"It is not arbitrary."

Changing which information reporting form gets used is either an accident or intentional and arbitrary for you, because you are supposed to enter what was reported to your taxpayer. Or, get a Corrected form.

"Were I able to enter it as a 1099MISC as in previous years I would have marked it as other income."

You also don't get to pick which Box makes it favorable to the taxpayer.

"The idiots mailed him a 1099NEC which I believe is just a mistake."

Okay...

But what about this part you stated: "but I have clients who are not self employed that have gotten these before. Was never an issue before because the 1099NEC didnt exist. I assume its just a processing error."

Why would you assume this? Why not assume your Taxpayer is wrong, or their Employer is wrong, or you misunderstand the nature of the activity?

"From what he's told me it's just residual income, not income he worked for."

Where do you find the IRS describes "residual income?" What does that mean? Royalty?

"He's not the only one of my clients who receives one of these for income that was not actually self-employment income."

Then what is it?

Because employers should report all payments to employees on W2, if it is taxable. Also, if they didn't "work for it" then it's what else (something you find in the tax code): reimbursement (under an accountable plan)? Allowance?

"He's a wage employee with no schedule C. The 1099 is $147 and creating a schedule C for this income would be preposterous, at least in my opinion. Furthermore, if I did so, I would have to come with expenses that do not exist, which would actually be arbitrary."

Instead of making assumptions and also entering the data not how it was reported to the taxpayer, the information needs to be better identified. Maybe all three of you have this wrong: You, the employer and that taxpayer. Someone is supposed to know exactly what this is and how it is reported and taxed.