On June 28, 2022, the Federal Social Court (BSG) ruled on the employment of a music teacher (case reference: B 12 R 3/20 R). The teacher was deployed as a "freelance" teacher at a music school in Herrenberg and received a fee for each lesson she gave. The music school assigned the individual pupils, and the teacher had to provide the lessons on the school's premises and adhere to a timetable. Once a year, the teacher had to prepare a student recital. A teachers' conference was held twice a year.
The BSG ruled that the teacher was not working as a self-employed person, but as an employee subject to social security contributions. In doing so, the BSG generally applied the previously recognized criteria for determining employment subject to social security contributions in accordance with Section 7 para. 1 sentence 1 German Social Code – Book IV (SGB IV). According to this, it depends on whether employees perform work in accordance with instructions and are integrated into the employer's organization (Section 7 para. 1 sentence 2 SGB IV). In the case in question, the instructions from the music school and the obligations that went beyond the actual teaching activities (recitals, teachers' conferences) were in favor of this. Accordingly, there was no self-employed activity. Per the BSG, this is characterized in particular by entrepreneurial risk and own entrepreneurial opportunities.
In the "Herrenberg decision," it was not decisive for the BSG that the teacher not only worked for the music school, but also gave lessons elsewhere. Rather, the decisive factor was that the teacher was unable to acquire her own pupils as part of her work at the music school. The relationship with the pupils was the sole responsibility of the music school. Although the BSG did not change the criteria for dependent employment in the Herrenberg decision, it did reassess them.
On November 5, 2024, the BSG ruled that a teacher at an adult education center can also be a dependent employee. It largely applied the same criteria as in the Herrenberg decision. The BSG largely confirmed the Herrenberg decision. This suggests that the BSG will continue to base its case law—at least for teachers—on the Herrenberg decision in similar cases in the future. The social insurance institutions have also reacted to this change in case law. This is supported by the published results of a meeting between the leading social insurance organizations—the National Association of Statutory Health Insurance Funds, the Pension Insurance Fund and the Federal Employment Agency.
These organizations intend to align their practice of examining dependent employment with the Herrenberg ruling from July 1, 2023. Even if teaching staff work largely free from instructions, this is to be deemed dependent employment if the teacher does not use their own company organization, does not bear any entrepreneurial risk, and has no entrepreneurial opportunities.
This speaks in favor of a broad scope of application of the Herrenberg case law. All persons who provide practical or theoretical instruction may be affected. Although this primarily concerns educational institutions, companies frequently deploy freelancers who—in a broader sense—act in a "teaching" capacity. Depending on the nature of the activity, this may involve a private coach, but also regular speakers, lecturers, or in-house training instructors. Teachers in particular often do not have their own "company organization" and must adhere to the client's specifications—for example, regarding the location, time, content, and duration of an event.
With Section 127 SGB IV, the legislator has initially created a transitional regulation until December 31, 2026. Therefore, the social security obligation for employed teachers does not apply until December 31, 2026 if the employer and teacher have assumed that the teacher is self-employed. In addition, the teacher must expressly agree that there is or will be no obligation to pay insurance and contributions due to employment until December 31, 2026.
This transitional regulation is extremely useful for affected companies. If according to the case law of the BSG, dependent employment would exist, but the teacher’s client has nevertheless not paid social security contributions in the past, this can have considerable consequences. The social security contributions can be recalculated within the four-year limitation period (Section 25 (1) SGB IV). The company is also liable for the full social security contribution—for example, employer and employee contributions (Section 28c (1) sentence 1 SGB IV).
Nevertheless, the employer can only reclaim the employee contribution from the teacher to a very limited extent: The deduction may only be made from the salary payment (Section 28g sentence 2 SGB IV).
An initially omitted deduction can only be made up for in the next three salary payments (Section 28g sentence 3 SGB IV). Garnishment exemption limits must be taken into account (Section 394 sentence 1 German Civil Code). Default surcharges are levied on the amount (Section 24 SGB IV). If the employer has not paid social security contributions, this may even constitute a criminal offense of withholding and misappropriation of wages (Section 266a German Criminal Code).
Companies should therefore make use of the transitional regulation until December 31, 2026. Existing contracts should be reviewed in detail. In particular, companies should clarify whether these contractual relationships can be structured in such a way that they are also exempt from social security contributions from January 1, 2027. In cases of doubt, a status determination procedure provides certainty. Upon application, the German Pension Insurance determines whether a contractual relationship constitutes employment subject to social security contributions or self-employment (Section 7a SGB IV).
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