March 19, 2020 Issue: March 2020

GERMANY - Crowdworkers Are Not Employees Under German Employment Law

Article first published at the Orrick Employment Law and Litigation Blog (reprinted here with permission of author and original publisher).

By: André Zimmermann and Marianna Karapetyan

In one of its latest rulings, the Regional Labor Court of Munich concluded that crowdworkers or microtaskers are not employees under German employment law. However, the Court has allowed an appeal to the Federal Labor Court.

What Was the Case About?

Crowdworkers earn at least part of their income by completing paid short-term tasks conveyed via online platforms or smartphone apps (for example, in America, those engaged for projects on TaskRabbit or similar apps).

In the case decided by the Regional Labor Court (December 4, 2019 – 8 Sa 146/19) one crowdworker – with the steel workers union’s active support – claimed that an employment relationship had been established between him and the platform operator by means of a framework agreement with the platform operator, which enabled him to take over certain orders via app and provide services.

The platform operator terminated the relationship with the crowdworker via e-mail, but the crowdworker claimed that termination was not effective since an employment relationship existed between the parties and employee protection laws applied. However, the court considered the crowdworker to be self-employed and denied the employee status, regardless of the fact that the crowdworker earned a considerable part of his livelihood from his activities for the platform operator. The court considered as decisive that, as usual for crowdworkers, there was neither an obligation for the crowdworker to accept an order nor an obligation for the platform operator to offer orders. Accordingly, the platform operator could effectively terminate the framework agreement by e-mail without having to observe notice periods under German employment law.

But What About a Fixed-Term Employment Relationship When Accepting an Order?

One legal question has been left open by the court as it was not up for decision: Can the acceptance by the crowdworker of a concrete order establish a separate fixed-term employment relationship besides the framework agreement (i.e., for the time required to process the order)? For this to be the case, the crowdworker needs to be integrated into the platform operator’s work organization and should be subject to its instructions. However, according to the current legal situation, the question of whether a crowdworker is self-employed or an employee can only be assessed on the specific facts of each case.

Impact and Outlook

The Federal Ministry of Labor and Social Affairs had already expressed that platform work plays a greater role in Germany than previously assumed and recognized the need for action. However, the legal situation of crowdworkers is barely regulated and insecurities exist on both sides, both for the platform operators and the crowdworkers.

The decision of the Federal Labor Court in this matter will have to be awaited. However, opposition to the ruling has already been announced from trade union circles. The ruling could therefore merely be a breather for the platform operators.

Properly Classifying Team Members as Employees or Contractors is Crucial

Properly classifying team members as employees or self-employed/independent contractors is crucial for companies. Incorrectly classifying an employee as a contractor can have significant effects on the company – from retroactive liability for taxes and social security contributions to reputation damage and even criminal liability of the managing directors (in case of intent). The decision of the Federal Labor Court will have a significant impact on the business of platform operators in Germany since it will likely give further guidance on how to separate employees from contractors in the Gig Economy business.

 

Orrick, Herrington & Sutcliffe LLP, Düsseldorf/Munich

Herrington & Sutcliffe LLP, Düsseldorf