When do crowdworkers become employees? Incentive systems as a means of heteronomy

Update from the Practice Group HR Compliance and occupational health & safety

The platform economy is a symbol of the digital transformation of our society and is growing rapidly. According to estimates by the EU Commission, more than 24 million people in Europe have offered their labour via platforms so far, and for about 3 million the gig economy is even their main source of income. The trend is also increasing due to job losses during the pandemic. At the same time, platform work is difficult to categorise and classify in established patterns of assessment under labour and social law. People speak about crowd-, click-, cloud- or gig workers without the terms being conclusively defined. The transitions are fluid, in particular when it comes to classifying the commissioning of “workers” as an employment or self-employment.

In its ruling dated 1 December 2020 (9 AZR 102/20), the Federal Labour Court (BAG) had to decide for the first time on the question of whether the work of a “crowdworker” can be considered an employment relationship. The BAG answered the question in the affirmative for the specific case, as could already be seen in the press release dated 2 December 2020 on which Thomas Wahlig has already reported on our blog (https://pwwl.de/sind-crowdworker-arbeitnehmer-bag-vom-01-12-2020-9-azr-102-20/).

Now, the reasons given by the court have been published (cited here acc. to BeckRS 2020, 41799). The BAG justified the determination of an employment relationship for the specific case by stating that 

• the suing crowdworker was obliged to provide the services in person,
• the activity owed was of a simple nature and its execution was predetermined in terms of content and 
• the procurement and the concrete use of the online platform were managed by the crowdsourcer in the sense of external control. 

Facts 

The defendant is a so called „crowdsourcing company”. It offers its customer, among other things, the control of the presentation of branded products in retail and at service stations. It splits its customers’ assignments into a large number of individual smaller assignments (“microjobs”) which it then advertises on its online platform for the platform users (“crowdworkers”). The platform users can display all assignments available near them via an app and accept them if they want to. For each successfully completed microjob, they receive remuneration and experience points. Through the latter, users can advance in “level”; depending on the level reached, they can accept more assignments at the same time and thus earn more money.

From February 2017 until April 2018, the plaintiff had carried out altogether 2,978 of these “microjobs” of the defendant. On average, he spent approximately 20 hours per week on these jobs. In this way, he generated a revenue amounting to an average of EUR 1,749.34 per month. It is to be expected that the plaintiff thus generated far more revenue than the majority of the other crowdworkers working at the crowdsourcer.

In April 2018, the crowdsourcing company informed the plaintiff that it would no longer commission him and would deactivate his account. He then brought an action seeking a declaration that an employment relationship existed between him and the company, that he had to be redeployed and he was consequently also entitled to leave and continued remuneration.

How did the previous instance decide?

Labour Court and Higher Labour Court (LAG) dismissed the action as unfounded. They stated that the plaintiff was not in an employment relationship with the defendant. Being a crowdworker, the plaintiff was not subject to any time, content or activity-related instructions. Moreover, he had not assumed any contractual obligation to work for the crowdsourcer, but he was always free to decide whether and to what extent he would accept the assignments advertised on the platform. However, the LAG left open the question of whether the acceptance of each individual microjob could have individually constituted an employment relationship limited to a few hours.

What did the BAG decide?

Contrary to the previous instances, the BAG determined that an employment relationship between the parties existed. Indeed, the explicit agreements between the parties did not meet the requirements of an employment contract. However, an employment relationship resulted from the actual performance of the assignments in their entirety. The overall view of all circumstances of the individual case required under § 611 a BGB (German Civil Code) showed that the crowdworker performed work subject to instructions and external control in a manner typical of an employee in the context of the actual performance of the contract. The ongoing and continuous commissioning of the crowdworker lead to an “interlocking” of the individual assignments into one unified (fixed-term) employment relationship.

The BAG essentially based this result of the overall view on the three aspects already mentioned in the beginning:

1.    Personal provision of service

In case law, the obligation of personal provision of service is a long-time recognized indication for the existence of an employment relationship. Whereas a freelancer/entrepreneur can regularly use his/her/its own employees and subcontractors to carry out the accepted assignments, the essence of the employment lies within the provision of one’s own labour.

In the present case, the core of the entrepreneurial freedom, namely the independent organisation of the execution of the assignment, was reduced to the crowdworker in terms of staff. Crowdworkers were not allowed to transfer or share the user account required for accessing the online platform. Sharing an account was even explicitly considered “abuse or fraud” and “violation of the Terms of Use” in the GTC.

2.   Simple, content-based activity

The existence or absence of the obligation to follow instructions is of major significance for the demarcation between employment and self-employed activity. § 611a p.3 BGB is a negative demarcation in this respect:

„Someone is bound by instructions when s/he is not free to organise his/her work and determine his/her working hours.“

Based on this, the BAG states that in the case of subordinate, simple work services, the performer has only limited creative possibilities from the beginning and therefore even a few organisational guidelines preclude an activity that is “essentially freely” organised. The microjobs carried out by the plaintiff as “crowdworker” were consistently simple monitoring tasks. In addition, each individual working step was specifically defined in the app respectively the online platform. Therefore, – according to the BAG – the plaintiff’s work was “bound by instructions” due to lack of his own creative possibilities to organise his work, although the defendant had not actually issued any concrete instructions.

3.    Functioning of the app: „gamification“ as a means of heteronomy

Whereas the first two criteria are not surprising in the result and generally reflect the BAG’s settled case law on these questions, the BAG’s opinion on the heteronomy of the assignment acceptance creates room for the assessment of crowdworking as an employment relationship:

The BAG assesses the concrete design of the crowdsourcer’s online platform and app, which the crowdworker have to use for the acceptance and performance of the assignments, as a “means of heteronomy” of the activity.

Thereby, the incentive element of the evaluation system (experience points and levels) plays a decisive role – the crowdsourcer calls this “gamification part”. By stimulating the platform users’ “gambling instinct”, the crowdsourcer aims to motivate them to regularly accept assignments. This is reinforced when the crowdsourcer splits its customers’ assignments into “microjobs”, which on their own are not of any significant economic importance. As a result, the individual crowdworker – if s/he wants to work in a profitable way – has to combine multiple assignments and compile a ”route” for the performance of multiple assignments. However, according to the structure of the app, this requires that s/he initially needs to reach a respective level. At the same time, the crowdsourcer limits the time window for executing the individual microjob to regularly only two hours after acceptance. Since the platform users undertake vis-à-vis the defendant in the App T&Cs and the basic agreement to execute assignments correctly and within the execution time after acceptance, they cannot “avoid” these time requirements by cancelling or letting them pass without committing a breach of duty.

Overall, this „organisation of platform work” determined by the defendant leads to a factual compulsion for the crowdworkers to constantly check the offer situation and to be ready for service at any time. Thus, the app’s function is not geared to the allocation of individual assignments by an independent user, but rather the crowdsourcer creates a factual planning certainty for itself as if it was using its own staff.

What are the consequences of the determination of an employment?

The decision already shows some immediate legal consequences of the determination of an employment relationship. Employees – contrary to freelancers, subcontractors or other self-employed persons – not only enjoy special protection against dismissal, but are also entitled to employment and paid leave. In case of non-employment, they can, if necessary, claim compensation for remuneration not paid and, in case of incapacity for work due to illness, they can claim statutory continued remuneration. 
The question of the social security obligation of crowdworkers as “dependent employees”- which is regularly financially more relevant for the employer – follows indirectly. Although, the Federal Social Court (BSG), which is in particular responsible for this question, repeatedly emphasises that it is not bound by the BAG classification under employment law, the relevant demarcation criteria are however essentially identical (cf. § 7 SGB IV (Social Security Code)). Accordingly, the social insurance agencies could take this ruling as a reason to audit crowdsourcing companies with greater attention. Employers are liable to the collecting agencies for social security contributions (employee and employer contributions) retrospectively for up to four years; in case of intent even up to thirty years (§ 25 SGB IV). Recently, Dr. Jochen Keilich and Leon Werlitz have already debated these and other risks and solutions regarding fictitious self-employment on our last blog (https://pwwl.de/risiken-und-loesungen-zum-thema-scheinselbstaendigkeit/).  

Conclusion: Are all crowdworkers now employees?

No. The BAG already emphasises in the official headnote of the decision that the continuous work of a crowdworker may lead to an employment relationship. The „personal dependency“ that is decisive pursuant to § 611a s. 1 BGB – the BAG also makes this clear – does not already result from a business concept which is set up to continuously rely on a fixed group of crowdworkers and to – factually – stabilise the cooperation with them.

The specific circumstances of the individual case are decisive and must be assessed in an overall consideration. This individual case decided by the BAG definitely has specific characteristics– especially with regard to the duration, scope and continuity of the cooperation between crowdsourcer and crowdworker on the one hand and the split into microjobs with very simple activities that are limited in time and bound to a specific location on the other hand. However, the decision is likely to have only low impact on the assessment of activities that are more demanding in terms of content or that can be organised freely (programmers, copywriters and other creatives) even if they are advertised on crowdworking platforms.

However, it is now obvious:

The mere fact that the crowdworker him/herself chooses without any obligation which assignment from a large variety of advertised microjobs s/he accepts and carries out– whereby s/he legally enjoys the highest possible degree of freedom regarding place, time, type and content of his/her activity – does not preclude an employment relationship. This is the essentially new knowledge of this BAG ruling.

However, the BAG’s view is not convincing. Even though, gamification created a strong incentive to accept a variety of offers and even to create routes, this ultimately results in the crowdworker still being able to decide freely if s/he yields to the incentive. On the next day or in the next month, s/he could decide to work more or not at all and then work his/her way up the levels again. S/He is still free to choose the intensity of his/her activity. And if s/he is given the incentive to earn more money, this does not yet mean that s/he essentially works under heteronomy. Exactly this differentiates the crowdworker from the employee who is not free to choose the intensity of his/her “routes” – and also not whether s/he temporarily stops working.

In practice, this assessment of the BAG will likely lead to platforms focusing more on the wide distribution of assignments in the crowd/community and less on the increased income opportunity for the individual.

Ultimately, however, the impact direction of the BAG is in accordance with the tendencies in European labour law. In February, the EU launched a consultancy initiative with the social partners on „Protecting People Working Through Platforms”. Trade unions in Germany have launched similar initiatives. In September 2020, the Supreme Court in Spain had acknowledged an employment relationship of a delivery driver. Essentially, the Supreme Court argued on the basis of economic considerations that the platform operators set the conditions, had the customer connections and set the prices. Therefore, the gig workers do not have any own entrepreneurial decision-making power, but they provide the service within the organisation of the platform operator.

According to consistent case-law of the BAG, such „economic dependency“ is expressly not a sufficient criterion under German law for determining an employment relationship; the decisive factor is the “personal dependency”, which is to be separated from it. The BAG also refers to this in the decision discussed herein (marginal no. 36) and basically wants to adhere to it. However, it seems inconsistent that the BAG justifies the heteronomy by stating that the crowdworker can only carry out his/her work in an “economically useful” (marginal no. 48) respectively “profitable” (marginal no. 49) way if s/he submits to the system of the app/platform (and thereby to the organisational control of the crowdsourcer).

What else was important?

The BAG remit the case to the LAG to decide on the amount of the salary entitlement arising from the employment relationship. The compensation agreement concluded with the contractor for a supposedly self-employed activity is not necessarily decisive if the contractual relationship turns out to be an employment relationship. Rather, the remuneration customary for an employment relationship is to be determined pursuant to § 612 BGB. The BAG thereby confirms its decision dated 26 June 2019 (5 AZR 178/18) according to which the employer may claim for repayment from the supposed freelancer, if applicable. Consequently, it depends on how much the employee would usually be paid for the performance of a microjob.

Our Practice Group HR Compliance and Occupational Health and Safety will be happy to advise you on this topic.