Employee leasing from abroad with “employer of record” without activity in Germany — subject to licensing according to the AÜG?

It hap­pens more and more often: A for­eign com­pa­ny “trans­fers” employ­ees, such as IT spe­cial­ists, from abroad to Ger­many. How­ev­er, these work­ers per­form their work exclu­sive­ly remote­ly and nev­er set foot on Ger­man soil in con­nec­tion with their work. They are employed by the for­eign com­pa­ny and work — as is usu­al for IT staff — very large­ly with­out instruc­tions, but there is at least reg­u­lar coor­di­na­tion with the Ger­man client, so that as a rule it can be assumed that they are work­ing under instruc­tions in the legal sense (no free­lancers). Is the com­pa­ny nev­er­the­less sub­ject to the licens­ing require­ment of the AÜG?

The legal point of view

Accord­ing to the prin­ci­ple of ter­ri­to­ri­al­i­ty, a state can, in gen­er­al, only apply its state pow­er and its law to per­sons who are locat­ed on its state ter­ri­to­ry. Accord­ing to gen­er­al opin­ion (see, among oth­ers, § 9 para. 1 SGB IV as well as FW 2019 1.1.1 (2)), the ter­ri­to­ri­al­i­ty prin­ci­ple applies to social secu­ri­ty law as well as to the AÜG.

The AÜG there­fore only applies if employ­ees are trans­ferred with­in or to Ger­many to per­form their work. The rel­e­vant point of ref­er­ence is the place of work. As part of social secu­ri­ty law, the place of work or employ­ment under the AÜG is deter­mined by the place where the employ­ment is actu­al­ly per­formed, cf. Sec­tion 9 (1) SGB IV.

The view of the Federal Employment Agency

In the author­i­ty’s own tech­ni­cal direc­tives, the Fach­liche Weisun­gen 2019 zum AÜG, 1.1.1 (2), the Fed­er­al Employ­ment Agency does write that “hir­ing out by a for­eign hir­er to a domes­tic hir­er if the tem­po­rary work­er is deployed exclu­sive­ly abroad” is not cov­ered by the scope of the AÜG. How­ev­er, the Fed­er­al Employ­ment Agency has since clar­i­fied its legal opin­ion in notices that we have received to the effect that this opin­ion only refers to cas­es in which, in addi­tion to the employ­ee, the hir­er must also be active abroad, such as on assem­bly sites, if the domes­tic com­pa­ny can­not assign enough per­ma­nent employ­ees for assem­bly abroad and these gaps are there­fore filled local­ly with for­eign tem­po­rary workers.

The Fed­er­al Employ­ment Agency dis­tin­guish­es between this and the increas­ing­ly fre­quent con­stel­la­tions in which employ­ees from abroad work pure­ly dig­i­tal­ly for a hir­er in Ger­many. This is because these work ser­vices could be per­formed any­where in the world, regard­less of loca­tion, but would have the effect of work per­formed in Ger­many. If such con­stel­la­tions were not sub­ject to the scope of the AÜG, Ger­man com­pa­nies could switch to employ­ing only for­eign work­ers with­out a per­mit and at sig­nif­i­cant­ly low­er wage costs. The social secu­ri­ty reg­u­la­tions could thus be eas­i­ly and per­ma­nent­ly cir­cum­vent­ed. In the view of the Ger­man Fed­er­al Employ­ment Agency, these cas­es should there­fore be sub­ject to the AÜG and thus require a license.

A new trend: “Employer of Record”

A new trend on the inter­na­tion­al labor mar­ket is also inter­est­ing in this con­text. With the help of so-called “Employ­ers of Record” (EoR for short), the entire employ­ment rela­tion­ship is out­sourced abroad. Employ­ers of record are for­eign agen­cies that are based in the respec­tive coun­try and take over the employ­ment of work­ers in that coun­try on behalf of, for exam­ple, a Ger­man com­pa­ny in return for a fee. In doing so, these agen­cies take care of all legal and for­mal require­ments in accor­dance with the local legal sit­u­a­tion. How­ev­er, the employ­ees hired in this way work exclu­sive­ly for the actu­al, for exam­ple Ger­man, com­pa­ny, so that the lat­ter retains full con­trol over the con­tent. Even though it is not explic­it­ly stat­ed, the Fed­er­al Agency seems to have these cas­es in mind with its changed legal interpretation.

AMETHYST Comment

While the Fed­er­al Employ­ment Agen­cy’s fear of the con­se­quences of increas­ing out­sourc­ing with the help of such con­stel­la­tions, espe­cial­ly in the area of IT, may be under­stand­able over­all, the legal argu­men­ta­tion leaves much to be desired. The Fed­er­al Employ­ment Agen­cy’s inter­pre­ta­tion is already not cov­ered by the word­ing of its own tech­ni­cal direc­tives, the Fach­liche Weisun­gen, in sec­tion 1.1.1 (2). Of course, such direc­tives can also be changed, but in this case, too, it is more a mat­ter of the authority‘s con­cern about loss of con­trol than of con­vinc­ing fac­tu­al argu­ments. Above all, the argu­ment of “pur­su­ing labor mar­ket pol­i­cy goals” can be used for just about any argu­men­ta­tion, but with­out anchor­ing it in the word­ing of the law, it is of no use. For good rea­son, how­ev­er, the clear social secu­ri­ty reg­u­la­tion of § 9 SGB IV speaks for the side of free­dom from per­mis­sion: What takes place abroad must be sub­ject to for­eign legal reg­u­la­tions, because oth­er­wise there are no pos­si­bil­i­ties to con­trol them in Ger­many. Or would the Fed­er­al Agency like to check for­eign tar­iff and con­tri­bu­tion reg­u­la­tions in the future?

Thus it remains that the goal of this view is to con­trol the uncontrollable.

Nev­er­the­less, the view of the Fed­er­al Agency must of course be observed in prac­tice. In the future, there­fore, we can expect more checks to be car­ried out on these issues as well. Com­pa­nies with the con­stel­la­tions described above should there­fore be aware of the risks of being clas­si­fied as employ­ee leas­ing requir­ing a license and take pre­cau­tions against this, i.e. at best apply for a license.

AN