Risk of false self-employment – not just for supposed clients

The distinction between self-employment and dependent employment as well as the keyword “false self-employment” has been a long-running issue since the Federal Social Court’s rulings on the social insurance obligation of fee-based doctors in hospitals on June 4, 2019 (e.g. Ref. B 12 R 11/18 R).
If it is determined retroactively that the supposed self-employment is dependent employment, this can be done in from a social security perspective become expensive for the supposed client. This person is usually confronted with claims from social security providers.
This is followed by a question for the supposed client from a labor law perspective the question of reversing the supposedly freelance employment relationship, after all, the fee paid to the “freelancer” was often significantly higher than the salary that he or she would have received in the context of an employment relationship.
The Federal Labor Court (BAG) dealt with the requirements for reversing a supposedly freelance employee legal relationship in its decision of June 26, 2019, 5 AZR 178/18.
facts
An employer sued a former employee for back wages after he provided IT services for the employer between 2001 and 2009, supposedly as a freelancer but actually as an employee. The employer took legal action to demand that the employee reimburse part of the remuneration paid, amounting to over €110,000.00, because the employee was entitled to significantly less wages as an employee than in the context of freelance work.
The decision of the BAG
The BAG decided in favor of the plaintiff employer that an employer could, in accordance with the provisions of unjust enrichment (Section 812 Paragraph 1 Sentence 1 Alt. 1 BGB), demand the repayment of overpaid fees if the employee status of a supposedly freelance employee - in terms of labor law - be determined retroactively. With this finding it is also clear that the supposedly freelance employee should be paid as an employee and that there is no legal basis for the fee payments. As a rule, the remuneration owed in the employment relationship is lower than the fee payments already made as part of the freelance employment relationship.
Since the BAG has now decided - contrary to its previous case law (see e.g. judgment of May 29, 2002 - 5 AZR 680/00) - that a claim for repayment does not necessarily require that the employer has different remuneration regulations for freelancers and for employees The Erfurt judges now have lower requirements for the repayment claim.
Rather, the BAG decided that if there were no such different remuneration regulations, a remuneration agreement expressly made for freelance employees could not easily be viewed as relevant in the employment relationship. If the employer does not have any special remuneration regulations for freelancers and employees, Section 612 Paragraph 2 of the German Civil Code (BGB) applies. This provision applies to cases in which no remuneration has been agreed and stipulates that “the usual remuneration” is to be regarded as agreed.
However, a reversal is only possible if the employer has no knowledge of the employee's actual employee status (see Section 814 BGB), whereby high demands must be placed on the employer's knowledge. According to the BAG's decision, mere doubts regarding the classification of the legal relationship as a freelance employment relationship do not exclude the right to repayment.
The BAG's decision is also interesting with regard to the statute of limitations on the employer's claims for repayment:
The BAG initially assumes that claims from Section 812 Paragraph 1 Sentence 1 Alt. 1 BGB are subject to the regular limitation period of three years in accordance with Section 195 BGB. According to Section 199 Paragraph 1 No. 2 of the German Civil Code (BGB), it is fundamentally important for the start of the regular limitation period to be that the creditor becomes aware of the circumstances giving rise to the claim and the person of the debtor or should have become aware of them without gross negligence. However, something different applies if and as long as it was unreasonable for the creditor to bring an action that would suspend the statute of limitations (Section 204 Paragraph 1 No. 1 BGB). According to the BAG, in cases where there is a dispute about the repayment of overpaid fees, the employer can usually only recognize the overpayment at the time of the legally binding judicial determination or out-of-court clarification of the employee's status. Only from this point on can he be expected to assert his claims for overpayment. It would be unreasonable to claim the employee earlier because the employer would be required to behave in a contradictory manner.

Consequences for labor law practice
The present judgment shows that the subsequent treatment of the supposedly “freelance employee legal relationship” as an employment relationship can have significant financial consequences not only for supposed clients, who, among other things, have to expect additional payment of social security contributions, but also for employees. Therefore, in order to at least keep its economic damage as low as possible, an employer should - if an employment relationship is subsequently established - check whether he has a claim for repayment in the amount of the difference between the employee's gross salary plus the employer's share of the total insurance contribution and the fee paid against the employee is entitled.