Crowdworking is a form of activity which has been gaining more and more importance in the last few years according to the available statistical information, in particular since the beginning of the corona pandemic, which is marked by short-term work and working from home. The principle is simple: Companies offer “jobs” via internet platforms. Interested persons may then apply for these services via the platform. The range of activities is highly diversified, from the writing of texts, through the testing of software, to controlling activities or quality management. In the agreements between the companies and the crowdworkers, the self-employment of the crowdworkers is regularly emphasized and an employment relationship is excluded.
Collecting bottles on the internet: This is how one crowdworker describes his activity, as reported in an interview on ZEIT-ONLINE with Christine Gerber of the Wissenschaftszentrum Berlin (Social Science Research Center Berlin). On the Deutschlandfunk website, Benjamin Dierks writes about the “digital day laborers” and considers: “What is ideal for employers, provides for precarious working conditions.”
An employment relationship? – No, says the Munich Regional Labor Court…
A crowdworker, who stopped receiving job offers from the company following disagreements and whose account had been deleted, applied for a declaration that an employment for an indefinite period came into existence and in addition insists on compensation and leave. He amended his action to include an action against unfair dismissal, after a notice of dismissal had been given by the defendant company as a precaution in case an employment relationship existed. The Munich Regional Labor Court (LAG) dismissed the action, as the Munich Labor Court had also done prior to this, on the basis of the argument that no employment relationship existed.
Christiane Benner, second chair of IG Metall, who supported the proceedings to be discussed here on the side of the plaintiff, stated in a press release by IG Metall on 4 December 2019, that the judgment of the Munich LAG did not meet the expectations of the trade union. Criteria such as personal and economic dependence or being bound by instructions were decisive and there were clear indications for the existence of these criteria in the present case.
In legal literature, however, the judgment has found approval. Lipinski, Fuhlrott and also Fischer, who otherwise can be found on employees’ side, as well as other authors have welcomed the judgment due to its reasoning and findings. Fischer had even made predictions on the appeal and had stated that any decision other than the decision of the Munich LAG would be a “surprise”. This surprise now occurred.
…Yes, says the Federal Labor Court
The Federal Labour Court (BAG) largely annulled the decision of the Munich LAG and referred it back to the LAG in part, in its judgment of 1 December 2020, after a comprehensive hearing and consultation, as process participants report. The centerpiece of the decision and the statement in the press release – the full text of the decision has not yet been published so far – is the assertion that crowdworkers can indeed be employees.
The formulation of the BAG implies that an employment relationship may well exist – or not -depending on the agreement, and therefore a case-by-case consideration is required. A different finding would have been an even greater surprise since – as in similar cases of disguised self-employment – a consideration is always necessary based on the criteria that are developed by the case law and are codified in Sec. 611a German Civil Code (Bürgerliches Gesetzbuch, BGB) in the meantime.
For this reason, an analysis of the facts of the case and of the facts of the judgment established by the LAG Munich seems reasonable.
The merchandising of branded goods in retail trade or in petrol stations was the subject of the contract that gave rise to the legal dispute. The “crowdworker” bringing action was tasked with merchandising goods of specified markets and forwarding the results to the contracting company via a website established by the principal using a combined app, according to the facts of the judgment of the LAG Munich. The entire contractual relationship was processed via the app, from the job description up to the job acceptance. The remuneration was paid via PayPal. The activity was based on a so-called “basis agreement” that can be read in extracts in the facts of the judgment of the LAG and essentially implies that the contractor can, but is under no obligation to, accept available jobs, no requirements are made concerning the place of work or the working hours, and the contractor is authorized to deploy his own employees or to conclude subcontracts.
This basic agreement is supplemented by “General Terms and Conditions of Business and Use” (GTC), which contain a regulation on bonus payments, which realizes a higher “user status” through so-called experience points, which enables access to a larger number of jobs and higher-rated jobs and thus effects a better remuneration. It is explicitly stated in the GTC that there is no need to follow instructions and no employment relationship will be established.
Actually, the contract is agreed in such a way that, upon conclusion of the agreement, the company grants the contractor the opportunity to accept orders on the company’s website and via the app via his own smartphone. The app includes a GPS system which can access the current location of the user, and which serves on the one hand to limit the geographical area of the orders and on the other hand ensures that the contractor visits the right targets. In short, it was also used for monitoring.
LAG Munich and other Regional Labor Courts: The present legal dispute
In the present legal dispute, the plaintiff processed about 3,000 orders in the period from February 2017 to April 2018, so that an average weekly volume of work of 15 to 20 hours was calculated. In April 2018, the defendant company informed the plaintiff that it would not offer him any further orders and it would delete the account.
After that, the plaintiff filed an action to determine an unlimited employment relationship, combined with a request for continued employment and payment of lost remuneration as well as protection against dismissal after notice of dismissal had been given in the proceedings.
Thus the core of the legal dispute is described and its relevance for labor law and policy: Are crowdworkers employees within the meaning of Sec. 611a BGB?
The LAG Munich heard the case in great detail according to the available information. The minutes of the court hearing comprise twelve pages – uncommon for a standard appeal hearing; this underlines the relevance of the “crowdworking” phenomenon. Apart from a decision of the Hessian LAG, which had to deal with completely different case facts, this was the first decision by a higher court on the issue of “crowdworking”. The Hessian LAG had to assess the status of a bus driver during an online application for an individual bus trip and therefore a non-comparable life situation. However, the Hessian LAG made some fundamental considerations concerning the situation of crowdworkers, reflections which cannot be found in the judgment of the Munich LAG.
The Munich LAG, however, deals with the criteria specified in Sec. 611a BGB without social policy considerations and examines the employee status on the basis of the need to follow instructions, personal and economic dependence as well as in the following a repetitive fixed-term employment relationship.
As a result, the Munich LAG rejects the employee status: Above all, it assesses the fact that the plaintiff was not forced to accept orders, but he was free with regard to which orders he accepted, and when. According to the LAG, this does explicitly not take into account the fact that, when inactive, the plaintiff was in danger of being excluded from further orders, or that his account could be deleted.
The Munich LAG does also not consider the large number of processed orders – almost 3,000 – as an indication for the employee status. Instead, it points out that this large number within one year indicates an economic dependence, but not a personal dependence, which is why a quasi-employee status comes into question, but not an employee status.
The Baden-Wuerttemberg LAG had expressed similar views and had negated the employee status in the case of an orchestra musician who had been working for an orchestra as a freelance employee for many years, even though the LAG considered the economic consequences to be difficult, but it gave the legislator the responsibility for the regulation of crowdworking or solo self-employment.
Finally, the Munich LAG considers in its decision whether the respective order acceptance initiated a fixed-term employment relationship and this then changed to an employment relationship for an indefinite period through owing to repetition (Sec. 14 (4), Sec. 16 sentence 1 German Act on Part-Time Work and Fixed-Term Employment Contracts, TzBfG), but objected to this, since the plaintiff did not file an action against fixed-term employment contracts pursuant to Sec. 17 TzBfG.
As a result, the Munich LAG rejects the employee status meaning that the other requests such as continued employment and remuneration and leave were also dismissed.
Position of the Federal Labor Court
The BAG has assessed the facts of the case differently. According to the press release, the BAG has primarily pointed out that the principal designed the platform operated by him in such a way that the plaintiff did not have complete freedom to organize his activity with respect to place, time and content, rather the plaintiff was, as a result, required to follow instructions through the bundling of orders, the specified timeframe and the specification of the retailers and petrol stations to be merchandised. Also, the incentive system created personal and economic dependence, since he was forced to accept a large number of orders in order to be able to coordinate them and thus to obtain a higher hourly wage.
Interestingly, the BAG assesses the drafting of the agreement in the sense of a personal obligation of the plaintiff, whereas the basic agreement in § 5 gives the contractor the opportunity to deploy his own employees to carry out the job or to allocate subcontracts. However, it becomes apparent in the facts at hand that the plaintiff actually executed all orders personally. This question may possibly be interpreted in greater detail when the full reasons for the decision are available. The plaintiff’s submission gives reason to believe that the BAG resolved this issue on the facts, because the submission stated that the service was to be provided on a highly personal basis and that the deviating regulation in the basic agreement could not be implemented and was therefore not experienced in reality.
In this respect, the BAG quite rightly points out that the formulation of the contract as a framework agreement or basic agreement is only a designation, and what matters is the actual implementation of the contractual relationship.
It can thus be concluded that declaratory regulations as in the present case, which contain formulations that exclude an employment relationship and stipulate that the contractor may work without instructions, are of little help for the drafting of the agreement. In practice, in order to achieve mutual legal certainty about the status, it should be essential that the contract and its practical implementation contain as few or as broad specifications as possible about the time and place as well as the personal execution of the activity. It might also be decisive when contrasting the decisions of the Munich LAG and the Hessian LAG with the statements of the BAG that a high number of contract awards to a crowdworker consolidates their personal and economic dependence as a criterion for the employee status. In this respect, employers or platform companies are recommended to implement maximum limits for the awarding of contracts. Finally, it is recommended to have clauses that have at least an indicative value in the case of solo self-employment, in which the contractor assures that he is not economically dependent on the (repeated) awarding of contracts, but only engages in crowdworking as a “sideline” and/or is active on several platforms, so that the singular reference to one platform is eliminated.
Further considerations will only be possible after the full judgment has been made available.