BSG continues its social security-friendly case lawService contracts between one-man companies and a client do not exclude the shareholder-manager being subject to social insurance contributions.

What has already been indicated in the case law of the courts in recent years has now been confirmed by the Federal Social Court (“BSG”) in three parallel appeal proceedings on 20 July 2023. The 12th Senate of the BSG ruled that the commissioning of an entrepreneurial company (“UG haftungsbeschränkt”) or a GmbH, whose sole shareholder and managing director is the only active person in the company, does not preclude the assessment of the activity of the managing director for a single client as being subject to social security contributions. In this context, it was less a matter of the form of the contract than of the actual implementation of the contract. The BSG thus clarified that the arrangement of providing freelance work through a legal entity, which has been recommended in most cases to avoid social security liability, is not a legally secure variant to avoid this consequence, which was not desired by the parties.

In three appeal proceedings (B 12 BA 1/23 R; B 12 R 15/21 R; B 12 BA 4/22 R), the BSG had to decide the question of whether the fact that a contractual relationship for services for a client was established solely with a legal entity (UG or GmbH) precludes the assumption of social insurance liability for the sole shareholder-manager who performs the contractually agreed activity for the client without employing further staff.

The case B 12 BA 1/23 R concerned a trained nurse who is the sole shareholder and managing director of an entrepreneurial company (“UG haftungsbeschränkt”). With this UG he concluded a contract for nursing services in the outpatient and inpatient sector with a hospital. According to the managing director’s employment contract, his work as managing director was remunerated with a monthly gross salary of € 500 and a bonus of 15% of the annual profit. For specific periods of deployment, the UG concluded service contracts with the hospital for the independent planning, implementation, documentation, and review of nursing and geriatric care services. For this purpose, an hourly fee of € 36 was provided for the deployment of qualified personnel as well as freedom from instructions in the performance of the assigned activities. During the contractually agreed deployment times, the managing director was the only trained specialist of the UG and worked for the hospital on its wards. It is not clear from the BSG’s report whether there were other clients for the UG; however, this was presumably not the case.

The lower courts disagreed on the question of whether this form of service provision entailed a social insurance obligation for the managing director of the UG. The Regional Social Court (Landessozialgericht) was of the same opinion and found that he was obliged to be insured in all branches of social insurance. On appeal by the managing director of the UG, the BSG overturned this decision and referred the case back to the Regional Social Court for a new decision. However, this was more a technical question. Nevertheless, the BSG took a clear position on the merits. It ruled that there was an obligation to insure under the pension insurance scheme and under the law on unemployment insurance. The BSG assumed that the employee was working under instructions solely in the interest of the hospital and was integrated into its organization. The UG did not have the entrepreneurial leeway in decision-making required for an independent work or service. In such a constellation, the express contractual agreements between the shareholder-manager of a UG carrying out the activity himself and the other company were irrelevant. Comparable to the case of a legal ineffective supply of temporary workers, the legal assessment as employment was rather determined based on the agreements between the UG and the other company and, above all, the practical implementation of this contract. Since in the case at hand – probably also due to the nature of the matter – an actual integration into an external work organization took place, this was sufficient for the assumption of a social security obligation according to the theory of integration prevailing in social security law.

The BSG thus clarified that, as in other status proceedings, it is always the concrete actual circumstances of the provision of services that matter and that the fact that the service contract was concluded between a corporation and the client does not change this. It will be interesting from a legal point of view to see how the BSG justifies its decision in detail; at present, only the report of the hearing is available. With this decision, the question of social security liability is not assessed in the relationship between the corporation and its shareholder-director, but in the triangular relationship between the UG, its sole shareholder and the client. For practice, however, it is decisive that it is no longer a legally secure way out to hire one-man companies instead of freelancers. There is no way around the timely clarification of status with the pension insurance.

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