Even though lawmakers seem to have relaxed their interest in the Temporary Employment Act since it was last revised, employee leasing and contractor compliance continue to keep practitioners busy.
This is primarily driven by the increasingly restrictive review practice of the authorities, which makes it even more important that existing forms of using outside personnel are in order and that new models are guided into controlled channels. Industries such as IT and, increasingly, interim management are coming under increasing scrutiny and are well advised to choose the framework of their assignments with care to reduce the risks of employment, social security, tax and criminal law risks.
In the following, we would like to inform you of the major developments in this field and of the activities of our law firm.
Our specialists are Dr. Thilo Mahnhold and Dr. Daniel Klösel, who have published a book on the deployment of outside personnel, “Contractor Compliance, Haftungsprävention und Fallmanagement beim Einsatz von Fremdpersonal” (Contractor Compliance. Liability Avoidance and Case Management when Using Outside Personnel).
- Federal Labor Court: Crowdworkers can be deemed employees
In a notable decision last Tuesday, the Federal Labor Court has taken a stand on the question of whether crowdworkers are employees. It is hardly surprising that they can be deemed to be employees and that this was also the view of the Federal Labor Court.
The detailed grounds of the judgment have not yet been released, but a central, important issue in this case was evidently the circumstance that the specific setting of the crowdworking platform, including its job acceptance and compensation mechanisms, resulted in a de facto performance duty, and the processing of the jobs thus solidified into ongoing and narrowly prescribed performance requirements. In its press release, the Court stated:
“It is not until a higher level on the rating system is reached after a number of jobs are performed that the users of the online platform are able to accept several jobs at the same time to complete them on a route and thus attain, de facto, a higher hourly wage. Through this incentive system the person in question was induced to attend to ongoing control activities in the district of his usual place of residence.”
Briefly stated; crowdworkers may be employees, but this will depend on the specific design of the platform and the job acceptance and compensation mechanisms. Although the mechanism in dispute in this case was viewed uncritically by the lower labor courts (Labor Court of Munich: File no.: 19 Ca 6915/18 and Superior Labor Court of Munich: File no. 8 Sa 146/19), the Federal Labor Court has now tightened the reins somewhat, and individual platform hosts will have to quickly adapt to this. The even more critical issue of social security duties and their related risks lurks in the wake of this determination of crowdworkers as employees. Even though new legislative parameters are currently being developed, it cannot yet be seen how they will be implemented and what their specific content will be.
Further information on the topic of crowdworking can be found here.
- On April 4, 2019, the German Bundestag debated the draft law against illegal employment and misuse of social benefits. This draft law is also important under a Contractor Compliance perspective. In future, anyone who unreasonably withholds social security contributions might commit a regulatory offence.
- In our November newsletter “Temporary Employment and Contractors – Trends 2018 – A Look at Actual Practice” we drew a first summary of the last one and a half years in order to give you the best possible overview and outlook on past and expected developments
- Mahnhold/Klösel, “Dilemmas in the management of temporary work agency staff”
HR-Journal Personalwirtschaft Zeitarbeit Special 10/2018 (only in German)
- Contractor Compliance, Haftungsprävention und Fallmanagement beim Einsatz von Fremdpersonal”, book review by Prof. Dr. Mark Lemke, LL.M. (Cornell)
Employment Law Journal RdA (Recht der Arbeit) 2018, 64 (only in German)
- The coalition agreement for the 19th legislative period from February 7, 2018 did not announce any directly relevant legislative changes for the use of outside personnel. However, the Temporary Employment Act is supposed to be revisited in 2020.
- Contractor Compliance Update – BAG and BSG Rulings on Free Lancers as Regular Employees and on Illegal Employee Leasing
JUSTEM Client Newsletter 04/17
- Contractor Compliance. Book review by Dr. Julia Schweitzer, attorney-at-law and mediator
Employment Law Journal NZA 4/2017, page 231 (only in German)
- Contractor Compliance. Book review by Dr. Jörg Habetha, attorney-at-law, specialist lawyer for criminal law and lecturer for criminal law at Saarland University
Commercial Criminal Law and Corporate Liability Journal (Zeitschrift für Wirtschaftsstrafrecht und Haftung im Unternehmen) (ZWH), 1/2017, p. 34 et. seqq. (only in German)
- Employee Leasing and Work Contracts in 2017 – The Federal Labor Court Shows Practitioners “How it is done”!
JUSTEM Client Newsletter 01/17
- Klösel/Klötzer-Assion/Mahnhold (Editors), Contractor Compliance – Liability Prevention and Case Management When Using External Staff
C.F. Müller Verlag, July 2016 (only in German)
- Mahnhold/Klösel, “Under Suspicion – Preventing Pseudo Self-employment: Do’s and Don’ts for Multinationals”
Labor Law Magazine 1/2016
- Jensen/Klösel, “Sec. 3 Legal Services Act: Compensation Consultants as a Compliance Risk“
Compliance Law Journal CB 11/2016, page 401 (only in German)
- Klösel, “Compliance Violations and Sanctions – A Guideline for the Corporate Practice”
Compliance Law Journal CB 7/2015, page 253 (only in German)
- Mahnhold, “Paradigm Shift in German Labor Law – Consequences of non-compliance for employers and principals according to the German Minimum Wage Act (MiLoG)”
Wistra, Journal for Criminal Tax and Criminal Business Law, Issue 3/2015, p. 88 et. seqq. (only in German)
(co-authored by Antje Klötzer-Assion)
- Klösel, “Compliance Guidelines – The Functional Change of Private Law in a Cooperative State”
(Compliance-Richtlinien – Zum Funktionswandel des Zivilrechts im Gewährleistungsstaat)
published by Nomos-Verlag 2012 (only in German)
Reviews: Bachmann, NZG 2013, page 378; Calliess CCZ 2013, page VII (only in German)
- Klösel, “Interim Management from a Practical Perspective under German Contract Law”
(Interim Management aus Sicht der arbeitsrechtlichen Vertragspraxis)
Commercial Law Journal NJW 2012, page 1482
(co-authored by Dr. Jörg Buschbaum) (only in German)
- Mahnhold, “Global Whistle, German Whistle -Whistleblowing Systems in Conflicting Jurisdictions”
(“Global Whistle” oder “deutsche Pfeife”, Whistleblowing-Systeme im Jurisdiktionskonflikt)
Employment Law Journal NZA 2008, page 737 (only in German)