On 1 December 2020, the Federal Labour Court made an important decision on the labour law classification of so-called ‘crowdworkers’. Hopes for a groundbreaking precedent–setting decision were thwarted, however. Numerous questions on this much-discussed and forward-looking topic, ‘Work 4.0’, remain unresolved. Nevertheless, this is a decision with far-reaching consequences. It poses new challenges for an entire industry, and particularly in relation to restructuring.
Crowdworkers are micro-jobbers on the Internet. Crowdworking involves completing paid small tasks that are advertised online. Typical jobs consist of testing apps, photographing opening hours or verifying online information. Until now, there was no entitlement to minimum wage, holidays or paid sick leave due to crowdworkers lacking employee status. In exchange, there was usually no obligation to accept a task and at the same time the person offering the task has no authority to decide where and when the order is.
The plaintiff worked for the defendant on the basis of a ‘basic agreement’ and general terms and conditions. The service was provided by enabling the plaintiff to accept orders offered online via a user profile without being contractually obliged to do so. When an order was accepted, it usually had to be completed within two hours according to detailed instructions from the defendant. The crowdworker was credited with ‘experience points’ for completed assignments. As the number of experience points increased, it became possible to accept several jobs at the same time, thus increasing the wage level. Due to discrepancies, the defendant prevented the plaintiff from performing assignments from spring 2018.
At first instance, the crowdworker sued, among other things, requesting a determination of his employee status in connection with a claim for compensation for the refusal to accept orders.
The lower courts dismissed the claim and denied the crowdworker employee status. The Federal Labour Court decided otherwise, finding that an employment relationship did indeed exist between the parties.
According to the Federal Labour Court (BGA), a crowdworker can have employee status be if, taking into account the overall circumstances, the work carried is carried out according to instructions determined by others. In addition, employee status requires a certain degree of personal dependence. The wording in the contract is irrelevant for determining the status of the employee.
(see the Federal Labour Court press release in German).
The fact that the defendant controlled the provision of services in relation to place, time and content of performance, meaning the crowdworker was integrated into an organisational structure which was subject to instructions and determined by third parties spoke in favour of employee status in this case. The Federal Labour Court considered the fact that the plaintiff was not obliged to accept orders to be irrelevant. Rather, the obligation to provide personal services and the incentive system of experience points were decisive in this case. According to the court, this meant that the plaintiff felt obliged to accept further orders continuously.
Despite the assumption of employee status, the Federal Labour Court rejected most parts of the appeal. According to the Court, the plaintiff could not simply demand payments in accordance with his fees previously received as a supposedly freelance employee. If an allegedly freelance employment relationship turns out to be an employment relationship in retrospect, it would not normally be appropriate to assume that the amount of remuneration agreed for freelancers was also agreed for employees. Rather, the usual remuneration would be owed.
Outlook and assessment
The hoped-for landmark decision by the BAG did not materialise. In the future too, disputes about employee status will continue to be assessed on the basis of a wide range of criteria in individual cases. The conditions under which crowdworkers work are as diverse as the tasks they perform. A reliable prognosis on the likely employment status of crowdworkers can only be made in advance by the employer in rather obvious cases.
To avoid unpleasant surprises, where there are doubts, employers should resort to the German Pension Insurance status determination procedure. After all, it is better to be cautious than lenient: employee status brings with it a large number of additional rights and obligations as well as costs. If this is not the desired outcome, the contract must be designed and implemented with foresight from the outset.
What are the practical consequences of this decision for restructuring?
Although this is an individual decision regarding the employee status of crowdworkers, it can be assumed that the discussion about the employee status of these and other solo self-employed workers will restart.
The classification of crowdworkers as employees has many consequences. The classification as employees leads in particular to the application of regulations on working hours, vacation claims and employee protection, such as protection against discrimination for employees in atypical employment relationships and especially collective protection rights in the event of restructuring.
In many cases, during restructuring, crowdworkers are used to perform and execute certain tasks. The previously existing danger that they could be classified as employees and this could lead to a long-term employment relationship is aggravated by the decision made by the Federal Labour Court discussed above. If crowdworkers are classified as employees, collective protection rights will apply. This includes rights in the event of transfer of a business (s613a of the German Civil Code), mass dismissals or employer’s insolvency and could make restructuring more difficult and in particular increase costs.
(Federal Labour Court, judgement of 1 December 2020, ref. 9 AZR 102/20; lower instance: Regional Labour Court Munich, judgement of 4 December 2019, ref. 8 Sa 146/19)