retained, exclusive executive search is a strategic, not transactional, relationship with the hiring manager and human resources, the “search committee.” Our business is driven by a single principle: Successful companies start with successful people.

Brooke Chase Associates, Inc. has its Corporate Headquarters in Sarasota, FL. For additional information contact Joseph McElmeel, Chairman and CEO of Brooke Chase Associates, Inc. at 941-479-6382 or

Our firm provides the information in this e-Newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-Newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties or performance, merchantability, and fitness for a particular purpose.

By |2023-09-19T07:38:14-04:00September 6th, 2023|Categories: Articles|

Employers Take Note: FTC Releases Notice of Proposed Rulemaking Banning Worker Non-Competes

The Notice would ban all existing and future non-compete agreements with workers, with a narrow exception in connection with the sale of a business by any individual holding at least a 25% interest in such business.

January 9, 2023
Thanks to Pillsbury Winthrop Shaw Pittman LLP


  • The FTC has published a proposed rule for a nationwide ban on non-compete agreements with workers, including non-employees who perform work for employers.
  • The proposed rule includes an exception for owners of at least 25% of a business in connection with the sale of such business, but the FTC is soliciting comments on whether the final rule should include additional exceptions.
  • Any final rule is likely to include additional changes and face legal challenges to the FTC’s authority.

Citing its interest in promoting competition and opening up “better employment opportunities” for workers, the Biden Administration is moving forward with a proposal to prohibit a feature of many U.S. employment relationships valued by employers and of significant importance in M&A transactions; non-competition agreements.  Rather than looking to Congress to enact legislation to achieve this goal, the Administration is relying on the authority of the U.S. Federal Trade Commission (FTC) to enforce and engage in rulemaking under existing antitrust laws.

In July 2021, President Biden signed an Executive Order directed at promoting competition in which he encouraged the Chair of the FTC “to exercise the FTC’s statutory rulemaking authority, under the Federal Trade Commission Act, to curtail the use of non-compete clauses and other clauses or agreement that may unfairly limit worker mobility.”  The FTC was listening.  In November 2022, the FTC releases a policy statement to reinvigorate Section 5 of the Federal Trade Commission Act (FTC Act), which bans unfair methods of competition.  Then, on January 4, 2023, the FTC announced that it found that three firms had engaged in unfair competition by using illegal non-compete agreements with their workers.

The very next day, on January 5, 2023, the FTC released a Notice of Proposed Rulemaking (NPRM) proposing to ban all non-competes entered into between employers and workers.  If ultimately adopted, the rule will apply both prospectively and retroactively, including with respect to the estimated 30 million Americans who are currently subject to non-compete agreements.  This proposed rule has implications for companies across the entire country – even companies operating solely in jurisdictions like California that already ban non-competes – and for the merger and acquisition process.  The proposed rule contains only a single, narrow exception for non-competes in the sale of business context: a person selling a business entity, or otherwise disposing of all of their ownership interest in the business entity, may be bound by a non-compete only if they own 25% or more of such business.  This narrow exception is far more restrictive than even California’s sale of business exception.  The proposed rule also applies beyond the employment context, covering workers who fall outside the traditional definition of “employees.”

The FTC voted 3-1 to publish the NPRM, with Commissioner Christine S. Wilson voting no and issuing a dissenting statement attacking the rule as a departure from “hundreds of years of legal precedent” and arguing that the rule “will trigger numerous and likely successful legal challenges regarding the Commission’s authority.”:  The FTC seeks public comment on several topics, including whether the rule should impose a categorical ban on non-compete clauses or a rebuttable presumption of unlawfulness, and whether certain categories of workers should be exempted from or treated differently under the rule, such as senior executives or higher wage workers.  Comments are due within 60 days of the rule’s publication in the Federal Register.

The rule proposes an effective date of 60 days, and a compliance date of 180 days, after publication of a final rule in the Federal Register.

The Substance of the Proposed Rule
According to the FTC, researchers have found that use of non-competes has negatively affected competition in labor markets, resulting in reduced wages for all workers across the labor force, both those with and those without non-competes.  The FTC estimates that the proposed rule could increase workers’ earnings across industries and job levels by $250 billion to $296 billion per year.  The FTC further asserts that researchers have found that non-competes have negatively affected competition in product and services markets and innovation.The FTC, therefore, pursuant to Sections 5 and 6(g) of the FTC Act, deems employers’ use of non-competes an unlawful “unfair method of competition.”  Specifically, the proposed rule provides that it is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker, to maintain with a worker a non-compete clause, or, under certain circumstances, to represent to a worker that the worker is subject to a non-compete clause.  In addition, the FTC intends for this to be the governing law of the United States.  The proposed rule contains an express preemption provision noting that the “Rule shall supersede any state statute, regulation, order, or interpretation to the extent that such statute, regulation, order, or interpretation is inconsistent with the Rule.”

Significantly, the proposed rule applies to “workers,” broadly defined to include any “natural person who works, whether paid or unpaid, for an employer,” even if not a statutory employee.  The term “worker” includes “without limitation, an employee, individual classified as an independent contractor, extern, intern, volunteer, apprentice or sole proprietor who provides a service to a client or customer.”

The proposed rule focuses only on non-competes governing work restrictions post-employment and only on those between employers and workers and not, for example, on non-competition agreements between businesses.  The Department of Justice, however, already takes the position that business-to-business agreements not to poach each other’s workers may be considered unlawful under the Sherman Act.

The proposed rule prohibits non-competes and their functional equivalents.  The Preamble to the proposed rule states that the definition of non-compete clause “would generally not include other types of restrictive employment covenants – such as non-disclosure agreements (NDAs) and client or customer non-solicitation agreements – because these covenants generally do not prevent a worker from seeking or accepting employment with a person or operating a business after the conclusion for the worker’s employment with the employer.”  The Preamble cautions, however, that “such covenants would be considered non-compete clauses where they are so unusually broad in scope that they function as such.”

In addition to prohibiting employers from entering into non-compete clauses with workers, the proposed rule would require employers to rescind existing non-competes and provide notice to applicable workers that their non-compete clause is no longer in force and effect.  The proposed rule includes model language that satisfies this notice requirement and establishes a safe harbor whereby an employer can satisfy the rule’s requirement to rescind existing non-competes by simply providing relevant workers with a notice in compliance with the notice requirement.

As noted above, the proposed rule includes a limited exception for non-competes between the seller and buyer of a business where the party restricted by the non-compete is an owner, member, or partner holding at least a 25% ownership interest in a business entity.  This exception is likely to send shockwaves through the private equity world and will have a profound impact on mergers and acquisitions if the rule takes effect.

The proposed rule unfortunately leaves many questions unanswered.  For example, it is not clear if:

  • A partner in a partnership, such as a worker who holds profits interests in an LLC taxed as a partnership and receives income reported on a K-1, would be deemed a covered “worker.”
  • A distinction can be made between a post-employment non-compete and a non-compete that has a fixed time-based duration applicable regardless of employment status.
  • Companies could still impose restrictions on competitive acts in exchange for the grant of equity or deferred compensation to an employee, and, if such employee engages in competitive acts, whether companies would be able to claw back such grants.

Commenters should request that the final rule address these more nuanced issues.

The Proposed Rule’s Uncertain Future
The substance of this proposed rule is likely to change given the FTC itself is soliciting input on the several key matters, including whether non-competes for senior level or high-wage employees should remain viable.  Moreover, as Commissioner Wilson notes in her Dissenting Statement, the rule is likely to trigger numerous legal challenges.  Indeed, the U.S. Chamber of Commerce almost immediately issued a statement questioning the authority of the FTC to promulgate such a rule: “Today’s actions by the Federal Trade Commission to outright ban non-compete clauses in all employer contracts is blatantly unlawful.  Since the agency’s creation over 100 years ago, Congress has never delegated the FTC anything close to the authority it would need to promulgate such a competition rule.  The chamber is confident that this unlawful action will not stand.”

Commissioner Wilson highlights three likely arguments in response to the proposed rule in her Dissenting Statement: (i) the FTC lacks the authority to engage in “unfair methods of competition” rulemaking under the FTC Act; (ii) under the major questions doctrine, the rule is a major question requiring clear Congressional authorization to impose a regulation banning non-competes and such authorization does not exist; and (iii) under the non-delegation doctrine, Congress cannot delegate its legislative power to the FTC.

These legal challenges could take months, if not years, to reach an ultimate resolution, leaving employers in a difficult position with how to manage non-competes.

Employers Must Ensure Current Compliance with Applicable State Law
Non-competes are not only under attack by the FTC; they are increasingly under attack and disfavored by legislatures across the country.  While waiting for a final answer on the applicable federal non-compete law, employers must ensure that they are compliant with the increasingly varied non-compete state laws across the country.

California, North Dakota and Oklahoma, for example, each have general prohibitions of non-competes (and California and North Dakota also prohibit non-solicits of customers and Oklahoma permits only non-solicits of an employee’s established customers).

An increasing number of states permit non-competes only for exempt employees or employees making more than a statutory minimum.  As of the date of this Alert, these states include Colorado, Illinois, Maine, Maryland, Massachusetts, Nevada, New Hampshire, Oregon, Rhode Island, Washington, and Virginia as well as the District of Columbia. Some of the statutory minimums are quite high.  For example, as of the date of this Alert, employees must make at least $150,000 to have a non-compete in the District of  Columbia, $101,250 in Colorado, and $116,593.18 in Washington.

An increasing number of states also have laws prohibiting forum selection and choice of law clauses designating any jurisdiction other than their own state.  Such laws are currently in place in California, Colorado, Massachusetts, and Washington.

In addition, an increasing number of states have enacted laws prohibiting employers from enforcing non-competes without pay during the restricted period, such as Massachusetts and Oregon.

Next Steps for Employers
In this current climate of remote work and employees working across the country, employers are well advised to work with their employment counsel to ensure that their current restrictive covenant agreements comply with all potentially applicable state laws.

In addition, in preparation for the possibility of a nationwide ban on non-competes, employers should work with their employment and intellectual property counsel to ensure that their existing agreements independently offer sufficiently robust protection of their confidential, proprietary and trade secret information.

By |2023-01-13T14:07:27-05:00January 13th, 2023|Categories: Articles|

What Business Owners Should Know About Financial Forecasting

Courtesy of Kerkerin Barberio

Is your business ready to tackle the challenges and opportunities that lie ahead in 2023?  Financial statements show how a company has performed in the past.  But historical data doesn’t necessary predict future performance, especially in an uncertain, volatile market.  As part of your planning, it’s important for management to prepare forecasted statements.

Make Reasonable Assumptions
The purpose of forecasting is to obtain the most realistic picture possible of a company’s future performance for as far out as management can look.  Forecasts provide important information that can be used to make decisions, such as:
  • When working capital shortages are likely to take place – and whether the line of credit is sufficient to bridge cash flow gaps.
  • How much inventory, including raw materials, parts and finished goods, the company should purchase each month.
  • Whether the company has the right mix of employees to meet its operational goals – and how it should remedy any deficiencies (or excess capacity)
  • Which fixed assets should be retired (or acquired).

A forecast is typically organized using the same format as the company’s financial statements: an income statement, balance sheet and cash flow statement.  Most conclude with a statement of assumptions that underlie key numbers in the forecast.  A detailed forecast of revenue drives many of these assumptions.

Roll with the Punches
Mangers use forecasts in their annual budgeting and strategic decision-making processes.  But many budgets and business plans are out of date before the end of the first quarter.  That’s because today’s complex, dynamic markektplace is almost impossible to forecast with certainty.  As a result, many companies have replaced traditional annual budgets with rolling 12-month forecasts that are adaptable and look beyond year end.

Creating a meaningful rolling forecast necessitates ongoing comparison between forecast and actual results.  This enables management to unearth and respond to weaknesses in forecast assumptions and unexpected changes in the marketplace.  For example, a retails store that suffers a data breach could experience an unexpected drop in revenue.  If the company maintains a rolling forecast, it would be able to revise its plans for temporary inventory decreases, as well as technology and marketing cost increases related to remedying the breach.

Consider External Market Conditions
Almost all forecasts begin with historical financial results, but that’s only a starting point.  These days, you can’t automatically assume current revenue and expenses will grow at a constant rate commensurate with inflation.  Management needs to evaluate the marketplace for emerging external threats and opportunities.  For example, health care providers need to anticipate how emerging government regulations, including the CDC and FDA guidance, will affect their future revenue and expenses.

Examples of other external obstacles that management can’t change, but may need to factor into forecasts, include rising energy costs, evolving weather patterns, and changes to tax and labor laws.  On the other hand, changes in technology – including the growing popularity of social media and smart devices – may create marketing opportunities that proactive businesses can use to their advantage.

Savvy managers watch how competitors are performing under the same market conditions.  In an evolving market, the performance of competitors – especially market leaders – is often more meaningful than historical results.

Evaluate Forecasting Risks
Once you’ve developed your preliminary forecast for 2023, consider performing a sensitivity analysis to identify which components are most critical to your business’s success (or failure).  Sensitivity analysis starts with a base case scenario.  Then assumptions are changed – one at a time – to see how the changes flow through the financial statements.

An input is more “sensitive” and, therefore, has high forecasting risk if a small change in the assumption has a large effect on the bottom line (or asset values).  If the most sensitive variables in your forecast are also the most unpredictable, you may need to monitor the situation closely to minimize problems.

Team Effort
Forecasts that employees perceive as dictatorial mandates are doomed to fail.  Reliable ones are based on input from all functional areas, including finance, sales and marketing, operations and human resources.  Cross-functional collaboration on forecasts can help you balance predicting demand with planning for supplies, catching errors and omissions, and achieving companywide buy-in.

Getting input from your financial davisor helps, too.  In addition to providing objective market data, experienced financial professionals understand financial reporting and offer fresh perspectives that can breathe new life into your company’s budge tor business plan.

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By |2023-01-09T15:13:30-05:00January 9th, 2023|Categories: Articles|

Breaking Down the Myths of Housing, Affordability, and Supply

By:  Matt Meyers, CEO of Yesler
Yesler CEO Matt Meyers takes a in-depth look at the state of U.S. housing and how we arrived at the current state.

The housing market.  To many, it’s crazy and unknowable.  It always seems in flux and getting more expensive, usually.

The widely accepted narrative is that homes are not affordable, because prices are so high.  But, high prices and affordability are two different things, with the majority of buyers borrowing to purchase their homes.

Can historic data help put our current market circumstances into perspective?  I think so.  Seeing the data will give you a different perspective on the housing market.  For example:

  • What is the underlying demand for housing?
  • What impact do interest rates have on the housing market?
  • Do we have a housing shortage?  Do we have an affordability problem?
  • Is it increasing or decreasing?

With an open mind and data, you may come to new conclusions about the current state of the US housing market and what the future holds.

Data sources
Most pundits, forecasters and consultants use U.S. Census Bureau or Housing and Urban Development (HUD) data.  In this article, I rely exclusively on The Federal Reserve Bank of St. Louis (FRED) data, which pulls from these government sources.  They provide an excellent interactive site to review all kinds of U.S. data.

Historic housing starts
About 25 years after the GI bill supported veterans in buying a home, their children, the Baby Boomers, were in need of housing.  The year was 1971, and by that time the US was well suited to supply it compared to the rest of the war-impacted cities of Europe and Asia.  The increase in demand from new households for the Boomer class showed up in new home construction.

Observe the peaks of the market since the 1960s, and you may be surprised to see that the peak wasn’t 2006.  The Baby Boom created the biggest housing boom.  Now draw a line connecting all the peaks since the early 1970s and you’ll see that line is down.  Draw a line connecting all troughs, and that line is down too.

That begs the question: Has the housing market been underbuilding for 50 years through 7 recessions and widely varied fiscal policy?  Or has demand for new U.S. housing starts been declining for decades?

What has happened to home prices over the same period?

Up, up, and up, with a few dips along the way.  How is this possible over a very log period?

Incomes must have risen too.

Note that this chart starts in the early 80s, not the 70s.  Examining the numbers, it looks like home prices (prior chart) have risen faster than incomes.  That must mean homes have become less affordable.  Unless, there is another factor – interest rates.

And interest rates?

The dramatic decline in interest rates created cheap money, for those borrowing on 30-year mortgages.  The recent spike to 6% or slightly higher is still low, from a historical perspective.

One chart that combines the three prior charts.

Here is the narrative: income has risen gently, interest rates have fallen dramatically, and home prices have risen faster than income!

The critical question:
Which has a greater impact on housing prices in the US?

1. Household income,
2.  Interest Rates

Based on this view of the data, I’d guess B – Interest rates.

What has happened to affordability in the US?
The following chart illustrates the relationship between the three variables of US Median Household Income, US Median Home Price, and interest rates.  The data is the same FRED data downloaded into a spreadsheet to calculate what can a buyer afford (the GREEN LINE) under the following conditions:

  • 20% down payment
  • 28% housing debt to monthly gross income ration (good assumption for mortgage approval) using US median household income reported for the year
  • Prevailing interest rate on the first FRED reported day in January of the year

The green line, what a buyer can afford, is higher than the median US home price (black line)!  Prior to 2007, the median sale price of a US home was closely matched to what a buyer could afford.  After 2007, homes became much more affordable due to lower costs of borrowing, even though prices were higher!

What about 2022?
What happens to the green line under the following hypothetical circumstances:

  • If median household income increases 5% in 2022 due to inflationary pressures.
  • If US Home prices slow their pace of escalation and only increase 5% in 2022.
  • If interest rates climb to 6% average for the year.
Then home prices relative to buying power become matched again, just like they were from 1985-2006.

Finally, what about the underlying demand for housing?  Don’t we have a shortage?

History tells us (back up to the first chart for reference) that the demand for housing was about 1.5 million annual housing starts until the 1980s, and since then, it’s been about 1.3 million.  That’s simply taking averages for those periods.  The number of recessions and corrections indicate the market is working!  When there are too few or too many homes, the laws of supply and demand take over to clear the surplus or fill the deficit.

To predict the future, using the past, I suggest demand will stay at about 1.3 million units unless three principal factors that affect new demand change course.

First, the mortality rate.  With the onset of COVID, mortality rates rose, and thus, underlying demand for new housing fell.  We can hope this factor will return to normal.

Second, the rate of births in the country has been declining for several decades, reducing new household formation.  If we have another boom, history tells us it will take 25 years to show up in demand for housing.

Third, and politically controversial, is immigration.  More immigrants would bolster demand for new housing.

It’s not demand that has driven prices higher, because underlying demand factors are not in favor of increasing housing starts; rather, it is historically cheap money!  With historically low borrowing costs, more money has flowed into real estate, driving competition and prices higher.

What does the recent dip in US housing starts suggest about the economy?  Go back and look at the first chart in this article and decide for yourself by asking this question: Do recessions (shaded areas) precede or follow peak housing production?  It should be an interesting 2023 for the housing market!

(Matt Meyers is the founder and CEO of Yesler, the Seattle-based lumber and building materials digital marketplace.)

By |2022-12-14T18:16:42-05:00December 19th, 2022|Categories: Articles|

Bigger is Not Always Better When Selecting a Search Firm Partner

By:  Kelli Vukelic, CEO of N2Growth

Senior leadership hires can make or break an organization.  Various studies show that the failure rate of executives coming into new companies is 30 to 40 percent after 18 months.  In a hiring market, like the one we’re currently experiencing, finding a true game-changing leader is extremely challenging.  Furthermore, making a hiring mistake is extremely costly in terms of both direct and indirect costs.  So how do you find those top performers and disrupters that can take your organization to new heights?  Internal recruiters do not have the tools or abilities to fill these critical leadership roles, their ‘open requisition’ stack is too full, and all roles get equal attention, whereas the most critical ones need a dedicated team.  Once you recognize that an external search professional is needed, the decision for which one should be solved with a different calculus than in the past.

With demand for top executives outstripping supply choosing the best search firm to partner with can have a critical impact on the future of your organization.  There are thousands of U.S. executive search firms who are looking to help to place talent in organizations.  So how do you decide on which firm is the best fit?  Should you use a large firm whose name is familiar to you because of ads and billboards?  Or should you partner with a more niche, local boutique?  Or should you consider a new emerging category of super elite boutiques that give you the best of both worlds, international reach, and creative, disruptive thinking?  “I would caution that size is not always an indicator of success, and more importantly not a risk mitigator,” said Kelli Vukelic, CEO of N2Growth.  “A small elite class of boutique search firms is achieving this, providing you all of the executive search solutions of larger firms, but with a more hands-on, better resourced approach.  There is no one-size-fits-all solution to placing C-suite candidates.  One-size-fits-one and having worked at both ends of the spectrum, here are my points for your consideration.”

Plethora of Choices
There are countless options when it comes to executive search firms.  On one end of the spectrum are the incredibly large firms, which come with big brand name recognition, high overhead, and revenues reaching into the billions annually, according to Ms. Vukelic.  “Several of these publicly traded firms have good reputations, but they have historically catered to Fortune 500 companies,” she said.  “If your organization is not a Fortune 500 company, your search can easily get lost in the shuffle or pushed down below the partner level, and placement costs can quickly exceed your price range with antiquated administrative fees that cover big overheads.

On the other end of the spectrum, however, are boutique search firms.  “You may be skeptical of these smaller enterprises, fearing that they lack the resources and experience to find the right executive for your organization,” said Ms. Vukelic.  “But these fears are often unfounded – in fact, boutique firms are often better resourced, making them a better fit for your search.”

Personalized Approach
When engaging with a boutique firm, you are more likely to deal directly with the person or team leading your project.  Typically, Ms. Vukelic notes that boutique firms create team structures to work on projects, and their “top-to-bottom” approach offers the client extraordinary attention to detail.  “They can assess a client’s unique needs and then customize their approach accordingly,” she said.  “An agile process allows time for listening, connecting, coaching, and advising.  This personalized approach allows boutique firms to place candidates who are technically, academically, and culturally additive to the organization.  This sets both the client and candidate up for success on the first go-around, saving everyone involved valuable time, money, and energy.”

By working with a boutique search firm on your C-suite placements, it is highly likely that you will interface and deal directly with the senior leadership of the company, according to Ms. Vukelic.  “Direct interaction with the leader of the firm builds trust, allows you to voice any questions or concerns you may have, and get a real-time answer from a key executive,” she said.  “A boutique firm will invest in learning your culture and talent needs.  The senior engagement leader that works with you from the onset of the search will lead the process, speaking to every prospective candidate on your behalf.  In a noisy recruitment market, where candidates have the upper hand, who do you want to tell your story and be that extension of you in the marketplace?”

By contrast, when engaging with a large firm, Ms. Vukelic explains that you may only speak with a partner occasionally as they are likely busy chasing billings and not focused on your search day-to-day.”  Larger firms often delegate key work to less tenured associates that you have never met and who have only second-hand knowledge of your organization and its needs,” she said.  “They also have limited experience, meaning they bring a narrower perspective to the candidate process.  These are the people telling your story in the marketplace.  This can result in candidates whose resumes match your specification on paper but may not align with your goals or add anything new or different to your culture.  Large firms are usually in a constant state of growth, which limits the attention they can pay to your search.  A sizable client base may be great for them, but it might no be best for you.”

Boutique search firms take the time to learn the intricacies of their client’s company culture and goals.  They operate with the understanding that trust is built every day and with each interaction, not bought with brand name recognition.

Greater Candidate Pool
“Executive search firms have an ethical and contractual obligation not to recruit from clients,” Ms. Vukelic said.  “Because large firms conduct business with so many organizations, they have significant hands-off limitations which limit their recruiting strategies.  Candidates that are active on a search within a firm are also off-limits for other searches.  With large firms, this can equate to thousands of candidates who are unavailable to your search, severely limiting the talent pool.”

By |2022-12-14T18:17:03-05:00December 16th, 2022|Categories: Articles|

These Are The Four Leadership Styles In Business (and which works best).

By:  Robert Jordan and Olivia Wagner
Authors of “Right Leader, Right Time,” say there are 4 leadership styles: fixers, artists, builders, and strategists.

Here are the four types of business leaders Jordan and Wagner identified:

The fixer
When things are turbulent, it’s time to bring in the fixer.

“The fixer leader is really drawn to chaos,” said Wagner.  “If you think of a dysfunctional organization, maybe there’s a toxic work environment, revenues declining, employees leaving.  This leader has an ability to go into that type of situation and cut through the mess, get the organization back on track.”

Once fixers do this, they often, move on to another company in crisis.

“They’re wired for repeat turnaround situations,” said Jordan.  “All leaders have to be great at fixing a crisis occasionally or one time, but the fixer is drawn repeatedly.”

Jordan expects 2023 will be “the year of the fixer” as organizations face challenges like inflation, persisting supply chain issues, international exposure amid Russia’s war on Ukraine, and recession fears.

The artist
Driven to create, artist leaders are most beneficial when a company risks becoming stagnant.

“The artist can invent something from scratch, or in many cases, they’re looking with a fresh perspective to reinvent how something has been done,” said Wagner.  “Any organization, big or small, that is looking for innovation, needs to make sure that they are encouraging the artist leader to step up.”

The builder
The builder is well-equipped to lead smaller companies looking to become dominant in the market.

“Every company reaches kind of a ceiling in growth at some point in their journey, and that’s where the builder tends to shine,” said Wagner.  “They step in and put foundation, process, structure in place to enter new markets, to really zero in on the people, the process, the product.”

As Jordan adds, “The mantra for the builder is market.”

Like the fixer leader, the builder doesn’t usually stick around forever, often leaving for another organization once the job is done to start over again.

The strategist
If a leader’s been around for a while at a large company, odds are they fit the strategist mold.  Unlike the other types of leaders, who often flit from one company to another as a situation suits their leadership style, the strategist is generally more loyal to an organization.

You might also think of them as the conductors, quarterbacks, or pilots of their companies.

“With so many teams, divisions, projects at play, the strategist can really see the whole playing field and bring people together, align the team, typically around both short- and long-term vision,” said Wagner.  “They can take that vision and turn it into executable plans.”

Knowing who is right – and when
To make the best leadership decisions, companies should frequently take stock of where they’re at and where they’re headed.

“As organizations change, the leadership needs to change,” Wagner said.  “The wiring needed is going to change along with the growth that takes place.”

By |2022-12-14T14:41:45-05:00December 12th, 2022|Categories: Articles|
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