Service Crafts in Department Store as Employee

Can the personnel hired by a producer to sell in a department store be hired as freelancers or must they be employees? The Federal Labor Court answered this question on February 4, 2009 (re VI R 4/06 of November 20, 2008).


Guy is a producer of cleaning fluids and following the wishes of the department store hired several persons for "shelf care". Following the agreement between Guy and his "shelf caretakers", they were supposed to perform services of accepting deliveries, giving correct presentation, pricing the products, cleaning the shelves, refilling the shelves, etc. Guy paid these persons € 9 / hr and the working shifts were 1 to 3.5 hours per calendar week. At the end of a month, the store manager acknowledge the hours of the individual person. The service person then invoiced the producer. After a wage tax audit, the tax office notified that these persons were to be considered as employees. Therefore, Guy was ordered to declare wage tax returns and forward the wage tax to the office. However, Guy disagreed with this approach and sought legal recourse all the way up to the Federal Tax Court.

Also the BFH held that these persons were to be treated as employees. An employee is somebody who owes his labor to an employer (§1 II 1 LStDV). In other words, such is the case, when a serving person subordinates himself under the will of the employer or is obliged to follow the employer's instructions (§1 II 2 LStDV). The determination is made with respect to the total picture of the circumstances and all arguments are to be weighed against another.

The incidents in this case showed that the persons' tasks were simple, physical tasks that were less determined by the personal gifts and talents but more mechanical nature. Considering time, place, and scope of their tasks, they were bound by instruction and (when even only indirectly) under supervision. Their possibilities of earning were limited. The chance for these persons to work at other venues did not show an entrepreneurial initiative and even less an entrepreneurial risk. And not even the lack of any incentives pointed to another direction than employment.


What rights does the employer have in this situation?

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