Time and again, the question of false self-employment comes up before the labour courts. The courts then have to decide whether someone was actually employed on a freelance basis or instead as an employee. The decision has considerable consequences for both sides. For example, the question of whether social security contributions must be paid in arrears for several years depends on it. In terms of protection against dismissal, too, everything depends on the classification as an employee instead of a freelancer. False self-employment can even lead to criminal consequences for the employer’s management. Employed persons can clarify their status with the German Federal Pension Insurance (Deutsche Rentenversicherung Bund) with the status determination procedure (Statusfeststellungsverfahren), at least with regard to social security contributions.

In the current case before the Federal Labour Court, a sports photographer defended himself against the dismissal of his employer, for whom he had worked continuously since 1990. While the plaintiff photographer was paid according to the number of photos taken at the beginning of his employment, the payment later changed to a monthly lump sum. In 2018, the employer offered the plaintiff a “contract for freelancers” with changed conditions. After the plaintiff rejected the offer, the employer terminated the contract with him. The photographer believed he was in fact an employee and challenged the termination before the Labour Court. During the unfair dismissal proceedings, the German Pension Insurance Federation determined that there was no employment subject to social security contributions between the parties.

Do the labour courts have to follow the assessment of the German Pension Insurance Association?

The Federal Labour Court (BAG), just like the other labour courts, is not bound by the decision of the German Pension Insurance. Even if there is an incontestable decision by the pension insurance that no employment existed, the labour courts can decide exactly the opposite.

False self-employment is strongly assessed on a case-by-case basis

In its decision, the BAG emphasises that all relevant circumstances must be considered for the question of false self-employment. The individual relevant indications cannot generally be ordered hierarchically. However, the labour courts must weigh the individual circumstances in a comprehensible manner and come to an overall conclusion on this basis. As is often the case, there were indications of an employment on the one hand and indications of freelance work on the other. The lump sum payment and the existence of an official email account spoke in favour of an employment. On the other hand, the fact that the photographer was not assigned to rosters and had the explicit possibility to work for other clients spoke in favour of freelance work. The Regional Labour Court had seen predominant indications for an employment relationship and had thus actually come to a different conclusion than the German Pension Insurance. However, due to a lack of comprehensible weighting of the individual indications by the Regional Labour Court, the Federal Labour Court referred the proceedings back to the former.

Practical advice:

Due to the sometimes unpredictable decisions on the issue of false self-employment in individual cases, affected employers or “freelancers” should seek advice on their legal situation and how to proceed. In view of the serious consequences of mistakes, it is advisable to act as prudently as possible when drafting contracts and, above all, when implementing freelance contracts that are bordering an employment relationship

BAG, Urteil vom 30.11.2021, 9 AZR 145/21