Operation not permitted error on Monterey

I keep getting some errors with new M1 and Monterey 12.1
I think I set the hazel sysprefs correctly...
but then I get this
2021-12-21 10:30:47.738 hazelworker[1813] Received error while processing file /Users/xxx/Desktop/xxx/xxx-xxx: Error Domain=NSCocoaErrorDomain Code=257 "The file “xxx-xxx” couldn’t be opened because you don’t have permission to view it." UserInfo={NSURL=file:///Users/xxx/Desktop/xxx/xxx-xxx, NSFilePath=/Users/xxx/Desktop/xxx/xxx-xxx, NSUnderlyingError=0x600003ce0c60 {Error Domain=NSPOSIXErrorDomain Code=1 "Operation not permitted"}}
and the permissions seem right on folder xxx-xxx...
if I change the source folder from something like xxx-xxx to just xxxxxx then the problem goes away....
Any Ideas?
I think I set the hazel sysprefs correctly...
but then I get this
2021-12-21 10:30:47.738 hazelworker[1813] Received error while processing file /Users/xxx/Desktop/xxx/xxx-xxx: Error Domain=NSCocoaErrorDomain Code=257 "The file “xxx-xxx” couldn’t be opened because you don’t have permission to view it." UserInfo={NSURL=file:///Users/xxx/Desktop/xxx/xxx-xxx, NSFilePath=/Users/xxx/Desktop/xxx/xxx-xxx, NSUnderlyingError=0x600003ce0c60 {Error Domain=NSPOSIXErrorDomain Code=1 "Operation not permitted"}}
and the permissions seem right on folder xxx-xxx...
if I change the source folder from something like xxx-xxx to just xxxxxx then the problem goes away....
Any Ideas?