Welcome to Insurance Agent Leverage, a podcast where we will have conversations and guests focused on helping you gain leverage in your agency. What is leverage? Well, it's a business term defined as the power to get you more time and greater business success through business ownership. Agency ownership, if done correctly, absolutely will create the opportunity for you to gain more time and financial freedom. Conversely, without the right people, systems, and processes, agency ownership will likely become a highly stressful and possibly low-paying job. The spirit of this podcast is to get you thinking of different ways to move towards optimization in your business and in your life. In today's episode, we're joined by Liz Pipko, the owner of Corvinus Law and founder of Renegade Legal, a do-it-yourself membership site, with dozens of templates and essential business strategies that protect small business owners like us. An entrepreneur herself, Liz pays special attention to the various pitfalls small business owners face every day. This is insurance agent leverage. It's sponsored by Agency Vault, an industry leader and agency coach, hiring and sales training. Agency Vault's unique connection between the hiring process and the sales training process has helped thousands of insurance sales producers and agents gain confidence and strengthen their abilities to sell more policies with the powerful seven-step trusted advisor sales framework and sales strength identifier assessment. For more information, navigate to www.agyvault.com. Okay, so I'm gonna let you in a little secret. Uh my name's Craig Pretzinger. That's not the secret. The secret is this podcast was recorded originally on a uh Facebook live interaction in our Facebook group, uh all state agency owners and staff, uh a group for for agent owners, and um we connected with Liz. We had a little bit of a technical difficulty at the beginning, so bear with the audio. It's a little grainy on my side, otherwise, some great content, and I'm super excited to introduce Liz Pivco.
SPEAKER_01Good job. Awesome.
SPEAKER_00Took long enough, but figured it out.
SPEAKER_01Yeah, well, you know, we didn't have to go to a third attempt. So I I I'm curious on on uh and a lot of the agents on here are in different stages of their uh of their careers, right? You have some some grizzled veterans. Uh I'm kind of in the middle, but I'm starting to get grizzled and old. Um but but especially at the beginning, or even as we open multiple agencies, uh you have to do different things with setting up the business, right? Like LLCs, corporations, all this fun, exciting stuff.
SPEAKER_00Well, it's really important for any business owner, whether you're an agency owner or doing something else, to first of all, select a business entity that um affords you some sort of personal liability protection. And those would be your LLCs or corporations. It's not that difficult to register one with the state, but what you're essentially doing when you do something like that is separate the business from you. So when the business incurs a debt or a liability, that is going to belong to the business. And if you do everything correctly, like follow all the required corporate formalities, um, like not commingling your finances and just running the enterprise like an actual business, then it will protect your personal assets from ever being seized as a way to satisfy a business liability. So it's really important, especially for people you know just starting out, because they they do tend to incur more liability because they don't know what they're doing. But it's really important to shield your personal assets because you don't want your personal savings account, you know, the down payment you're saving up, or you know, whatever uh personal assets you have that are valuable, you don't want those to be seized because you incurred a business liability because you didn't know what you were doing. So definitely separate that off. And of course, if you get the proper insurances, which I know you guys are, um those liabilities will be minimized, but not every policy will cover everything. So there is still that um level of personal exposure that you want to um get rid of. So definitely LLC is the easiest structure. Um, it's really easy to form as far as getting your articles of organization into the state. Um some states have specific requirements, so you should definitely look on your Secretary of State's website or just Google name of your state LLC registration requirements, and um it'll give you just a quick overview of the process, but it's super easy.
SPEAKER_01How about how about let's let's totally switch gears. How about with hiring a team? Um, you know, there's some people, like uh especially some of the the bigger agents uh have have uh telemarketers or sales assistants, you know, then and then they'll say, well, I'll I'll do them as as 1099s versus uh W-2 employees. Some of us have all W-2, so it's uh everybody runs their their operation a little bit differently. Can you get into some of that and some of the legal considerations?
SPEAKER_00It's uh whether someone is an employee or an independent contractor under the law or as far as the IRS is concerned, uh, has nothing to do with what you call them. If you of course, if you have employees and you know they're employees, you should have an employment contract. And if you have independent contractors, you should have an independent contractor agreement. But just because you have an independent contractor agreement with someone, if you exert so much control over them that you're essentially dictating what they do each day, what their schedule is, how they do their jobs, basically they're there nine to five, you tell them what to wear, when they can eat, essentially micromanaging them all day. And it's just a regular employment scenario, they're going to be treated as an employee by the IRS. So you're going to owe those taxes, and you'll have to pay back pay and benefits if you misclassify them. And this is an issue that comes up a lot. So it always turns on level of control. So with independent contractors, you know, the typical independent contractor is someone who has set up their own shop, they provide a service, and they have a bunch of clients, not just you, but they work tasks for a number of different clients. Whether it's a VA, you know, that's providing, I don't know, five to ten hours of VA services to four to ten clients a week, um, or it's someone that's um coming in to do your IT work, or sometimes even sales professionals. Um whether they'll be employees or independent contractors, that'll depend on on how much you control them. But independent contractors have their own gig. They you can't control how they do their job, you can't control their schedule. Um, like with me, you you normally don't retain me as an attorney and tell me that I have to work on your stuff from 7:30 a.m. until 5.30 p.m. And um when I can go to lunch and I have to answer the phone, and you know, you're constantly checking in on me through email. You can't do that because I'm an independent contractor. So that's the major difference. And it's important because with employees, um, you're subject to a lot of regulation, both on the state level and the federal level. So if you have employees, you you have to pay those employment taxes. It's it's not a 1099 situation. You have to do W-2s and you have to probably engage a payroll company to figure out those withholdings and do everything right in that respect and familiarize yourself with um with all the Department of Labor regulations that apply to hours and benefits and time off and vacation pay and sick leave. Um it's it's a lot of regulation.
SPEAKER_01All the stuff that makes my eyes roll. So so um uh in our in our world, I touched on the telemarketers. So there's a lot of agents that use telemarketers, and because of the turnover, right, with the telemarketers, um they come in, they come out, and you know, doing all the paperwork is is a nightmare. So if you require that they call during like they were at the office during these specific hours, is it does that then create a situation where they shouldn't be 1099?
SPEAKER_00Um a lot of times it can, because if you require them to be at your office nine to five, the IRS doesn't care how difficult it is for you to do the paperwork. What they care is that you have a nine to five worker that you're requiring to be present in your office doing these tasks every single day.
SPEAKER_01Part-time and you're exerting enough.
SPEAKER_00Like if it's a part-time um yes, because it's level of control again. And of course, yeah, and and exclusivity plays a part because if they're there full-time, they might not have an opportunity to work for anyone else. So and if it's an exclusive relationship, that puts it more toward that uh independent contractor um category. If it's non-exclusive, it's less likely to be independent contractor because they're not spending all their time on you. But even with part-time workers, part-time employment is is definitely still an employment situation, even if they only work 20 hours a week. It just depends on that level of control and how much you're I keep using the word micromanaging because that's how it's stuck in my head, but um uh it's just how much you control their day-to-day activities and how they do their jobs. Now, a lot of people go with um, you know, staffing companies, and that's a that's a totally different arrangement, but um there are some companies that provide telemarketing services, and your contract is uh with the staffing company, and they just supply contractors, and um that's another that's another area to to explore if you if you want to go that route. Okay.
SPEAKER_01Well that's that's great stuff. I mean, uh my one of the takeaways I get from all of that is we need documentation, right? We need to have a contract if we're gonna do a 1099, and we need to have employ employee agreements if we do a W-2. And I think that uh this this world is a very reactive world, and so a lot of times the the details like the paperwork and and these things sort of get pushed aside because we're busy with all these other things, right?
SPEAKER_00Yes, and you need the contracts to protect yourself as well, because um both with independent contractors and employees, you want the contract to spell out what they're supposed to do in exchange for whatever it is that you're paying them. Because when they don't do it, you have grounds to terminate the relationship. Now they're both typically terminable at will. Most employment situations you know don't require cause anymore. Everybody's an at-will employee. But um, with employees, you better have a good reason anyway, because you don't want them coming back to sue you for um unlawful termination or coming back claiming unemployment benefits, thinking, you know, saying that you fired them for no reason whatsoever. So it's important to have the contract and it's important to have ongoing documentation, um, especially as far as your employees are concerned, because when you're terminating them, you need to be able to show documentation of their of their misconduct and everything that they've done wrong over the years, or maybe just a couple of months, I don't know. Um, but um it it's it's really important to write them up every single time they do something that's um that's against their their contract, that's against the job description that they specifically agreed to in writing. You know, every time they don't do what they said they were going to do, you need to document that. You need to sit down with them, you need to explain it to them, and document it in the file that you had that conversation. So when termination comes up, you can just pull from the file, here, this is what you did on this date, this is what you did on the next date, this is what you did on the third occasion, and this was your fourth, and as the contract says or as the handbook says, this is grounds for termination at this point, and um it's totally your fault. So don't even try to uh to go the unemployment route because that's not going anywhere. Just just move on with your life.
SPEAKER_01Yeah.
SPEAKER_00So that's uh it kind of morphed into something else.
SPEAKER_01If if you're not doing if you're not doing those things that Liz just talked about, um documenting and writing people up, um you will because you're gonna find out the hard way. And and that's where I I learned from you know ha having some uh headaches. And and so it's it's really important. And and and there's some really good tools out there that that can help with that too.
SPEAKER_00So and not just from the an unemployment claim perspective, but think about the anti-discrimination statute. You can't um you know discriminate um on various bases, age, sexuality, physical disability, if they if they have some kind of uh illness that you don't know about, and they're underperforming, and you just fire them without having that meeting, and then it later comes out that an illness prevented them from uh performing how they were supposed to, then you're on the hook for for wrongful termination. And uh those situations are are never pretty because they go straight to the EOC.
SPEAKER_01So what if somebody is underperforming and it's you know they're sick, whatever, and um and they're underperforming. So you can't terminate them as a result of them underperforming if they can prove that they're underperform.
SPEAKER_00In a lot of cases you have to try to reasonably accommodate them. Okay. So you have to work with them to a degree to see if there's anything that you can do to work with their condition to to make it so they can still work for your company. You can't just straight up fire them because of let's say they have you know a psychological issue. They have they have anxiety, and um it's uh it affects how they work. It's uh it shows in their, you know, in the way they talk, and maybe they sound rude on the phone, and your customers are complaining because she's rude and she really just has anxiety, and then you fire them, and then she's gonna say, I was discriminated against, I was fired because of a legitimate medical condition, they never tried to work with me, they just kicked me out, and that is that looks very bad for you as an employer. So so try to work with them.
SPEAKER_01Right. So you work with them, and in the same way that you would document them doing something wrong, you're gonna document that on this day we did counseling, on this day we did this thing, XYZ. And then what's a good amount of time? If if you know the writing's on the wall and you're going to have to let somebody go, then what is a safe like I I know that nothing's set in stone, but what what do you get a sense of?
SPEAKER_00Yeah, it's it really varies from person to person and what the actual reason is. Um a lot of times if it's uh if it's injury or something like that, uh you need to check with your uh your state because sometimes you can't fire them at all. I uh I worked for a firm that did uh workers' comp insurance, and we had the situation all the time where um you know people would get injured, they couldn't do their jobs anymore. Well, the employer had to put them in a different job, even though they didn't even have that job. They had to make up a position for the person because the person can't be fired. And so going to your state, calling your your SBA, they're they're usually very helpful. They they focus on helping small businesses with issues like that, and they your taxes are paying for that. So they will, for free, point you to all the resources that you need to to make that evaluation and to just familiarize yourself with the hundreds of potential laws that can apply in any given situation. So this is definitely something to call your SBA about, and they're there to help you, and they're there to to to direct you to someone who can help you with your specific facts and circumstances because each one will be totally different. You know, someone with anxiety is going to be treated totally differently from you know someone who who got injured on the job and broke an ankle, even though they're both medical conditions. They'll be treated completely differently.
SPEAKER_01It it really speaks to the importance of that pre uh uh before you bring them on, right? Like some some folks and and especially in a high turnover business like the insurance business, you get desperate because you need somebody, and then you you bring them on and you kind of overlook some of the red flags, but now once you've brought them on, you're subject to all of these conditions, right? So um really, really important to think about. It looks like Brian has a question. Can you see the screen?
SPEAKER_00Does this apply considering our law in Indiana? Okay, I don't practice in Indiana, but Indiana is an employment at will state. Um employer can terminate an employee, any reason. Yeah, that is correct. Okay, so employment at will, but um any valid reason. So it can't be a discriminatory reason or a reason that is against a specific law that is on the books protecting these people from getting fired. So you can't fire pregnant at will, but at will, but you know, you can't fire pregnant women, you can't fire employees because you don't like their race, you can't fire someone because they're 55 years old. Um there are a lot of these requirements that you have to deal with as an employer, and it's it's going to be your responsibility to familiarize yourself. And usually you would start with the Department of Labor. I would go to the Department of Labor website and look up all the regulations on the federal level that apply to employers, and go to your state regulations as well, because there are state laws that apply too. So go to the Department of Labor, look up your state's regulations, then you'll have a clear picture of all your obligations when it comes to employees. And this is a huge area. Like there are attorneys that are specializing in nothing but employment laws. To give an overview of employment law year is is impossible. We'd be sitting here for for five weeks at least.
SPEAKER_01And there's somebody that knows a lot more than most other people about that thing. So if you make somebody angry by letting them go and they talk to one of these people, you you're gonna be in trouble.
SPEAKER_00Yeah, it's a very need to have your your systems and processes in place before you start hiring. So, you know, register as an employer with your state, because that's a requirement, and um look up all the laws and download all the posters from the Department of Labor and get a payroll company to do your withholdings right, and familiarize yourself with the discrimination statutes very well, and and then you can you can start hiring people. Don't hire first and then figure it out because uh there are some really counterintuitive laws. Um and of course, there are laws that apply to what you can ask in an employment application. So maybe that should be the first thing you look at before you start asking them things like are you pregnant or do you plan to be pregnant in the next five to ten years? You know, uh do you have a disability? No, you you can't ask certain questions. Are you You know, no. That's none of your business. Make sure your employment application doesn't violate the law. And make sure that your your actual implement relationship doesn't violate the law.
SPEAKER_02Thank you, Mark. We were able to cut it back up. I didn't want to get the website information from Liz, so that's the list. Thanks so much, Liz. It's been a pleasure to have you on. And we appreciate the value that you've delivered for all the listeners. And we hope to see you again.
SPEAKER_00It was a pleasure being on your podcast.
SPEAKER_02Thank you once again for joining. My name is Craig Fresnel, creator of the Internet Leverage Podcast, which of course is sponsored by sales training. He's gonna bring some unique perspective when it comes to your So we're very excited to welcome him next week. This is Craig Russia, and we appreciate you joining.