On March 27, 2013, the plaintiff, a rural district and operator of two independent clinics, entered into a contract with the individual joining the proceedings, a female anesthesiologist, on the provision of her specialist medical services at the clinics operated by the plaintiff. The contract expressly stipulated that the service was to be provided “independently and personally” and that the person joining the case was “neither in an employment relationship nor in an employee-like relationship” to the hospital. In performing her duties, she would have to comply with the organizational rules applicable in the hospital and follow the chief physicians’ instructions. It was also agreed that the contractual relationship would be entered into for an indefinite period and that the work would be covered by the hospital’s liability insurance. On October 31, 2013, both the person joining the case and the plaintiff filed an application under Section 7a Social Code IV with the defendant – Deutsche Rentenversicherung [German Statutory Pension Insurance Scheme] – with the objective of establishing that the work of the person joining the case did not constitute an employment relationship within the meaning of Section 7 Social Code IV. Following a hearing, the defendant established with orders (for the respective work in both of the plaintiff’s hospitals) dated February 28, 2014 that the person joining the case was working in the clinics within the scope of a dependent employment relationship. There would be a duty to provide the service in person. In addition, the work would be carried out in a work organization under the direction of others. Furthermore, the patients would be assigned to the plaintiff. The person joining the case was also subject to the instructions of the chief physicians. The objection raised only by the plaintiff initially succeeded before the Social Court. The plaintiff essentially argued in the proceedings that various laws, in particular the Hospital Remuneration Act, recognize the existence of fee-based physicians. Were integration into the organization of the hospital alone sufficient to presume dependent employment, the legally provided possibility of fee-based medical work would be impossible in practice. Reference was also made to the fact that labor courts regularly recognized fee-based physicians as self-employed. The defendant’s appeal, on the other hand, led to the annulment of the first instance judgement. The subsequent appeal on grounds of legal error lodged by the plaintiff remained unsuccessful.
In its decision, the Federal Social Court was strictly guided by Section 7 Social Code IV and made clear that the healthcare sector could not be subject to different provisions than other lines of occupation. Here, too, the fact that fee-based physicians are subject to instructions is the governing factor. An argument to the effect that the particular quality of medical professions as services of a higher kind justified an exception did not apply. In addition to being bound by instructions, there is also close integration into the company’s work organization. Anesthesiologists, for example, such as the person joining the case, are usually part of a team that has to work together within a concept of division of labor under the direction of a person in charge. In addition, fee-based physicians are predominantly making use of the hospital’s staffing and material resources for their work. Thus, the physician in the case at issue was fully integrated into the operational process just like physicians employed at the hospital. There is usually no scope for entrepreneurial decision-making when working as an fee-based physician at a hospital. The amount of the fee was only one of many indications to be considered in the overall assessment and was not key in the case. In addition, the argument – also put forward in the proceedings – that there was a shortage of specialists in the healthcare sector in particular, so that the use of fee-based physicians was therefore essential to maintain care, is irrelevant. Statutory provisions on compulsory insurance and contributions under social law could not be repealed to increase the attractiveness of the profession by “relieving” the burden of social security contributions and therefore enabling higher remuneration.
Although not in the manner as hoped, the decision will provide legal clarity to hospitals in particular relating to the use of fee-based physicians. It is certain that the widespread use of such fee-based physicians is set to decline considerably, since a dependent employment relationship entails appropriate additional costs due to the social security obligation. The effects will likely not only be felt in the healthcare sector, however, but also in several other sectors in which fee-based staff are employed.
So as not to be exposed to potential high additional payment demands at a later time, employers must always ask themselves, when employing such individuals, whether the actually exercised work of the relevant individuals does not “virtually” meet the facts of Section 7(1) Social Code IV and thus a dependent employment relationship is to be affirmed. This is always determined by the specific individual case. Essentially, an employment relationship (work relationship) is dependent where the respective work (i) is performed in accordance with the employer’s instructions and (ii) integration into the company’s work organization is given. This does not mean that the work must be carried out within the company. Work at home may also be considered as integrated into the company where technical facilities are available that establish a link with the company, thus also characterizing the work by the operational organizational process. Finally, (iii) additional criteria developed in particular by case law may be used for assessment. Key indicators to affirm a dependent employment relationship include work equipment that is provided by the instructing party, the lack of entrepreneurial risk of the individual performing the work, external appearance in business on behalf of the company, the lack of possibilities to dispose of one’s own labor, no actually freely manageable working hours or the (obligation to) perform the respective work personally.
On the other hand, circumstances such as the use of one’s own capital or labor with the risk of loss, liability in the event of poor performance, the existence of a permanent establishment of one’s own, purely performance-related remuneration (no work = no money) or the lack of commitment as to the “how” (only the result counts, which applies both to the working time and to the type of exercising the work) speak in favor of a genuinely self-employed activity.
Overall, the issue is governed by the specific exercising of the work. The contractual provisions are not the relevant factor, but may at best serve as initial indicators, as illustrated by the case discussed above.