Critical Decision by the BSG on the Distinction between Self-Employment and Employment
Despite extensive case law and legal commentaries on the subject, distinguishing between genuine self-employment and bogus self-employment has always been quite a challenge in the labor market.
In June 2022, the German Federal Social Court (BSG) took a new approach with its so-called "Herrenberg Ruling" (BSG, June 28, 2022 – Case No. B 12 R 3/20 R), when it surprisingly classified a music teacher at a municipal music school as an employee. While the court relied on well-known criteria for determining employment status, it applied them much more strictly, thereby raising the requirements for recognizing self-employment. According to this ruling, the mere factual integration of a contractor into the organizational structure of the client (e.g., through the provision and maintenance of work equipment and premises) is sufficient to establish employment. Furthermore, a high degree of independence (e.g., only general framework guidelines set by the client) does not automatically indicate self-employment. Rather, self-employment can only be assumed if the individual exercises a level of autonomy that characterizes the work as entrepreneurial in nature.
As a result, not only did lower courts adjust their rulings, but the top organizations of the social security system also revised their assessment of teaching and lecturing activities in accordance with the “Herrenberg Ruling.” This shift had far-reaching consequences, particularly for employment status assessments in public and private educational institutions, as well as in educational programs for refugee integration. Many affected individuals faced massive retroactive social security contribution demands, putting their livelihoods at risk.
Legislative Response – The Transitional Regulation of § 127 SGB IV
To relieve the education sector, given its significant societal importance, and to address the legal uncertainty caused by the “Herrenberg Ruling,” the German legislature introduced the newly revised § 127 SGB IV, effective March 1, 2025. This provision serves as a transitional regulation for "teaching activities," which, according to the legislative rationale, encompass virtually all forms of knowledge transfer and practical instruction.
Under § 127 (1) SGB IV, no mandatory social insurance contributions will be required until the end of 2026 if (i) both contracting parties agreed at the time of contract formation that the work constituted self-employment and (ii) the individual performing the teaching activity consents. If these conditions are met, social security providers have no claim for contributions from employers for the transitional period between March 1, 2025, and December 31, 2026, and no retroactive payments will be demanded. However, if the individual performing the teaching acitivity does not consent, the work will be assessed based on its actual nature and may be classified as employment, resulting in mandatory social insurance contributions according to general legal provisions. Considering statutory limitation periods, retroactive contributions may still be required. This consent requirement is intended to protect teachers’ rights by ensuring that their social insurance coverage is only waived if they explicitly wish to do so.
Partial Relief, but continued Legal Uncertainty
While the protective intent behind § 127 SGB IV is commendable, its limited scope to teaching activities does not go far enough. The implications of the “Herrenberg Ruling” extend far beyond the education sector. The new, stricter criteria for employment status determination are already being applied by social courts and insurance carriers to other professions, including tax consultants, physiotherapists, and television moderators. Currently, no legislative solution exists to mitigate the financial consequences of the “Herrenberg Decision” for professions outside the education sector or to provide legal certainty for the future.
As a transitional regulation, § 127 SGB IV is only valid for a limited time. By the end of 2026, educational institutions and instructors must find ways to restructure their organizational or business models to enable viable cooperation—whether as employment or self-employment. In the meantime, contracting parties should explicitly define in their agreements that the work is self-employment rather than employment and ensure that clients obtain (potentially retroactive) consent from teachers, confirming that their activities are not subject to mandatory insurance under statutory health, nursing care, and pension schemes, as well as employment promotion law.
It remains to be seen whether the legal landscape will shift again. A legislative clarification regarding the impact of the "Herrenberg Ruling" on professions outside the education sector would undoubtedly be desirable and welcome.
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