Flexible forms of work are in vogue, not only for companies, but also for service and labour providers. Independence offers advantages for both sides. But when is a freelancer really a freelancer and not an employee?
Flexible collaboration models are not always easy to qualify legally. From the perspective of civil law, are the „commissioned“ persons employees or agents and from the perspective of social security law, are these persons self-employed or employed persons? These questions of delimitation are, as will be shown below, of great importance for the contracting parties involved and also of frequent concern to the courts.
Civil Law Qualification
Under civil law, the question arises as to the contractual relationship which could be qualified either as an employment contract, an agency contract, or another service agreement.
In accordance with the principle of contractual freedom, the contracting parties are free to regulate the content of the contract within the limits of the law. It is important to note that ultimately the only relevant factor for the qualification of a contract is not the designation of the contract chosen by the parties, but the implementation of the contract by the parties.
In this context, the so-called subordination plays a very central role. The more the person who provides work performances subordinates himself or herself at the place of work in personal, organisational and temporal terms, the more the relationship is to be qualified as an employment contract and less as an agency contract. In other words, dependency, or being integrated into a company structure, plays a central role with regard to the qualification of the contractual relationship.
Another typical feature is the worker’s obligation to follow and observe instructions and the employer’s right to control.
In the framework of an employment contract, the employer largely determines when, how and where the person is to work. The employer is also authorised to issue instructions to the person with regard to the execution of the work and the conduct in the company and to monitor this person’s work.
On the other hand, an agent regularly lacks integration into the work organisation of his or her principal. The agent provides the service in an independent position and there is no subordination relationship. Likewise, the agent is generally more economically independent of the principal. Nevertheless, the agent is obliged to safeguard the interests of the principal. The principal also has the right to issue instructions to the agent. However, this is limited to issuing instructions to the agent with regard to the business assigned to him or her, whereas an employer can issue binding instructions to the employee on the type, scope and organisation of work performance.
The qualification of the contractual relationship as it is actually practised in real life has a particular influence on the flexibility of the contractual relationship:
While an agency contract may be terminated at any time and with immediate effect by either party (efforts are under way to change this), the parties to an employment contract are generally bound by either the statutory or contractually agreed notice periods. Normally, an employment relationship, therefore, only ends after a certain notice period has elapsed (with the exception of termination with immediate effect).
Furthermore, party autonomy in employment contract law is restricted by mandatory protection norms. Various contractual rights and obligations are stipulated by law. In this sense, the employer is obliged to continue to pay the employee’s salary for a reasonable period of time in the event of an impediment to work through no fault of the employee’s own, e.g. in the event of illness. Furthermore, in certain life situations the employee enjoys protection against termination for a certain period of time. Finally, an employment contract – in contrast to an agency contract – is always necessarily remunerated, and the employee is entitled to payment of a salary for his or her work performed. The employer must also pay part of the social security contributions. On the other hand, the parties to an agency contract – with the exception of the (today still valid) mandatory right of termination at any time and with immediate effect – are largely free with regard to the form and content of the contract.
Social Security Law Qualification
Social security law distinguishes between employed and self-employed persons. In this context, the bodies applying the law, such as the competent compensation office, are obliged to determine the social security status of economically active persons. Any contractual agreement between the contracting parties concerning the social security status of the person providing work performances is non-binding and therefore has no legal effect.
According to Federal Supreme Court rulings, the qualification of an economically active person as self-employed or employed is to be based on the economic circumstances:
If the person concerned does not bear any economic risk and from an economic and organisational point of view is in a relationship of dependence, then he or she is considered to be employed. The economically active person is considered dependent on the employer if he or she is bound by instructions and integrated into the organisation of the business. The employee is to be considered to be integrated if the employee is bound by the employer’s working hours and thus not being able to engage in any other gainful activity during this time. Dependence is generally also given if the economically active person works exclusively or predominantly for one employer. The more the economically active person is bound by the instructing person’s right to issue instructions, the more likely it is to be assumed that he or she is employed.
Indications of the existence of self-employment in the sense of social security law, on the other hand, are acting in one’s own name and for one’s own account, the use of capital, the establishment of a business organisation (workplace with customary equipment), the hiring of personnel, bearing the costs for the resulting operating costs and bearing the debt collection and loss risk.
The distinction under social security law is of great importance for the contracting parties involved:
If an economically active person is qualified as an employed person by the competent authorities, the employer, from the point of view of social security law, is obliged to take out an accident insurance for the employee, whereby the premium for the obligatory accident insurance for occupational accidents is to be paid by the employer. Contributions to the AHV/IV/EO/ALV are borne equally by the employer and the employee, but must be paid by the employer to the competent social security institutions. If the gross annual salary exceeds CHF 21,330, contributions are also payable to the occupational pension scheme (so-called second pillar, BVG), which are paid proportionately by the employee and the employer and paid directly by the employer.
In contrast, self-employed persons are only obliged to pay contributions to the AHV/IV/EO. They are not covered by the unemployment benefit insurance, occupational pension schemes, or social accident insurance (UVG). On the other hand employees are insured with these insurances. Nevertheless, self-employed persons are free to take out accident insurance and pay contributions to the occupational pension scheme. However, self-employed persons cannot be insured under the unemployment benefit insurance.
Conclusion: Case-by-Case Assessment
The distinction between self-employment and employment, or between an employment contract and an agency contract, is not easy in individual cases. It must also be taken into account that the qualification under social security law is not subject to party autonomy. Ultimately, the overall circumstances of the individual case are decisive for the assessment. It is important that the parties to the contract deal with how the contractual relationship is to be qualified from a civil and social security law point of view before the contractual relationship is structured and settled upon. If the parties intend to conclude an agency contract, the principal should ensure that the individual to be providing the services is qualified as self-employed from the point of view of social security law and has a corresponding confirmation from the competent compensation fund. As long as there is no corresponding confirmation from the responsible compensation office, there is a risk that a service provider may be classified as an employed person, at least from the point of view of social security law. This can sometimes result in the social security institutions claiming the social security contributions from the „principal“ afterwards.