Dashboard: Just Ignore Those New 1099 Rules

[Music] welcome to another 21 hats dashboard brought to you by our sponsor the great game of business I'm Lauren Felman and I'm here with Jee Marx welcome Jean hey Lauren how are you I'm doing great great to have you here um Jean you wrote a piece recently in which you reported that the Department of Labor's new rules governing whether a worker should be classified as an employee or as a 1099 contractor uh those new rules are going to have a significant impact on businesses including yours um tell us what what's the change so it's not actually just about the change but it's all it's more what should employers do about it so first of all let's just because I'm I'm I'm kind of taking a stance on this first of all the change okay um if if you have independent contractors you need to be aware acutely aware that uh in March the rule for classifying them is going to change um these independent contractors that you have if they are integral to your business which means that if they are generating revenue for your company or if they're core to the operation of your company like you know you need them to provide uh work so that you can provide products and services then it is um quite likely that you will have to reclassify those those independent contractors as employees which means you'll have to pay employer taxes and employee benefits and they can unionize how is that different Jean hasn't that been the case for some time no there was a change to the rules so there's always been this long list of requirements as to whether somebody's independent or not uh you know whether or not you exert control whether they can negotiate fees whether they can control their schedule work independently all that and none of that is you know a lot of that is mostly the same as it was but these revised rules focused on this this integral part so it was kind of implicit before that someone if someone was integral that they should be an employee but now it's being spelled out and there's a definition for what integral means right because it was implicit it was things like say you're a trucking firm and you've got a a driver and it's an independent contractor and even though he might work for you 10 hours a week or 20 hours a week and have other customers um that person was an independent contractor they had their own business they drive their truck you give them a $199 and you that's what it was well if you are on a trucking firm and this person is is driving your products and then you're turning around and billing his services to your customer that's integral now you know and that's it's not implicit that is now specific and and you know the Department of Labor is saying hey uh that person should be an employee of yours I mean you know even if it's 10 hours a week although I think one of the criticisms I read of this and it may have been in your piece is that what exactly is interr is a little bit vague and that it's it's just not black and white and not something that someone can determine for themselves clearly whether an employee or a contractor is integral or not yes know I mean it it kind of depends I mean listen my my company has really you know got an issue with this I mean I hire a developer to do work for a client and uh you know the guy charges me 50 bucks an hour I turn around and Bill my client a 100 bucks an hour um that person is doing services for my client through me um he's generating revenue for me I think that's pretty pretty black and white that I would have to classify that person as an employee do you have a plan what are you going to do yeah well that's what I wrote about in the Washington Times I said first of all let me just you know so that you don't you don't go to jail Lauren I don't want to put you in any liable situation here because You' got some Maniac on the on the line talking about like some crazy because my my position is you might want to ignore the rule if you're an employer right now first of all talk to a labor attorney don't be you know Brash but there's a lot of reasons why uh there's a lot of reasons why um this rule might never ever see the light of day even when it's issued in March um for starters there's already lawsuits that are contesting it there's going to be a number more um that are going to contest it uh for things like you just mentioned about how do you determine integral and whether or not this is even you know under the purvey of the the Department of Labor to do like are they allowed to do something like this um and those lawsuits are going to continue on for the rest you know throughout the year and that that kind of puts a stay on on on the regulation um there's another you and I talked about this whole Chevron deference thing with the suprem Supreme Court yep we're going to get a ruling from the Supreme Court in the summer and it looks like the Supreme Court is going to turn you know a lot of these Regulatory Agencies the sort of decisions that they make uh let judges decide whether or not they're in you know you know you uh consistent with the legislation um this is the fair labor standards act and so I imagine a bunch more lawsuits will come up contesting the Department of Labor's right to even do this you know so there's that um and then there's an election and um you know if if u a republican gets you know elected president um it'll be their Department of Labor and uh you know both Nikki Haley and Donald Trump have you know you know opposed this um and have supported you know more flexibility for independent contractors and would certainly not pursue any lawsuits you know or or or defend any lawsuits against the government um and just let it lie and therefore you know the old rules will stay intact so there's a lot of reason to to think and by the way there's also um you know a fair number of congressmen on both sides of the aisle that are trying to um convince the Department of Labor to exempt small businesses uh from this rule as well um so those conversations are going on you know so you know what I mean like all these things are happening that it's like I don't know like so in my situation like I'm probably GNA play the lottery and and wait and see how this all turns out before I start classifying people as employees uh because it seems like it's kind of murky you know well I think it's likely you that that'll be a pretty easy decision to make don't you think I mean if the if there is litigation as you're describing the the rule is not going to go into effect I mean it might go into effect for a week but uh if there's litigation everything will be put on hold don't you think okay well well thank you Lauren my attorney I will take your advice and when I'm when I'm locked up in prison you'll be my first phone call okay to we'll do dashboard with you in prison that'll be interesting you'll be like you'll be like ah yeah well I guess I was wrong on that sorry wait I I'm not telling you to ignore it you this was your idea yeah I hear you I hear you let me ask you this the the the point of this rule law is that there are employers who have taken advantage of workers by uh treating them as if they were employees but not rewarding them paying them giving them benefits as if they were uh employees do do you you basically agree with that I do I mean I listen I think there's there's two things that are going on here one is the employ the other is that and again I don't you know a lot of people accuse the B administration of want to help the unions you know the more employees there are they don't accuse them of that the Biden Administration says they want to help employees right it's true and and part of that is to protect workers as well but then again one of the one of the people that's uh one of the organizations that's suing the Department of Labor is the like the national Freelancers Association do you know what I mean so you know it's you know you've got it from both sides and um I know my I have a lot of independent contractors in my business and they have no interest in being an employee of mine you know they like their freedom and uh they get health insurance through an association there's that gray area there where there are there are workers who are not being taken advantage of who do like that uh the freedom to set their own schedule determine their own hours you know whatever it may be um and operate essentially as entrepreneurs and I guess it's it's just hard to put that in language that will hold up in a court of law yeah it'll be uh it'll be interesting you know it's just a different appro it's it kind of like sums up the approach that different sides have to this you know like you know the the and again I'm not saying either one is right or wrong but you know it's like you know the democrat's approach is you know there should be more regulation the government should make more of these decisions to make it more clear and then the Republicans you know approach is no we're going to leave that up to business and their employees to figure out you know what's best and yeah there's there's cases to may make on on both sides I think you know which side I land on so well let me ask you this suppose you do have to live with this rule as it is currently written how big would that impact be if you had to make some of these significant I'll tell you who would be significantly affected I don't think she would mind me saying is my wife who runs a nonprofit that you know provides literacy Services um you know she she gets funding and then uh provides these uh certified tutors to teach kids how to read uh That Couldn't otherwise be able to afford it on their own you know um which is amazing because it's you know literacy is a huge huge issue and um she uses contractors to do this she's got about 50 or 60 independent contractors that you know that that that are going out there and teaching these kids in the inner city in Philadelphia helping them get up to grade level in Reading you know and um if this rule came through and she had to comply with it her expenses would significantly increase because she would then have to make them all eligible for their benefits as well as pay uh workers compensation as well as pay employer taxes on all these people as a nonprofit which basically means she will have less money available to provide services to help kids learn how to read if you see what I mean sure my wife is very quickly turning from a Democrat into a republican rules come out and and you don't think there's any question it's not a a matter of it being a gray area those contractors that she uses would be integral to the business oh there's no doubt yeah there's no doubt they're they're integral they're they they are the core of the services that she provides is she sends them out there to teach his kids how to read I mean that's that's what their whole her whole organization is about you know what I mean and for your business do you think would you bring these people on as employees would that you sure I would have to yeah no I would have to and I would just have to raise my fees interesting all right next topic more regulation you you wrote another piece uh about the EOC and new guidelines that are coming uh it does make me laugh these guidelines because um nobody seems to know this about this in the business world like this week I was in I was in Scottdale and I was in I was in Cabo Mexico and I was speaking to like a Construction Group in Scottdale and then a group of trucking companies in in Cabo American trucking companies and you know I'm talking about things are going to impact them in 2024 and I start talking about this EEOC Rule and they are looking at me like what the [ __ ] are you telling us here I mean you should see the expression on their faces it's a it's this is a a harassment an update to harassment guidelines that date back to the 1965 Civil Rights Act and the EEOC is going to be issuing these finalize rules this quarter and um they're targeting certain groups of employees and they're making employers more responsible for not just their behavior the employer Behavior but other employees behavior in their office uh or out of the office like managers yeah oh no anybody like in or out of the office it can be so for example for example um they address uh lgbtq employees um if there is an lgbtq employee who is feeling um you know harassed or uncomfortable because that person is being intentionally Say misgendered by another employee you know which come on you and I know this [ __ ] happens um and nothing is done about it even if the employer is not aware of this the employer could still be liable if the employer doesn't provide a gender neutral bathroom there is an LGBT say there's a trans you know employee there um who you know identifies as a female and wants to use the female bathroom and then there are other employees that don't feel comfortable with that that's a hostile work environment and but you know and the employer would be responsible under these new rules I have more the EEOC is saying do not discuss in the in the workplace abortion like if you have pregnant or or women that have given birth there should be no conversation about contraception right to life you know uh you know women's right to choose just out of keep it out of the office because that could make people feel uncomfortable and does it flat out say you can't talk about it or is the way you talk about it flat yeah flat out I mean you would have to look at the guidelines which are like hundreds of pages they're like they're really long um and it gives a bunch of different examples um but my interpretation is it's like if the conversation is having is taking place and an employee feels uncomfortable by this you know it's creating a hostile work environment that's you know that's when you've got that issue one other of that is it it IT addresses virtual things out of the office and in the office so if this happens at a bar among employees um or if it happens on an online meeting like you've got like a supplier by the way I I wrote about this for the inquire I spoke to a couple of attorneys about this so this is not me talking you've got like a supplier on a zoom call with some of your employees and like I don't know the the supplier has like mine comp on a bookshelf behind him do you know what I mean and that makes the employees feel uncomfortable you know and and you're not even aware of this but they could report that they this is a hostile work environment this is true this is all stuff that we're now subject to all right so a couple of things number number one number one are are are you planning on ignoring these rules too Jean I'm gonna Double Down Baby right I I'm gonna put that on my employment application do you you know support abortion or not right make those decisions that way so no I mean you have to be what I'll tell you what I'm going to do I'll tell you what I'm going to do which is is what I'm advising all the people that were looking at me with these incredulous looks these truckers first of all you got to talk to a labor attorney and let's all agree that we all picked the wrong profession you should not have gone into journalism Lauren you're a smart guy you should have been a labor attorney you would be living in a much bigger house uh and probably not doing this you'd be much more financially well off but okay so you need to talk to a labor attorney and um you need to make sure that your your policy like my HR policies are completely updated to be in accordance with these new rules zero tolerance so you got to be on record of that that's number one number two you need to have a system of reporting um now I've got a very small company so I'll communicate to everybody that if any of this stuff is going on if you're not comfortable I my system of reporting is you need to tell me right away I need to know now obviously if you're a bigger company it might be a little bit more layered you know where you go to HR or to your manager whatever but you need to have a better system of reporting because remember the EEOC you can report now violations directly to the EOC and then like the next thing you know you're getting a call from Washington so you need to be able to grab that before it happens finally some states require training uh depending on the size of your organization you really might want to consider training for your employees as well those are the things you need to do to mitigate this all right so forgive me but I I suspect that you're spinning this just a little bit to make it sound as bad as you possibly can uh perhaps for the entertainment value a couple of things I want to ask you about one is you you seem bothered with the notion that um this applies whether it happens the harassment in an office or somewhere else and my question to you is what if it's a you know a manager and a subordinate and there's harassment sh why wouldn't that matter if it happened somewhere else especially if it's a you know a company outing or something but even if it's not yeah I'm I'm bothered by this entire role I just want I sense bothered by the entire thing I think that um it is we were just talking before about the independent contractors and you whose impacted I mean I I believe this is such a tiny tiny part of of the you know of the workforce that you know are impacted by this such a tiny tiny part that I kind of feel like why are we wasting the time of the EEOC and employers and an industry of attorneys that are going to argue against this you know it covers a broad range of harassment for all sorts of reasons I'm not sure it's as Tiny I mean you could pick any individual group and say it's small but which brings me to my next point because it identifies a a broad range of harassment it opens up so many opportunities for a disgruntled employee to make some kind of a claim it like basically gives them an open book to do that which then puts the employer at that much more of a all right let let me stop you because I I think you're still making this sound as bad as you possibly can make it there's clearly some truth to what you're saying um especially just now about the the possibility of a disgruntled employee taking advantage of this but you know you gave the example before of a supplier it's not somebody that an employer controls it's a it's a supplier who's who's on a zoom call and has an offensive Book on a bookcase you know I don't think the business owner is going to lose his or her business because of one Zoom call and if there is a report about this I mean if if you were that owner and and it was your supplier in that Zoom call with mine comp on the on the bookshelf you would probably want to know that and you'd probably do something about it am I right exactly no you're absolutely right which is by the way that's the kind of thing that should be part of your pering your reporting procedures anything anything that makes you feel hostile you know like creates that kind of an environment and definitely I mean I mean 99.9% of my clients that I know that are employers if they heard of such a situation like wait wait wait let me get this straight you want to call with some guy and he's got this book behind him like I get that let me talk to the supplier and make sure that doesn't happen again so yeah of course which is why I haven't heard you say anything that suggests to me that something terrible is going to happen to the business owner unless this is reported and ignored F unless they go through something about it sure but I guess my my it still gets back to you know again why do we have so now an employer has to take action I mean you any employer that I know any normal employee they hear something like this you know it's up to they'll take the action it's their business so if they think that this is something that is you know going to create a hostile work environment and they're looking out for their employees and let me tell you something in 3.7% unemployment with with 9 million unfilled jobs right now we value our employees very much and we want to make sure they're happy and that we've got their backs if I heard that any of my employees on to call being in any way teased or bullied or you know you know constantly misgendered when they're you know when they insist on being a you know I can't even imagine not you know not even saying like stop doing this everybody behave and just do your [ __ ] work you know what I mean I can't imagine you allowing that to happen either but I know there are plenty of employers where it has gone on I don't know about plenty it gets back to my original argument that you know are we are there plenty of employers where this is going on is this really like you know you know a crisis at the level that we have the have the EEOC spending time creating this giant book of guidelines I think you and I are fortunate enough not to have been subjected to this or to have observed it uh all that often if ever in our careers but I I suspect it does go on more than you'd like to think I keep getting back to the point that um and this gets back to other issues that are in HR I mean it is still an employees World there are still many choice for an employee to go out and work uh most employers should be treating employees well and you know there's there's there's it's a demand and Supply thing and it's going to be going on forever if you're working for a jerk um you know if if you and people aren't you know responding and you're feeling uncomfortable or you're in a hostile work environment then leave I mean I think there's plenty of other choice that's sometimes easier said than done um I understand that the labor market has gotten a lot better for labor of late but still it someone shouldn't have to do that especially given depending on what type of harassment it is I think it's I I just I I really do believe that this stuff is over the top I really do I really do and by the way I know I'm not alone and I know that you know oh of course not you know it's you're going to find a lot of business groups saying this is just this is just crazy you know what's missing here Jean you you've told not not on your part but you've told us what the new guidelines are and you've given your advice about talking to uh a labor attorney and making sure that you have clear rules and all that it's not clear to me what happens if you fail to do that properly you're fine by the EO s well but but for what exactly how far do you have to go I mean I'm not I'm not sure you know the answer to these questions but you know how egregious does the situation have to be how big are the fines what are the stakes here uh that's a piece of this that I think would be important to know first of all first of all yeah it's a relevant question to ask but Al just you just bear in mind that even like an IRS audit you know the minute that the EOC hears of something like this and then uh starts in investigating now you're spending time defending yourself now it's a it's an issue that your that your other employees are aware of and depending on where you are in the you know in your community I mean it's a potential issue that other people in your community start becoming aware of as well even if you're completely innocent and it's just extra headaches that I don't think a business owner needs fair enough lastly let's talk about something I think we both agree on there's a very interesting family business story in Philadelphia late and I'm wondering if you could explain this to me there's kind of a a cheese steak Empire uh in Philadelphia known as Tony Luke's a family-owned business where there in preceding years there was a split in the business the father two sons one son goes off and franchises I think under the same name which is awkward to begin with litigation follows in that litigation it is revealed that the father and the son who stayed with the father have been engaging in uh tax fraud worth millions and millions of dollars and they are now on their way to prison why do these things only happen in Philadelphia it does seem that way does it chicky and Pet's also was a big Philly Restaurant right they got in trouble uh for wage kind of what I know it doesn't only happen in Philadelphia but it seems like it happens there more yeah I I really think there's something in the water that we grow more numpties than other places in the country you know and these people are numpties first of all I'm not even a fan of Tony Lukes they do have some outlets in the Philly Airport and I think they're you know average at best although I do hear their their their pork sandwich is is is very very good so their Rose pork sandwich so you know that fine but um these guys are like you know so they they commit this tax fraud they pay employees under the table it's a very complicated scheme they would way out of their way yeah to to to fraud the government and as if you know and like any other scheme um of course it's going to be found out because you're involving so many people do you know what I'm saying I I tell this I was listening to like a podcast and this guy was talking to like this uh retired Police Homicide investigator and he was saying like you know I want to commit the uh perfect murder so what do you think of this plan and then the guy was like the guy was like so I'm gonna do this and I'm GNA get a buddy of mine to do that and then the police you know investigator was like okay well you're going to be caught the minute you involve you know another person you ultimately you're going to get caught because somebody K and like Tony leaks are such a bunch of numpties that they're like they they have this elaborate scheme to defraud the government by paying employees under the table um and that was one only one part of it and then not paying any taxes related to it for God's sake you've got this brand that's in the Philadelphia Airport and other places around this city it's so well known it's not like you're like the genan marks Cheese Steak Shop that nobody gives a [ __ ] about you know you you do this stuff and like you get it's crazy and you know what's also crazy about it you know Lauren which is which it gets back to a lot of other things that people don't uh you when realize when they when they when they have extra costs I mean Tony Luke's charges I don't know 10 bucks for a cheese steak you know maybe that's the going rate for a cheese steak I think it's a little more okay say it's 12 bucks make it $1250 and pay the tax and pay the taxes you know what I mean like you know you know all the stuff that you're saying all the money that you're getting away you can so easily pass this down to your customers um and then make sure you're doing it the right way otherwise this is what happens and then you've got two two jokers you and me talking about it on a podcast so it's just crazy it's crazy well here's what we really agree on I think I think people make a mistake I think the cheese steak is not the best Philadelphia sandwich and you think it's what Rose pork I I do pork with provolone and broccol Rob that is what Philadelphia should be famous for yeah I hear you definitely not scrapple either by the way the cheese steak and also because I'm I'm at an age right now where like eating a cheese steak is probably just not the the best thing to do for a guy in his 50s I'm not sure it's good for anybody at any age but all right uh what are you working on Jean anything we should be looking for this week yeah actually I do have an aggressive schedule for this week so um oh you know what I'm going to wrate about for the guardian um literally the guardian my editor said that he's got to talk to his illegal team to get it clear I uh Lauren I I did a I spent 50 bucks on Twitter the other week to promote like I have a new book out on CRM and um I put I said okay I'm gonna have a promoted tweet for 50 bucks uh with a URL in the Tweet taking him to my landing page to um you know to to download the book do you know what I mean and uh 50 bucks I I get shop I get the repor in from Twitter 80 billion Impressions whatever that means you know and then like and then it says like I had like over 400 clicks on my link Twitter told me clicks and remember Twitter's eating up my budget based on the twist the clicks right I go to my landing page there's 10 views of my landing page and Twitter told me there were 400 clicks to it and I'm I am I'm writing about that this week wow you're taking on you you're the biggest Elon Musk fan boy I know and you're going to take them on love oh I love not yeah I'm not I'm not picking on Elon Musk per se I'm I'm picking on this is an overall online by the way it's called X Jean yeah it's X sorry it's it's it's it's X and it's even Google ads there there's and then you're going to tell me I know there people like oh well there are a lot of bots you're probably just getting clicked on Bots I'm like okay so what that's my problem I just gave Tex $50 and you're telling me 400 Bots clicked on it so what do that you know how does that make it better why is that yeah how does that make any better so I think it's it is just a scam and I am going to write about that it is a scam and so you can look for that let's talk about it again next week how does that sound just I look forward to that now I can't wait to read it and to talk about it Gan marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times the Chicago Daily Herald Forbes and entrepreneur you can also hear on ABC radio's eye on the world with John Bachelor Jean hosts two small business podcast with paychecks Corporation and the Hartford this episode was brought to you by the great game of business which helps businesses use an open book management system to help build healthier companies you can learn more at Great game.com thank you Jean thank you Lauren have a great week everybody