"Crowdworkers" shall not be deemed Employees

In its judgement of December 4, 2019 (file no. 8 Sa 146/19), the Munich Labor Court of Appeal decided that an agreement between a so-called "crowdworker" and the operator of an internet platform does not establish an employment relationship in terms of German labor law if the agreement does not contain an obligation to take on assignments.

Facts

The defendant is a crowdsourcing company which, among other things, carries out checks on the presentation of goods in retail outlets or petrol stations for brand manufacturers. In order to perform these tasks, the defendant uses an app with which it offers assignments for completion to contractors, the crowdworkers.

The conclusion of a basic agreement entitles the contractors to take over orders in a self-chosen radius of up to 50 kilometers via the app. If an order is taken over, it has to be processed regularly within two hours according to existing guidelines. There is no obligation on the part of the contractor to accept an order, nor is there an obligation on the part of the company to offer orders. If the contractor accepts an order and carries it out correctly, the contractor receives the agreed remuneration.

The plaintiff registered with the defendant as a contractor in 2016 and agreed to the basic agreement. Subsequently, he primarily performed so-called "tool checks" for the defendant at service stations, which are characterized by comparatively high remuneration. In April 2018, the managing director of the defendant informed the plaintiff that he would not be awarded any further contracts and that his costumer account would be deactivated after the credit balance was paid out. The plaintiff thereupon filed a declaratory action regarding the existence of a labor contract and a claim for continued employment payment of lost remuneration.

In its judgement of February 20, 2019 (file no. 19 Ca 6915/18), the Regional Labor Court of Munich dismissed the action, whereupon the plaintiff filed an appeal. The Labor Court of Appeal dismissed the plaintiff's appeal.

Reasons for the decision

The Labor Court of Appeals justified its decision by stating that an employment relationship within the meaning of German labor law had not existed in the present case. According to the statutory definition, a labor contract only existed if the contract provided for the obligation to perform externally determined work in personal dependence and bound by instructions. This is generally expressed in the fact that the employee must observe work instructions regarding time, place and content of the service owed and is integrated into the employer's work organization. The actual implementation of the contract is decisive.

The basic agreement did not meet the requirements, if only because it did not contain any obligation to provide services. The fact that the plaintiff had actually earned a considerable part of his livelihood from the contracts and had seen himself under pressure for various reasons to continue to accept orders in the future did not lead to the plaintiff being able to claim employee protection under German labor law. The termination of the basic agreement as a mere framework agreement was therefore also effective by e-mail and did not – as is the case with the termination of an employment relationship under German labor law – require the written form to be effective.

The Labor Court of Appeals expressly did not decide whether the assumption of an individual assignment in each case establishes a fixed-term employment relationship. This was not relevant for the decision because the invalidity of a fixed-term employment relationship can only be asserted by taking legal action within a period of three weeks, which was not the case here.

Due to the fundamental importance of the matter, the appeal to the Federal Labor Court was permitted.

Practical Advice

Due to the many new forms of employment in the digital world of work, German labor law practice is confronted with ever new problems. In this context, the decision of the Munich Labor Court of Appeals deserves approval. Crowdworkers regularly work free of instructions and decide on a case-by-case basis whether or not to accept an assignment. Their work, in the context of which they usually owe a concrete success in performance, should be legally qualified as a contract for work and labor.

However, the variety of forms of crowdworking prohibits a blanket classification of the activity. Employers should therefore take care in their framework agreements to avoid, as far as possible, an obligation to accept orders as well as non-mandatory provisions on the time, place and content of the activity.

Subject to an amending decision by the Federal Labor Court, the growing crowdsourcing industry in Germany, which according to studies already employs more than one million people, can thus initially breathe a sigh of relief. The qualification of crowdworkers as employees would not least be accompanied by the obligation to pay a regular wage. The business model, which is based on the flexible deployment of labor, would be difficult to continue under these conditions. Meanwhile, it is to be expected that politicians will increasingly ask themselves how effective employee protection can continue to be guaranteed in view of the new forms of employment.