On this episode, Rachel talks about broccoli and chocolate, and in case you haven't guessed it, "legal stuff" is the broccoli. But don't worry, Rachel will explain it in a way that you've never heard, a way you can ac
"You never have an issue until you have an issue, especially when it comes to an inherently risky activity, like fitness."
Lawyer. Business Strategist. Author. Athlete. Mom. Rachel Brenke is a taco-loving, dog-rescuing and coffee-drinking entrepreneur from the East Coast. She has spent over a decade helping entrepreneurs legally protect, market effectively and strategically implement their businesses. She is not any other lawyer. She brings legal and business strategy advice from the perspective of being a multi-biz owner and passionate entrepreneur herself.
On this episode, Rachel and Dan talk a lot about broccoli and chocolate, and in case you haven't guessed it, "legal stuff" is the broccoli. But don't worry, Rachel will explain it in a way that you've never heard, a way you can actually understand! Listen in as she talks about the most important things you can do as a gym or studio owner to protect yourself and your livelihood.
Dan Uyemura [0:05]
Welcome to The gymOS podcast. I'm your host Dan Uyemura, CEO of PushPress. Each episode I bring the best and the brightest in the business world straight to your gym and we tease out actionable steps and strategies that you can implement immediately become a better business owner.
How many of you guys out there opened your gym, pulled a waiver off the internet and formed your company or business entity through Legal Zoom, and kind of moved on to training people. Now, what a lot of people don't understand is when you do that, you're really setting yourself up for some potential legal problems down the road that might end up costing you your entire business, and potentially even could dig into your own personal stake in life. If you haven't started your company correctly if you haven't structured your contracts and your waivers and agreements correctly. you're setting yourself up for a ton of liability. And I know way too many gym owners who have half assed the front end of their business. And today's episode, we're going to focus on that. Today, we have Rachel Brenke from FitLegally. Rachel is a practicing lawyer who's also an MBA and a fitness enthusiast. And she comes in to talk about how to structure your business correctly to protect yourself and your business from potential ruin. If things don't go right down the road. Now, it's actually easy to do and it isn't as expensive as you think. And I think it's something that every gym owner and everything a studio owner needs to pay attention to. Because it's not a matter of if you get sued. It's probably a matter of when you get sued if you stay in business long enough. So check out this episode, and I'll catch you on the other side. Let me know what you guys think.
Hey, everybody, Dan Uyemura here, CEO of PushPress bringing to you another episode of The gymOS Podcast where we work on making you a better business owner one episode at a time. And today I got with me a special guest, Rachel Brenke from FitLegally, she is an attorney. She has been practicing law for how many years?
Rachel Brenke [2:13]
Almost a decade.
Dan Uyemura [2:14]
Almost a decade. She's an MBA business consultant. She owns FitLegally.com, which is a blog and podcast on how to run a better fitness business very similar to what we do. And she also has a podcast, which is The Business Bites Podcast, which is, I would say like a more condensed version of what we do, it's a 10 minute 10 minute bursts of business education on how to run a better business isn't necessarily specific to fitness.
Rachel Brenke [2:39]
Sometimes it is, and it's really heavy and legal and business strategy,
Dan Uyemura [2:43]
Okay. And that's what we're going to dive into today. So, here at PushPress. We talk about a lot of things in the lens of broccoli and chocolate where chocolate is like the fun stuff you want to do the new training methodologies, the new certifications you can get in your gym and movement and training and then the broccoli is legal. Pretty much, right?
Rachel Brenke [3:03]
I was gonna say should we just tell them this is gonna be an all broccoli episode? ::laughter::
Dan Uyemura [3:07]
Well, we're gonna make it as chocolate as we can here. The thing is though, as you know, in your gym, everybody comes into your gym looking for some change. And what they want to do is all the chocolate stuff, they want to do the fun stuff, the park or the ninja stuff. But what they need to do is work on the foundations first, which is the broccoli, you got to have the foundation's in place. In order to get to the point you can do the fun stuff, right? If you try to jump right to the fun stuff, you probably are leaving yourself open. And I'll use the word that we're gonna use a lot liable for some problems later on down the road. And you know, as a gym owner, you probably can see that when the guy or girl comes into the gym and she wants to jump right into doing some, you know, very advanced movement or something and they won't listen to you about scaling back into the foundations, you know, there's a problem waiting to happen. Well, guess what, that's the same as your business right if you haven't sorted through the legalities and some of these things Some of these legal things that you need to traverse first, then you're kind of setting yourself up for a problem down the road. So this will be a broccoli episode and but it's very, very important because if you don't pay attention to it, I think it's a matter of when not if you will have a problem that will be a serious detriment to your business. So with that, I'm gonna let Rachel introduce herself and then we'll kind of kick off from there.
Rachel Brenke [4:20]
Yeah, so my name is Rachel Brenke and I always cringe when people lead off with my bio and say attorney because I'm afraid that everyone's going to shut the podcast off because legal is not fun. It is very broccoli. I'm not like most attorneys. I mean, you guys can't see me probably, I'm normally and ripped jeans and a nose ring or outs and fitness clothes like today since I just got done with my own workout. But I'm also different in that I am an entrepreneur as well. So I'm not an attorney sitting in an ivory tower telling you to do this, this and this, and I am so removed from what you guys are going through. I mean, admittedly I've never owned a gym myself, but as an athlete, myself and as an entrepreneur myself, I have injected into the industry. I represent a lot of fitness and gym clients. And so I've been around doing that for a while. And, you know, it's exactly like what you just say it's you. It's not if you have an issue, it's going to be when. And I always push back whenever a business owner, especially, especially here, the emphasis, especially a gym owner comes to me, or I'd see them at a conference that I speak at, and they kind of just roll their eyes about my topic. And they say, Well, I haven't had an issue. And I always say, you never have an issue until you have an issue. And you guys are in a very, you know, situation like very precarious, very liable, liability filled, because you have people from novice to advanced coming around slinging around barbells and weights and doing hardcore, like you said, and all other stuff. And so it's not like a typical business owner, entrepreneur, you guys unfortunately have a whole nother level of liability in legal minds that you have to get your head around. And one thing I was thinking about in the intro, you know, we're talking about broccoli. Well, think about that. If you don't eat the broccoli, you're gonna have nothing to eat because you could lose your gym. It's a very real possibility. All it takes is for someone to get hurt or to claim they've been hurt. And you could spend time money and energy with an attorney as fun as I am. I would rather you guys be preventing issues rather than cleaning them up later.
Dan Uyemura [6:18]
Yeah, and for for all of you out there who are listening and you know, you're probably saying yourself, hey, I've been in business for seven years and I'm the best trainer and all my coaches are very versed in what to do, and yada yada yada. I should probably bring on a few insurance agents I know who represent or sell insurance to gyms because I am amazed. That's always my opinion is like I don't know a single gym that's ever been sued. And every time I talk to one of my insurance agent, friends who insures gyms, they're telling you about the whole roster of gym lawsuits that they're dealing with at that moment. So it just opens my eyes the fact that these lawsuits are happening every day. And you know, like like Rachel said, You're Not a restaurant where someone just sits down and maybe slips and falls, it's like you're actually doing physical activity that is inherently dangerous. So it needs to be something that is very, very well thought through and looked at. To be To be honest, and I will admit, I did this with my first gym, not my second gym, but my first gym. I feel like most gym owners The first thing they do when they form their company, and actually we're skipping ahead here but let's just do this since I've already started the first thing they do when they form their company and they're getting ready to take clients as they Google waiver for gym and then they copy and paste wherever they find and they put it on a Word doc and then that's what they use recommended or not.
Rachel Brenke [7:35]
Well if it comes from FitLegally.com, then yes, of course.
Dan Uyemura [7:38]
You guys got one. Okay good.
Rachel Brenke [7:40]
Yeah, no, we do know and actually this is a very classic situation that I see. So outside of all the different brands in the podcast, I also own my own law firm and we have a lot of gym clients and with a very classic example all the time it doesn't honestly matter what industry it is. situation like you're Talking about, you'll Google you'll copy and paste real good in a Facebook group, you'll use somebody else's. And I had people inquire, I'm going to give you the one example in my mind. This gentleman had come to me in January one year and said, Hey, you know, I cobbled this together from the internet, how much to review and revise it. And I was like, Oh, well, it's probably like 567 hundred dollars, depending on how many edits because we're not just typical attorney either. We don't just sound like a restaurant. We don't just take your order. You know, we work together since I have an MBA, we talked about business planning, growth and all of that. And I said, Okay, so it could be about six, seven, maybe $800. He's a no, no, no, I'm good. Let's fast forward eight months, he's still using this cobbled together document. And he ended up having a claim filed against him in court, because he was missing key things because it wasn't lawyer drafted and he obviously wasn't trained to put it in there. You end up having to spend $8,000 on me to fix the situation and then what else did he have to pay for me to fix the contract anyways that he could have done In January, and now understand like this isn't to say that you're always in there thinking, well, we do everything right, we research we know everything. That's what we should do. But here's the problem. Sometimes you just have crazy customers, they just think all the time, sometimes.
Dan Uyemura [9:19]
Guaranteed guaranteed you're gonna have crazy customers.
Rachel Brenke [9:21]
Well, a massive thing. It's not if it's when and so you can sit all day long and think, well, I've done everything right. I've taken the right measures and all of this but here's the problem is if you are taken into court, you still have to show up to tell the court here's how I did it right in the in this person is suing me is wrong, that cost money and time and energy away from your business, putting it into lawyers pockets, because in the end, the only people that win are lawyers and those type of situations. And so I just encourage you know, this is kind of a lot of different ways that I went of answering this question. I think it is still is good to sit back in Google and see what are the things I want to have included, but you have to have Lawyers hand touch that and make sure that it is legit for your state is legit for your business. And I also encourage Don't let it be a one and done. So like you were mentioning the person who's been in this for seven years, well, maybe they got their documents for their website, I'm sorry for well off a website for their gym. Like in year one or two, guess what you've probably grown your services have probably changed your liabilities increase your contract needs to grow with you also. And so I encourage, sit back and think what you want in it, get an attorney to help you draft it but also like how you grumble grumble have to meet with your CPA every year, meet with your attorney every year, just maybe even more frequently, depending on how often you're improving or changing things in your business. So that you are truly protected because there's no sense in having a contract, like a cobbled together when you've done on your own or one that's out to date and doesn't really cover you because then what it's really worth as a piece of paper. There's no protection.
Dan Uyemura [10:57]
Yeah, yeah, that's one thing that I'm Personally kind of drives me crazy. I understand that a lot of small business owners are strapped for money and they're worried about you know where that money is allocated but I always feel like it's a penny hacker you have the same goes Pennywise pound foolish. And it's the same respect like I tell people like go pay a personal trainer if you have real true goals, you know, on your personal physical level, pay the personal trainer don't try and watch something on YouTube and do it because you're not going to get what you want, and you're just gonna waste your time, right? But and gym owners understand that they're like you're gonna pay me what I'm worth because imma get you where you want to go but then at the same time, it's hard for them to pay a CPA, a lawyer, marketing comm you know all these different companies to do what they want to get where they want to go. And like you said, it's something something that I didn't think about until later on in my in my gym ownership life. Like you go to LegalZoom and you create a company, well, you're probably losing all the benefits that have been put in place for creating you know, asset protection and liability protecting entities by doing yourself, do you know you're doing? You know, like, that's actually something special. you file your taxes with TurboTax. Like you're losing all of the potential gain benefits you can get. Because you're trying, you're trying to save the cost of the CPA. I assume that you agree with me on that.
Rachel Brenke [12:15]
Yeah, I mean, just go back to the numbers I gave you. Let's round it up. Had he just paid $800 for that contract off the bat, we won in court, but he didn't include something in the contract because he wrote it himself as a non attorney. He didn't allow for attorneys fees. Like there's this idea in the US that if you win in court, you automatically get your attorneys fees, there's only two ways you can get them and either set out in law. So when the statute or contractually agreed to he didn't have attorneys fees provision, so even though we won in the end, he lost and you know, and that's really unfortunate. And the other side of that, you know what I really think about this with taxes. I feel like I'm a I'm a smart cookie, I could figure out the taxes on my own. A I don't want to keep up with make sure that what you know all the updates of tax law. I've gotten With my own to do, but what happens is, if I get audited, you know, on that side, or if I have a contract that is written really properly, well, if you do your own taxes or have a really bad drafted contract, where are you going to get your recourse? Like, you know, I mean, like, if I found me on taxes and I get audited, I get all these fines, I'm stuck paying that. If I have a professional do it for me, more than likely is less likely I'm gonna have to that I'll even have an issue. And then if I do end up with fines and penalties, who do I have recourse on my CPA, same thing when it comes to contracts.
Dan Uyemura [13:32]
Right, right. So so let's back up a little bit. We were talking earlier about this legal triad. And basically what we're talking about here is using the legal structures that are put in place to protect, protect you as an as a business owner, right? And again, when you cut the corners, you're kind of cutting all that protection out. So it's kind of we're spending the money to do these things correctly. Do you want to kind of go over for our listeners with this little triad is and how that affects them?
Rachel Brenke [13:59]
Yeah, we Basically just explain the first of the triad. These are the three major tools that I feel like many entrepreneurs, but especially gym owners need to have to limit their personal and business liability. So contracts we just talked about. It could be like liability waivers, its membership documents. It's the documents that you have with your your staff, whether they're independent contractors or their employees. So contracts can encompass a whole bunch of things, you know, we just outlined and got on my soapbox for all of that. And the contents of those are going to vary depend, like we talked about before, how you approach your businesses, the services and what your goals are. But the other two tools within that legal triad for limiting liability. One is having and you already touched on this earlier is having proper insurance and really what this triad is contemplating liability insurance, but I think you need to take that a step further, especially since majority of gym owners or maybe your personal trainer that goes to people's houses or someone comes to yours. You're going to have Physical equipment as well. So equipment insurance, as well as liability. And I bring that up, because if you're jotting down notes, which should help you guys are, you're going to go through contracts, you can get that done, you're going to look at getting your insurance, when you reach out to an insurance company to talk to them specifically about liability insurance. There can be discounts depending on the company and what state you're in, because it's state driven, of combining that with equipment insurance. And, you know, really important thing here to understand and kind of like with contracts, too, you can't just look at it and go, Oh, all liability insurance policies are the same or Oh, liability waivers are the same. Those are just titles that we put on these tools, you really have to look at what's included. So for gym owners on this lower second part of the legal tryout of liability insurance, reach out to multiple insurance companies and make sure that you are specifically covered because you guys are engaged in inherently risky activity. I mean, it's not like skydiving, mountain climbing, rock climbing, all that sort stuff, we have pretty risky activity here, you're going to have a broad spectrum of health circumstances that come in your door depending on the level activity or just physical health, medical issues. And so for me as an attorney, when I sit down to work with a gym owner, if you don't have liability insurance, I am super scared, because I also see these legal triad as hurdles to you. So I always have you guys sit in envision, you know, the movie Independence Day with Will Smith, you know, the big ole alien ship comes in and they shoot at it and you see the blue forcefield that's what each of these legal triads are. It's like putting you between you and the aliens that are going to try to come get you don't tell your members I call them aliens, or like extraterrestrial life for whatever, you know, but we're trying to protect our ship. That's what we're doing. And so contracts in liability insurance. And one of the key things I think with liability insurance besides making sure that your cover is also looked to see if it includes for legal fees, because again, it's not. If you have a problem, it's going to be when, if there's a claim against you and have a proper liability insurance in place, it's a lot easier to hand them off to your agent or hand them off to an attorney that's being paid for by your insurance company, then you have to suck up the time, money and energy to deal with a problem. Right?
Dan Uyemura [17:21]
Right. When you were talking about that, I actually actually was reminded of something that came up legally that was of a bunch of gym owners interest maybe about a month or two ago, and I saw you actually did a podcast on it. So I want to dive into it really quickly. And that's this force majeure clause. Did I say that right?
Rachel Brenke [17:40]
Yeah, you did.
Dan Uyemura [17:43]
So in Coronavirus it a lot of gym owners found out after the factor or late that this clause was invoked against them in a lot in leases and stuff like that. I think it was, can you kind of dive into that and explain kind of why that's in place and how that might affect them in the future.
Rachel Brenke [18:00]
Yeah, so force majeure, which you guys can now throw that around at networking events and sound completely professional and know what you're talking about. And actually before I go into explaining this and what it is understand that the legal industry is also flipped on its head because portions are clauses up till now had just want a general ripcord when certain activities occur, it's alleviating the responsibilities of one or both parties that are in that agreement, in this situation is probably going to be either like, you know, landlord, and the person leasing or it might be between you and your members of your facility. And nobody really could contemplate a worldwide pandemic to the scale. I mean, we've had pandemics before but for the entire world to essentially be shut down in such a way. So the legal industry is being flipped on its head I'm you should see the way brains were exploding. So don't freak out. If you're thinking I've never heard of this before, or it wasn't drafted properly or I don't understand it. You're not alone. There's even lawyers that are freaking out. So be comforted to know. But for me, I think it's good to have for some short clauses in any sort of contract that you're going to enter into, because like we just talked about if a certain circumstance occurs, most the most common ones are like this or the shutdown due to pandemic or natural disaster acts of terror. You've heard the term or act of God, it could be I say, natural disasters and you know, major things like that...
Dan Uyemura [19:26]
Is war included in that?
Rachel Brenke [19:28]
War could be you know, and I mentioned this a little bit ago like don't just say, oh, liability insurance, let me get it or let me get that waiver. Like those force majeure clauses you have to look to see specifically what are the triggering event and actually, this was really at the beginning of this pandemic stuff This was very difficult because even if there was like catch all language, which I always draft mine I put like war, terrorism, natural disaster and all of that. And then I add on like a catch all language anything outside the control, you know, reasonable control of the public. We because of the way that states were shutting down, so incrementally in like narrowing and the directors are changing every other day, just because your force majeure clause didn't apply one week could have applied the next and so it was Yeah, so if you guys are freaked out by it, just know, yes, you should have one in whatever contracts that you're doing, make sure that you understand what the triggering events are. And then once those are triggered, what exactly the responsibility may be on you, because maybe as a gym owner, you obviously have shut down because the state has shut you down because you can't have people come in, you might have language in that provision that requires you to provide notice to your members. So look for that, because if you don't do that, you can't lean on the force majeure clause to keep you from any sort of liability from that contract. So just just contemplate that you always need to look to see what is required of either party. Now. My other side of this though, is I mentioned a little bit ago kind of set it in passing, don't freak out if you didn't have a force majeure clause because it is has to be very specific circumstances. It's meant for really extreme things like this pandemic and shutdown. But there's other events that can occur that may not reach that level. And this is where I think, another type of quote unquote ripcord provision either like a cancellation type provision, you know, to allow you guys to get out of the agreement with each other that is also needed. And so if you are have a contract and may have a cancellation section that may still apply during pandemic so don't think, Oh, it's pandemic I have to have force majeure. Again, it goes back to what's included in it and at what stage of this that we're in because now that things are starting to reopen. It's so funny I had all these gym owners come to me a couple months ago I'm shut down what do I do and now they're kind of me we're reopening What do we do and because it's all in phases, so it look at the government directives. See if it you know what the current life circumstances are at the time does it trigger? What are the responsibilities And then if you don't have any of those, none of that applies check your cancellation of your contract.
Dan Uyemura [22:05]
Right. Now, in my mind, this force majeure clause makes sense when you have a contract saying like you will be a member of this gym for one year, you agree to do this, this and this for one year, or we're doing personal training for 24 sessions. What if a gym is just a month a month? You can quit when you want. We just want 30 days notice, type gym, is there is there a place for a force majeure clause in that case?
Rachel Brenke [22:27]
Yeah, you might need it because of the 30 day notice thing because you remember when we were all shutting down, it was happening like that, like it was so quick. I mean, at least for us in Virginia, the governor way come out on Tuesday, we'd be shut down by Friday. So like you didn't have 30 days notice to provide 30 days more worth of services to a month a month member? Yeah, I definitely think in those situations. Now, mind you that I'm also just speaking from a contractual position right here. Like I think that's where you always need to start is understand what your contract is what you can do, because that's kind of the baseline. From there you can offer customer service you know, like I know our gym, the gym that I go to. We are on a year, year long contract, I believe. And they just they took it upon themselves even though it wasn't in the contract, they took it upon themselves not to charge us all through pandemic and even now that the reopening they're giving us the option of when we want to come back so you know, there's once you know where you are legally you can then provide more go above and beyond.
Dan Uyemura [23:28]
Let me ask you a question, as a lawyer, when you get presented a contract, or a terms of service, do you actually read it?
Rachel Brenke [23:34]
I'm smiling, sometimes I am in complete pain in the ass when we go like skiing or two places and they're like sign this assumption of risk waiver and I'm like you want me to review it for you real quick and tell you what's wrong. No. I yeah, no, I do read it. You know, that's I'm glad you brought that up because in I didn't finish the legal triad. I need to get back to the third here in a second. But as far as on the contract thing, I definitely hear a lot of pushback from entrepreneurs in general, but definitely gym owners who are like, Oh, I don't want to burden my clients I or my customers, I don't want to. I don't want to look unprofessional. I mean, this is on top of they just don't know where to start. But now they have this podcast they do. Here's the deal. We've talked about this. It's an inherently risky activity. And so the common consumer, they're used to seeing Terms of Service all the time, they're used to seeing contracts, and if they are a quality consumer, they're going to read it, they might have questions, and that's okay. You want them to ask questions before they sign it. You don't want to get into bed with somebody and then they ask questions later, right. I always use I don't know if I can use this example. But it's like when you go out to a bar and you meet someone, you want to ask them their name before you get into bed. You don't want to get in the bed and then when you wake up, ask them their name.
Dan Uyemura [24:53]
By the way. What's your name?
Rachel Brenke [24:54]
Who are you? Um, what you know. So the same thing is With your your members, you want them to read and sign up ahead of time. And as a consumer myself, of course, I understand I'm an attorney, but I'm going to feel better protected, because that's one things about contracts is that they're supposed to protect both parties, right? It's not just a one way street. And so that's another pushback I give to you guys, when you're saying, Oh, I don't know, I'm like, but it's outlining responsibilities and obligations, also, that your member has what you have and what they have, so that it is a mutually beneficial relationship. So that was contracts. You know, like we said, it was all encompassing, that's the first of the legal triad. The second was liability insurance, which really isn't a legal tool, but you guys can see how it can kind of intertwine and work. But the third is choosing the right business structure, especially to limit your personal liability. So this is choosing either a limited liability company or LLC, or to be a corporation. Obviously, this is us base, if anybody internationally is listening, you guys have equivalence there. But for me if you just go out, and I just go and file, or I don't follow anything, maybe with the city or I just go get a business license, and I tell them the name, and you haven't taken the steps to actually set up to be an LLC and create that entity or set up to be a corporation, anything that you've done every contract you've entered into after that, even if it's under like a lot, all these FitLegally as an example, let's say I never set up my LLC and I just start put up my sign on my gym wall started taking members, it doesn't matter, there's a different name, all of the liability of those members would be attached to me personally, there's no division, you've got to cut that cut that cord of liability between you personally, and your members or staff or whoever it is instead of one of these entities.
Dan Uyemura [26:47]
Right. Okay, cool. Let's dive into another topic. That's been a hot button topic amongst the gym community in general, and that's you touched on it earlier, hiring staff. So for the longest time at least in my industry in the world that I've been involved in, for the most part, we paid everyone as a 1099 contractor. At some point, it became not cool to do that, from social pressures and whatnot. And a lot of people are going out there saying like, I do the right thing. They're W2 employees now. Me I'm from the tech world, and I've always felt being a contractor is better for me, at least in my world. So I've always disagreed with the stance that it's green, it's red or green. Like if you're a 1099 employee, that's bad. And if you're an employee W2, that's good. A) can gyms hire people hire people as a contractor? And what do you see as the pros or cons of that?
Rachel Brenke [27:46]
So yes, they can hire them as contractors. Here's the reason there's been such a big change in kind of this whole advisement, to go to employees for a couple of reasons. One, oftentimes you as the business owner just want to pick a status, right? And it's easier just to pick employee because then you don't have to worry about if you're treating an independent contractor paying them like one, all of a sudden you start having more control over them, right? That's the test of deciding whether they're employee or independent contractor. It's not as simple as well, they're a W2, and they're a 1099. It's all about controll and how you treat them. And if there is danger that if you hire someone as a 1099, independent contractor, when you start putting more control and more restrictions and requirements on them, they're actually an employee even if you're not remitting a W2 and the danger there is you can get in trouble with the state you have back benefits, so you'd have to pay, etc.. And so that's one side is like I feel like a lot of people are running to the W2 portion. The other one is that we're seeing this onslaught of push to W2 because many businesses are getting pinged for much like what I just mentioned, they're wanting to avoid payroll taxes, employer taxes, W2, all the pay payroll stuff in legalities. And so they're hiring people and calling them tiny 1099. But they're treating them like W2's and what does the government want? They want their piece of the pie. So they've been trying, they've been cracking down a lot on this. I mean, it's a two prong thing. It's one government wants their money, but they also want to make sure that the employee slash contractor is protected from the employer and that they're getting the benefits that they are to receive because 1099 typically don't get any benefits. That's kind of why they're paying more it's upon them to pay their own taxes, they have their own insurance, etc. Whereas W2's are typically, quote unquote, paid less. I mean, it's less than two cents that that's the cash outlay...
Dan Uyemura [29:40]
You get intangible pay.
Rachel Brenke [29:42]
Right, right. Um, I don't recall what your second question was.
Dan Uyemura [29:46]
I can't remember either now, I mean, basically, is it oh, is it possible to hire coaches as a 1099 contractor? And what are the pros and cons of doing so?
Rachel Brenke [29:59]
Yes, I mean, we Just kind of talked about the pros and cons. I mean, the pros are that there's less paperwork, you literally submit a 1099, you pay them monthly or by the job. And depending on how often they're coming in and doing classes, etc, it can be a very easy way to pay staff or team members. And there's not a lot of oversight. You don't have to worry about filing and paying unemployment and all this sort of stuff on behalf of them because they're not an employee. Here's the problem is it's kind of like what I touched on in the beginning of talking about this is to watch how you treat them. Right? Because you can have a W2 employee, you're just an employee who comes into just one class a month, but because you have so much control over how they do it, what they were when they do it, how they show up, you know, you provide everything. They're an employee. That's control and actually the IRS has a whole test and most states have their own test and deciding what the status is and is very similar to the IRS. Well, but yeah, I mean, but you can have independent contractors who work maybe seven days a week, but if you're very hands off about it, they can be contractors. It's, it's not I can't sit here and simply say, Okay, here's what you need to do, because it's a factor test, meaning you can have a combination of the factors. It's not just a checklist.
Dan Uyemura [31:19]
So in a typical group lead class, if I said, Okay, Rachel, you're coaching your 1099, contractor with us, but you're going to be doing the noon class and the 3pm class, Monday through Wednesday. Does that pass? Does that pass or fail the control tests? I'm telling you where to be. You can wear whatever you want. You have to do the workout that's been published for the gym, maybe right, but you do the 12 o'clock and three o'clock.
Rachel Brenke [31:46]
Under the, generally speaking, I think that's going to be an employee, but it's also going to dig into the state. You know, if your California people are listening, there's a whole hullabaloo at the beginning of 2020 about that. I think under California, that would be employee.
Dan Uyemura [31:59]
Yeah, for most It is okay. Last question on that. Assuming a coach is so coming from my background, I would always prefer to be 1099 because I understand the rights responsibilities and you know what I get out of being a 1099. And honestly, most coaches in gym small gyms aren't getting benefits or any of that kind of stuff anywhere. Can between me and the gym owner who's hiring me? Can I say, Hey, I'm gonna be a 1099. And I'm okay with that. Or is that like not okay, across the board?
Rachel Brenke [32:28]
No, it's you cannot contract into a status and be treated another way it is kind of you think about it. It's almost, it's the government, the laws are trying to prevent a disproportionate power situation, right? Because you're the employer at that point. And I don't know how to articulate what I'm saying is not an equal power stance. So you think it'd be too easy for an employer to be like, well, you need a job. I'm going to give you this as a con. You know, you must say you're a contractor so I can avoid taxes. What's the likelihood that that contractor is actually going to speak up. And then the other side of that is, if you may, even if that was legit, you could do that from the beginning. And I had this happen, everything's fine until it's not fine. You have a contractor, or a coach that comes in or a trainer and they're a contractor, they may work for you for three and a half years had this happened to a client, everything was fine. They actually went out and publish a job posting for their position, because they were actually going to promote my client, but they hadn't told my client, my client thought they were being fired, and decided to go to the state and say, well, I've been improperly classified as a contractor when I am an employee, even though they had agreed upon it. So it went from being a promotion to a whole thing. And once the government gets involved, it's a shit show and it's just kind of a haha funny because it's like, you were being promoted and you opened up a can of worms, but it's a really light situation you just never know. So don't try to contractually agree to something unless you actually can do it and I my stances, you can't just say you're only a contractor, you have to partner that with the actions.
Dan Uyemura [34:16]
Got it. Okay, that makes sense. Okay, um, last thing I want to I want to talk into, or dig into, is what we typically have in our waivers is what's called a photography or media waiver, or I guess it's a waiver, where and I guess it's kind of also touches on another another bullet point that I had here was I call stuffing waivers where it's just like in your waiver, you've got a digital rights waiver and you've got a use of likeness waiver and blah, blah, blah. And it's like one big waiver. Can you talk into that like for gym owners out there who don't have that in their waiver or don't have that in their agreements? Why is that important to have a digital or a marketing rights included in your waivers?
Rachel Brenke [34:59]
So from a non legal standpoint if any of you guys ever check out my stuff you see, I'm super huge about imagery doesn't matter which platform Twitter, Instagram, Facebook, because text is not not nearly good enough, actually, you can even debate that even still, photography is not good enough anymore, you need video. But so that's a key cornerstone of marketing plans. But in order to get to do that, and do it, so you don't have to have problems later on down the line, exactly what you're talking about. We want to ensure that we are getting permission from whoever it is in the photograph to be able to utilize that photograph because what a lot of people don't understand is that we all have a publicity right? Right estate given right to publicity for the usage of our face or our likeness, right? Like I don't want someone to take a photo of me and get to slap it on a billboard for something that I believe in, right? I have control over my likeness. So oftentimes what happens with these media releases or whatever you want to call them, and we have these on FitLegally as well. There needs to be two major things. I find that a lot of attorneys at least get number one but they don't get number two unless they really work in this arena. Okay? The first one is obviously you like your member, let's say you've done a transformation, you know from their first day at the gym to their 12th week at the gym and you want to promote it. That's fantastic. Obviously you want to get their permission, they're obviously standing there for the photos. So the first thing is they're going to give you permission that's been taken and since I have a publicity, right of likeness, you can use it for in your marketing. Okay, great. We got number one, but number two, is what you need to really hone in on that a lot of these don't have it is a the member or whoever it is in the photograph is waiving claims of compensation. What this means is let's say I come to your gym we do this 12 week transformation, I look badass after 12 weeks, so you want to share it. Well, all of a sudden it's on like a billboard in Times Square or in town or here and there and I know you're getting tons of numbers. If I'm savvy enough, I want a piece of the pie because you're using my likeness if I gave you permission, but without waiving any claims to compensation, I can have a potential. Now, like I said, this is a very nuanced area, you really have to be someone that works in media and doing like what I do to really look at this. But I definitely we do a lot of copyright infringement. And I still switch over to this publicity rights aspect. And I always look to see what was signed, because there are always there can be potential claim, and you guys don't want to pay out more than you need. The likelihood of it happening. We don't know. You just never know who's going to walk through your door.
Dan Uyemura [37:32]
Right? So so let me get this clear. So there's probably a lot of gym owners out there who have embedded, first of all, if you don't have a waiving of the rights to my likeness, or a digital, I forgot what we called it in our waivers like a digital media type thing, same same idea, right? You need to have that in your waivers. Does someone need to sign that very specifically, like can it be part of your waiver package when they join like here, sign this here, sign this here, sign this doesn't need to be like you're coming in for your transformation shoot and I need you to assign one specifically for this.
Rachel Brenke [38:03]
I'm a bit more risk adverse because I'm more of a proactive approach. So what I would recommend in this situation obviously want to have it in that those couple things of contracts that they're going to assign when they come on as a member just so you have freedom to photograph while people you know, you just want to have something for Instagram you walk out to the gym one day you just take a photo, you don't have to chase down your members while they're in the middle of their workout to get it. Now I wouldn't do I think that if it was drafting the way I would drafted you, I think that that would cover like a transformation shoot. Yes, but if you wanted to be sure because think about a transformation shoot, if you're showing, they're probably going to be in less clothing. They are in a normal gym environment, there's going to be clothes you're going to see their face a lot more. I would probably double down to sign another one and even people when you have and just simply right transformation shoot on such and such date.
Dan Uyemura [38:54]
Got it. Okay, cool. And so a lot of people might have this already kind of packed into their waiver, I don't think what a lot of people have is this release of compensation, right? So that's something that you need to pay attention to take a look at your waiver. If you have a digital rights or use of likeness type waiver, make sure that you include wording and I assume does the FitLegally one, how do you have these type of...?
Rachel Brenke [39:20]
We do and actually, the more we often see this in let's say you have members who are spinning up their own brand on Instagram or on YouTube, right? They will start honing in this sort of stuff like do I think the normal member will probably not unless they've listened to this podcast are going to FitLegally but so yeah, ours has it in it just like off the bat. And now you can also utilize it. If you end up hiring, quote unquote, model athletes to come in and just do like a stage shoots for maybe your website, you know that. That's also when you would want to be able to utilize that.
Dan Uyemura [39:53]
Yeah, one thing one thing I learned too, over the years is you also have to get that signed by a photographer because if you pay like if you pay a photographer to come into a photo For you, if you don't legally sign a thing saying you to use it, you don't get to use it right?
Rachel Brenke [40:03]
You guys can't see my huge smile. So photography is the other like major industry that I work in...
Dan Uyemura [40:07]
Rachel Brenke [40:09]
Yeah. So no, we could do a whole podcast just on that. Typically you just got to look at the rights, does the photographer own it, or do you own it?
Dan Uyemura [40:16]
But by default if the photographer even if you pay them to come, yeah, by default, the photographer owns the rights to all the photos they take. Yeah, so you have to have them sign a contract saying you get to use it too.
Rachel Brenke [40:26]
Yep. Because they're a contractor. And we can even take that a step further and look at if their staff is creating social media posts for you or taking photos or something and they're actual contractors, like we've talked about, they by default, own all that content and your brand doesn't really they is their employee, you own it, but if you're a contractor and they leave, they could technically take it all with them.
Dan Uyemura [40:49]
Interesting or what if they take it and you start using it in your marketing materials because they see you and say you're using my copper. Okay, so another reason keep having them as employees.
Rachel Brenke [40:59]
We'll have to do just a whole episode on copyright stuff.
Dan Uyemura [41:01]
Photography stuff's interesting. Yeah. All right. So we're gonna wrap it up there. I mean, we we went about 15 minutes on the super exciting. I actually thought it was fun and exciting topic of legal stuff. I do really, really, really believe like this and taxes are the two most boring things that most gym owners don't want to deal with. And for some reason, they they try to tackle it half assed quarter assed on their own most of the time. If somebody wants to talk to you about about using your services to to represent them, do you have like a monthly agreement where like I can call you and be take out the situation came up or I want to position myself for this next year? What do you advise you do stuff like that? Or how does that work?
Rachel Brenke [41:42]
Yeah the way that we approach our law firm so we actually are nationwide. We have a network of attorneys that works for me so and we do a lot of federal like copyright trademark. We work primarily virtual, especially now during COVID. But once you come on on boarded as a client, we don't require like a monthly retainer or anything. We have a new client initiation fee, and then you just email me and I answer you like we don't, it doesn't have to be a whole big thing. Now, if you have like a huge issue that comes along, we'll get back on the phone, we'll talk about if we need to have any sort of retainer agreement, but typically, they just shoot me an email if they have a question. And, you know, one thing I wanted to say that has been super valuable right there for all of my gym clients during this COVID stuff, because they're already so busy trying to get their head around and do everything. If you can get a relationship with an attorney that has that type of approach. I mean, obviously, self interest, I would love for you guys to come to us. But finding someone that really understands your industry, and that has flexible, open scheduling. I mean, like our initial inquiries can take a little longer just because we have such a long waitlist. But if you email me directly, I can move you to the top because I'm the boss. But we we try to make it as flexible for our small business owners as possible. And actually another point I think with COVID is I hope this shows you know you're talking about about legal and taxes or bla bla look at like the way that things have gone through COVID. I mean, we've been dealing with like paycheck protection programs and contracts.
Dan Uyemura [43:08]
It's all legal and CPAs, right there.
Rachel Brenke [43:10]
My hair was on fire. And it's to the point that I was working 12-14 hour days last week because people waited I just like at the end of my calls, I'd be like, let's not do this again. Let's be proactive. You're not doing this, so hopefully thats a lesson.
Dan Uyemura [43:26]
Let me clarify this because this maybe goes against every interaction I've had with a lawyer. If I wanted to retain you for my gym, there's an initial fee to join the network or whatever.
Rachel Brenke [43:37]
Well, it's initial fee and then it's our initial call. So like you would send all your stuff over and we do like a free consultation in house I review everything and then it then we do our first meeting is paid and it's a business strategy and we do the whole business audit a lot of what we just talked about here. And then from there, we you if you have a question next Thursday, you email me I either email or call you and then I just put it on a bill for like 5-10 minutes, whatever it is, I don't require a huge monthly.
Dan Uyemura [44:03]
So you just bill for usage based on some hourly rate for the minutes and whatever that you use. Okay, that's cool. That's good to know.
Rachel Brenke [44:12]
As long as you say that in legal context, if you take the clip out of what you just said, so you billed by the minute, it sounds a little risky.
Dan Uyemura [44:22]
I assume you have some hourly rates, and it's just like, you've used 25 minutes, this, you know, rounded to five minutes or something, okay, that's, that's cool. That means you're not on the hook, like as a gym owner, you can have the peace of mind of knowing you have someone behind you, without having to, you know, pay a monthly retainer for that access, or whatever.
Rachel Brenke [44:39]
And the other thing I encourage and we do a lot of this and I understand small business budgets, you know, very sensitive to that say, you come to me and you're like I need a bundle of all these waivers, we won't just sit there and say okay, well, we don't know how much it's going to be we do a lot of flat rate. So even if it takes us longer to do it than we anticipated. You guys know up front like how much it's going to be and I'm encouraged to see a lot of legal industry going that way. So if you're seeking out a local attorney, ask them if they offer flat rates because then you can put it in your budget.
Dan Uyemura [45:07]
That's cool. Okay, cool. So if you're a gym owner listening to this, I mean, this and CPAs and slash taxes are the two areas I really feel you, you should find somebody like this my CPA to file my taxes cost me like if you want to talk compared to TurboTax cost me like thousands of times more, you know, probably. But he also because I don't know the intricacies of tax law, and I don't really want to know the intricacies of tax law. He saves me way more money than I would save myself using tax cut or whatever those TurboTax cost more, saves more, I end up spending $1 to make two or three so I do it right. But when I just think about how much it costs to file taxes, it's insane. But I do have a relationship, like actually during this podcast, he called me I don't know why I'm gonna call him back. Now. Like I have somebody behind me that like if I if something changes in my life, I get married, this COVID stuff, I can call them and say like, Hey, you know, should I take this idea alone? Or should I not? Because here's my situation and they'll work with me. That's invaluable.
Rachel Brenke [46:09]
And it's deductible. All legal services are deductible.
Dan Uyemura [46:12]
Exactly. So I would encourage you to seek that out fit legally comm you can check that out, or if they're like, like she's saying, if there's one in your area of someone you already know, see if they can get an arrangement like that, where you're not paying a monthly fee, or you're not paying a huge retainer that you have to pay out against, but you can pay as you go. That's, that's pretty favorable for a small small business like most gyms are. Alright, great. Thank you for your time. I feel like it's been very informative. I hope we have a whole roster of gym owners that have listened this far in the podcast because there have been a 50 minutes plus worth of very good information that is essential for them to run a successful business and I hope people have invested that amount of time to understand that. So thank you for your time and anytime you want to come back, let me know we would love to have you back. We talked about photography next time.
Rachel Brenke [47:00]
Sounds good. Have a good one!
Dan Uyemura [47:01]
Thank you. All right, there we go. Tell me what you guys think. Like we mentioned in the podcast, broccoli and chocolate, legal stuff, financial stuff, I know, potential snooze fest, you guys aren't really into it. We all want to get to training. But again, you're not going to be training anyone, if you do get sued, and you don't have the right contracts and waivers in place, and you haven't set up your company correctly, and all these other legal things that aren't exciting to you have to be done, right. So if you don't understand how to do that correctly, I would highly advise you find somebody asks your members or any of them attorneys don't even know attorneys, is there any way you can get in front of an attorney to help you structure this stuff correctly? So that you don't you've got yourself protected, right? You, you wouldn't enter into any type of business or any type of situation without the proper protection. We're all not foolhardy risk takers, right? So, it's blind to think that if you've set up a Legal Zoom entity and you've just pulled a waiver off the internet that you're protected because you probably aren't. Okay. the livelihood of your business and the and the the wellness of your community is predicated on the fact that you have set up your business correctly. And that's exactly what we just dug into. I hope you found this episode interesting. As always, we're trying to bring some very important concepts to you gym owners and help make you guys better business owners one episode at a time. If you liked this episode, if you felt like it could help, let me know. Because I'll have Rachel come back and talk about more. She also is a photographer and she works on a lot of IP, intellectual property law around photography. So if that's not if that's something of interest to you guys, too, because we take a lot of pictures and we use a lot of pictures in the fitness industry, let me know as well. We'll get her on to talk about that. She was more than willing to come back on again. As always, if you liked this episode, please give us a like, subscribe to us. Check us out on any of the app on any of the streaming services you listen to. We're there. We're here to help you come become a better business owner one episode of time here at The PushPress gymOS Podcast. I'll catch you guys later, peace.
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