Pseudo-self-employment on German construction sites

Construction workers who are employed on construction sites to perform simple tasks, receive an hourly wage, and do not appear to be entrepreneurs on the market are generally classified as dependent employees. This was decided by the Hesse Regional Social Court (LSG).

Facts of the case

In its ruling of February 20, 2025 (L 8 BA 4/22), the Regional Social Court of Hesse ruled on the social security classification of the work performed by a Polish construction worker for a German construction company. The worker was employed by the plaintiff as a construction and demolition assistant from 2008 to 2011 and also earned additional income as a sole trader. The specific activity was largely determined by the plaintiff's specifications and controls. There were no written contracts; payment was made on an hourly basis according to timesheets provided and checked by the plaintiff. The work equipment was provided, but the work clothes had to be procured by the worker himself. Following an accident at work that was not recognized as an accident at work, the intervener applied for a determination of his social security status in 2014. The plaintiff, on the other hand, claimed that the worker was self-employed with his own office, his own employees, and other clients.

In the administrative proceedings, the defendant (German Pension Insurance) determined that an employment relationship existed and that the worker was therefore subject to compulsory health, nursing care, and pension insurance as well as employment promotion law. The plaintiff objected to this, arguing, among other things, that the intervener had worked independently and had been flexible in terms of working hours. The court of first instance found that the worker was regularly bound by instructions and integrated into the plaintiff's business; his activities, appearance, and actual work processes exhibited typical characteristics of dependent employment. The obligation to pay insurance contributions was not called into question by the business registration or additional income.

Reasons for the decision

The plaintiff's appeal was also unsuccessful. The LSG Hessen confirmed the opinion of the lower court and classified the activity as dependent employment.

The overall picture of the work performed is decisive for distinguishing between employment and self-employment (Section 7 (1) of the German Social Security Code (SGB) IV)). The actual circumstances are decisive, not the intentions of the parties or formal individual characteristics such as the possession of a trade license or activities for other clients. In this case, the key criteria for classification are personal dependence, integration into the plaintiff's business operations, and the fact that working hours, place of work, and activities were largely determined by the plaintiff. Due to working hand in hand with the plaintiff, the worker appeared to the outside world as a link in the plaintiff's work chain and merely performed preparatory work which, taken on its own, could not be assessed as independently definable commercial services.

There were no entrepreneurial characteristics, such as independent market presence, the possibility of increasing profits through his own organization and working methods, his own entrepreneurial risk, or significant infrastructure of his own, such as a PC or car. The construction worker was mainly engaged in simple auxiliary activities and did not appear to the outside world as an independent entrepreneur. The mere possession of a trade license and individual additional clients were not sufficient to establish self-employment.

Practical advice

The ruling once again highlights the problem of supposed self-employment. The overall picture of the activity must always be analyzed critically. The mere intention of the parties is only an indication and not a decisive argument. Similarly, the contractual documents concluded are not relevant if, according to the LSG, they are merely “false labeling,” which, as a sham transaction, can result in the agreements being null and void.

Even a commercial appearance, the issuing of invoices, and occasional work for other clients are not sufficient on their own to rule out social security obligations. If the employee is integrated into the organizational structure like a regular employee, subject to the instructions of the client, and controlled by others in terms of working hours, place of work, and work results, the existence of dependent employment is virtually inevitable.

Due to the increasingly restrictive approach of the German pension insurance system and social court rulings, only a status determination procedure can provide legal certainty in borderline cases in order to avoid the payment of back contributions and the associated considerable financial risks.