Crowdworkers can be employees

On 1 December 2020, the Federal Labor Court (Bundesarbeitsgericht, BAG, docket number 9 AZR 102/20) ruled for the first time on the status of crowdworkers and held that crowdworkers can also be employees. The court thus ruled differently from the lower court (Regional Labour Court of Munich on 4 December 2019, docket number: 8 Sa 146/19). The ruling is in line with the previous decisions of the highest courts which tend to rule in favour of the employee’s status (Federal Social Court on 4 June 2019, docket number B 12 R 11/18 R9). According to German law, an employee is someone who is obliged to provide services on the basis of a contract under private law and in doing so works on a dependent basis in a personal capacity. This means that the status of an employee depends on the fact that the employee performs work that is bound by instructions and determined by others in personal dependence. The distinction from a self-employed person does not depend on the wording in the contract, but on the actual implementation of the contractual relationship.

What are Crowdworkers?

Crowdworking is a digital form of outsourcing. Companies advertise individual projects or small work tasks via web-based platforms. Registered users have the opportunity to offer their labour and skills worldwide. Companies can absorb personnel bottlenecks in their own ranks, react flexibly to order peaks and benefit from the “intelligence of the crowd”. Crowdworking is a modern form of third-party personnel deployment that makes use of modern means of communication. The registered users are called crowdworkers. The operator of the platform is also known as crowdsourcer.

The case:

In the case under review, the plaintiff had concluded a framework agreement and general terms and conditions with the defendant, a crowdsourcer who carried out checks on the presentation of goods in retail stores and at gas stations, for the performance of corresponding checking activities. Using an order platform, the plaintiff could accept the orders offered there by clicking on them via the app installed on his cell phone. An accepted order was generally to be completed within two hours according to more closely defined specifications. There was no obligation to accept orders or to process a certain quantity of them. For completed orders, the plaintiff received experience points credited to his user account, which enabled access to a higher level and thus to more orders.

The judgement:

In the opinion of the Federal Labour Court, the fact that the crowdsourcer controlled the cooperation via the order platform in such a way that the employee was not free to organize his or her activity in terms of place, time and content, spoke in favour of an employment relationship. This applied even though the person concerned was not contractually obligated to accept offers from the defendant. According to the court, the incentive system used by the platform was also decisive for the affirmation of employee status. However, the crowdworker whose status as an employee has been established by court cannot easily demand the same remuneration that he received as a supposed freelancer. Rather, the usual remuneration is owed, which the lower court must now determine.

Legal relevance of the ruling:

Beyond the individual case decided, the ruling of the Federal Labour Court means for all platform operators that great attention must be paid to the contract design as well as the actual contractual practice. As an employer, you should always bear in mind that the actual performance of the contract is decisive for the question of employee status and not the designation in the contract. It must be ensured – contractually as well as in practice – that crowdworkers are free to organize their activities in terms of place, time and content. Incentive systems used by platform operators must not lead to organizational and operational integration of the crowdworker. The consequences of non-compliance are considerable: Not only are crowdworkers to be classified as employees in this case. Above all, the platform operator – as employer – must pay the social security contributions for the employed crowdworkers from the beginning of the assignment. Platform operators are therefore advised to put their business model to the test in order to avoid possible (social security and criminal) risks.