(English) New law Self-employed are placed under general suspicion and come into the crosshairs of customs

This text is an automatic english translation of our original article about this topic:

New adversity for the self-employed often comes like a wolf in sheep's clothing, i.e. under a cloak. The same happened with the "Law against Illegal Employment and Social Benefit Abuse", which came into force in July. On the face of it, the federal government wants to take stronger action against illegal employment, human trafficking and child benefit abuse. So far, so good.

But with the law the federation procured itself now also its hitherto sharpest ?weapon? in the fight against (suspected) pseudo-self-employment: All independent ones stand now de facto under a blank suspicion, their business premises may enter by the financial control of undeclared work (FKS) of the tariff and their supporting places, documents are controlled. At any time! In addition, self-employed persons can now also be held jointly liable for their "subcontractors". It is a catalogue of possible measures that far-reachingly intervenes in the work of self-employed persons.

On 6 June 2019, the Bundestag had adopted the "Act against Illegal Employment and Social Benefit Abuse" with the votes of the CDU/CSU, SPD and AfD in a roll-call vote vote ; the FDP and Greens abstained and the Left voted against. After the Federal Council also gave its approval on 28 June, the law in force since July 18, 2019.

FKS now has central auditing and investigation powers in the case of "suspected false self-employment"

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This so-called Article Law has adapted more than a dozen laws which, in particular, give customs and its Financial Control of Undeclared Work (FCS) unit significantly extended powers to deal with illegal employment, day-labour exchanges, "work strokes" and human trafficking or the unauthorised receipt of child benefit.

The Federal Ministry of Finance provides a general overview of all topics related to this Article Act in its monthly report of June 2019. Most of the tightening measures have been reflected in the Black Labour Fight Act (SchwarzArbG).

Far more: The FKS now has a central auditing and investigating authority in the case of "suspicion of bogus self-employment", this was a declared goal of the Federal Government, as it itself stated in its reason.

Business premises may enter, documents in inspection to be taken

And these new powers for customs and TCS respectively have their own merits. For example, customs authorities may now also enter "business premises, with the exception of apartments" of self-employed persons, obtain information there and inspect documents "from which it can be assumed that the scope, nature or duration (...) of their actual or apparent activities can be deduced or deduced".

This can be read in §3 paragraph 1 of the amended Schwarzarbeitsbekämpfungsgesetz (SchwarzArbG). In terms of time, this right refers to the "working hours" of the persons working in the rooms - since self-employed persons do not have 9to5 working hours, i.e. theoretically around the clock.

This right of access applied before only to the business premises of employers and the clients of independent ones - the intensified law extended it to the business premises of the independent ones.

It is unclear here whether the FCS also has a right of access to an "Office at Home", i.e. if the self-employed person has his business premises within his flat, if his office can only be accessed through rooms in his flat.

"suspected clan" in office communities and coworking spaces

Freelancers who share an office, work in an office community or in a WorkSpace are threatened with trouble: Here, colleagues are also threatened with "suspicion of clans". This is because customs is allowed to obtain information about their employment relationships from all persons "who work in the business premises (...)"; the SchwarzArbG also makes this possible in §3 paragraph 1. This means: If a web designer shares an office with a photographer, customs rings a bell because of the designer, then customs is also allowed to check the photographer and inspect his documents.

Apropos right of inspection: The legal wording is so broad that not only offers, orders and outgoing invoices, but all business documents could be affected, as lawyers complain (see below).

However, inspection does not (yet) mean seizure: Customs would have to apply for a seizure order for such an inspection.

Contradictory legal situation

It is conceivable that customs officials may also look into the Non-Disclosure Agreements (NDAs) issued by many self-employed persons to clients in addition to the confidential business secrets sent by clients; often NDAs provide for drastic financial penalties if the contractor does not observe his secrecy about confidential information and data of the client.

For self-employed persons, this could affect far-reaching issues, especially since the "Law on the Protection of Business Secrets", which requires companies to take appropriate protective measures, only came into force on 26 April 2019.

And it is quite piquant that customs, as part of the federal administration, can have extensive access to self-employed persons, while the federal government has often refused even members of the Bundestag access to contracts it has concluded with companies - with reference to the protection of trade secrets (e.g. when it came to the toll operator contract).

Right of access and inspection with independent ones also for 20 further places, under it the old age pension insurance

Now who thinks "Everything's pretty bad, but customs won't ring my bell": The right of access and inspection does not only apply to the authorities of the customs administration, but also to all the customs "supporting bodies", provided it is an examination according to SchwarzArbG § 2 paragraph 1. The law lists in §2 paragraph 4 a total of 20 offices, including not only the finance or police enforcement authorities, but also the

• Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway
• Catchment points according to § 28i of the Fourth Book of the Social Code [these are health insurance funds],
• pension insurance institution
• accident insurance carriers

and many more.

These places had already before a right of access and inspection - however also here only for the business premises of employers and clients - now they may visit also the self-employed ones mentioned explicitly in the law.

Unclear, which clues and circumstantial evidence facilitate entry

The legislator leaves the self-employed unclear as to which clues may be used to view documents, which circumstantial evidence may ring the TCS and enter the business premises. To put it colloquially: Customs may now "check" all self-employed persons at any time - and therefore all self-employed persons may be suspected of being under a flat-rate suspicion.

Also liability questions are unsettled. Which client likes to work together with a self-employed person suspected by customs of being bogus self-employed, on the basis of whom the business premises of that client are also entered and documents checked? Is this the reason why the self-employed person loses his order or customer? It is probably very difficult to claim damages ("entrepreneurial risk").

The self-employed are also in a hermaphroditic position here: they can be examined directly by the FKS (with a subsequent examination at the client's premises), just as their client could be examined first, then themselves.

Consequences for working in networks

And for all freelancers who work together in a network with colleagues in order to acquire and process a larger order, for example, there is now increased legal uncertainty: they have to check all their business contractual relationships in this respect cleanly. If, for example, a PR consultant awards a contract to a web designer as part of a joint project, customs might come up with the idea that the web designer might be apparently independent and examine the case.

At this point, many self-employed people are likely to feel a little queasy. They could get into the millstones between their clients and the authorities. Admittedly: These are still theoretical questions and scenarios, the law has only been in force for a few weeks. But what matters is what is possible de jure now.

More than 100,000 examinations planned annually

But how often will the FKS actually investigate the suspicion of a sea island self-employment? The comments on the draft law of the Federal Government (see there on page 36) provide an indication, albeit not very clear. Accordingly, the Federal Government assumes that there will be 106,000 cases a year in which customs will investigate "social security benefit fraud through fake work and fake self-employment". It is not possible to deduce how many of these cases involve self-employed persons - although there are likely to be quite a few.

Interesting: For each case, the Federal Government estimates the cost of personnel expenses on the part of the customs administration at 700 euros. This suggests an "assembly line clearance" which would hardly be in a position to examine cases individually and appropriately.

It should also be mentioned that the powers of customs to automatically exchange data with other bodies (such as the DRV) have been significantly extended. For a case examination, the TCS does not have to press the office bell of the self-employed person first. Perhaps to be mentioned in passing: The basic right of telecommunications secrecy has thus also been further restricted.

Sights on online exchanges

In addition, the TCS will in future examine more closely cases "in which services or work have not yet been provided but are already in the process of being provided", as stated in the explanatory memorandum to the draft law (see link above). Customs could take a look not only at the "day-labourers' exchanges" on the Internet (keyword: illicit work), which are already in the focus of attention, but also at freelancer exchanges where self-employed workers can show their (free) work capacities.

It is therefore possible for customs to get involved in the project brokerage process and check whether they are pseudo-self-employed - it is doubtful whether there will then still be an order brokerage. Here, too, the legislator has given FKS extensive powers to interfere in the free exercise of business by self-employed persons.

Self-employed are liable for their subcontractors

The self-employed are also faced with more bureaucracy: if they have services or work performed "to a considerable extent" by "one or more persons", they are jointly liable if these third parties have not made certain applications or registrations. A fine may already be imposed in the event of negligent ignorance (§8 Paragraph 1). Self-employed persons should therefore have knowledge of the "notification of the commencement of the independent operation of a standing trade" of the contractors, i.e. whether they have registered their trade.

The SchwarzArbG does not say what is to be understood by "considerable scope" - it should therefore be left to the interpretation of customs.

Also affected are independent event managers who cooperate with travelling trades such as carnies: If they are unable to present a travel trade card, the self-employed person who commissions the work also acts in violation of the regulations.

Handicraft card or travel trade card to be presented

And in the case of orders to craftsmen subject to registration, self-employed persons should check whether they are entered in the register of craftsmen - otherwise there is also a risk of a fine here. And this does not only apply to freelance architects who work with bricklayers or carpenters: According to Handwerksordnung (HwO) one of the professions requiring approval is also the "information technician". Any self-employed person who commissions such a person with IT maintenance should first check whether the technician is entered in the role.

The non-registration and/or entry were also already before administrative offences - new is however that all clients are taken into the joint liability. This means that self-employed persons are now also liable for their "subcontractors".

The same applies in the opposite direction: in future, the clients of commercial or craft self-employed persons will be able to inquire more precisely about their applications and registrations before awarding a contract.

Significantly more personnel for the FKS

Additional powers require additional personnel: The current financial planning of the Federal Government provides for an increase in the number of TCS jobs from the current 7,900 to more than 10,000 by 2026. In addition, 3,500 more FCS posts are to be created in the future due to the new tasks - this would almost double the number of posts compared to today.

Self-employed are originally affected - but were not asked

At the turn of the year, the Federal Ministry of Finance (BMF) had conducted the hearing of the associations for the draft law, which took place "on the basis of the assumed concern about the content of the draft bill. The affected associations were involved", writes the Federal Government in its answer to a small inquiry dated 10 May 2019.

If one takes the Federal Government at its word, the self-employed should not be affected by the law at all, although the fight against (presumed) false self-employment is a central concern of the law - of course this is a mischievous interpretation. Neither the VGSD nor the Bundesarbeitsgemeinschaft der Selbstständigenverbände (BAGSV) were asked for their assessment of the law.

Thus it does not surprise that under the 18 statements of federations of the building industry, the handicraft, of trade unions and social organizations only those of the German Lawyer Association (DAV) deal with the possible collateral damage for (genuine) independent ones, which the customs suspect wrongly of the illusory self-employment.

No, not quite: The dbb beamtenbund believes that "curbing (...) bogus self-employment also makes an effective contribution to preventing individual poverty in old age. Of course, this also includes the so-called click and crowdworkers, who make up an ever larger proportion of the working population in the course of digitalisation."

It is unclear on which statistics the civil servants' union bases this very daring assertion: According to a BMAS study on the topic, clickworking, which is repeatedly brought into play by the government against the self-employed, is a marginal phenomenon - and according to the study more employees and civil servants participate in it than the self-employed.

Fierce criticism from the Bar Association

The statement of the Deutscher Anwalt Verein (DAV): In it he complains above all of "the extension of investigative powers including the transfer of tasks and rights of a prosecuting authority to the financial control of undeclared work". The law intervenes "in various way in liberty rights, disregards the operational and private sphere without thereby the welfare state is improved and/or the economic situation (including social security) of the concerning ones.

Even at the public hearing of the Finance Committee of the German Bundestag on 6 May 2019, the self-employed were not asked to act as experts. Here, too, it was only the lawyers' association that criticised the consequences for the self-employed, as evidenced by the word protocol and the comments submitted.

The DAV made even more detailed statements to the Finance Committee than to the BMF a few months earlier. It drastically pointed out the consequences of the new search rights of the FKS: "The office of the self-employed person is entered and searched with the examination task, whether the self-employed person is really active as such and/or he in turn gives orders to (bogus) self-employed persons. The FKS can thus enter almost all business premises in Germany and demand inspection of almost all business documents - without any reason, just for "examination".

The lawyer federation put the finger into a further wound with its question, why exploitative working conditions are persecutable only in relation to employees and female employees, not however regarding independent ones or Beamtinnen and civil servants.

As meant nevertheless Federal Minister of Finance Olaf Scholz, a candidate for the presidency of the SPD, in its speech to the law before the Bundestag in April : ?We cannot accept that reports appear again and again, in which it is to be experienced that with any sham contracts people much less earn than that, which is entitled to them. We must be able to control and prevent that." Well, that only applies to employees and day-labourers, not to self-employed people - who, for example, work for the public sector at manageable fees (as interpreters, translators, VHS lecturers, etc.).

Zoll-Gewerkschaft BDZ had great influence on the law

The BDZ - Deutsche Zoll- und Finanzgewerkschaft is very pleased about the new legal situation including extended powers of the FKS vis-à-vis self-employed persons . The BDZ is no small size: The union organised in the dbb beamtenbund is, according to its own information on its website, "the largest trade union for employees in the business area of the Federal Ministry of Finance". The 25,000 or so members are "essentially members of the Federal Customs Administration and the Federal Ministry of Finance". The BDZ thus represents many of the customs employees who audit the self-employed.

Already on 12 November 2018, three weeks before the BMF submitted its draft to the association hearing, the BDZ praised in a press release that the new law would give customs additional powers. "This success was achieved by the BDZ as a result of persistent efforts and political negotiations with a view to far-reaching optimisation of the legal framework conditions for the audit and investigation activities of the TCS," the BDZ stated. Dieter Dewes, Federal Chairman of the BDZ, expressly welcomed the additional powers for the TCS - which would "make customs even better able to ensure order and fairness on the labour market".

Since the BDZ is a trade union of federal employees, it can be assumed that the information disseminated by the BDZ on its influence is correct.

... and demands an independent right of decision of the FKS about self-employed

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The opinion of the BDZ, which it submitted for the hearing of the Finance Committee of the Bundestag in May 2019, provides a deep insight into how this customs union sees self-employed workers.

Accordingly, the BDZ was able to report: The answers submitted to the DRV Bund by self-employed persons within the framework of the status assessment procedures "concerning the activities performed do not correspond to the actual circumstances". In addition, the German Pension Insurance Association is "already overloaded with the procedures for calculating damages sent by the FKS", according to the last page of the statement.

It is obvious that the trade union could only have expressed this interesting assessment to the members of the Bundestag if it had the corresponding information or assessments from the DRV Bund.

However, the BDZ knows how everything can be improved!

Since, in the opinion of the customs union, the Financial Control of Undeclared Work "collects and determines exactly the relevant criteria that speak for or against self-employment during its on-site audits exactly, the FKS should also be granted the legal possibility to in these cases independently to decide, whether someone is self-employed or dependent. [The highlights are from us.]

Which "decisive criteria" does the FKS check on site, the controversial DRV catalogue of criteria? What expertise do customs employees have in today's complex (project) world of self-employment? We have a few questions...

FKS should be allowed to decide practically on the status of all self-employed persons

In the last paragraph of its opinion, the customs union then detonates a "bomb" against the self-employed. The exercise of such a power (the independent decision of the FCS on [bogus] self-employment) should "relate exclusively to self-employed persons who are encountered by customs officers during an examination and who have not made use of the above-mentioned possibility of examining the existence of self-employment pursuant to § 7a SGB IV (i.e.: voluntary status assessment procedure, note from us) or have described an incorrect fact to the Federal Pension Insurance Fund in the questionnaire".

More understandably formulated: Since the number of voluntary status assessment procedures is kept within manageable limits compared to the absolute number of self-employed, this customs union demands the right for the FKS to be allowed to use the sword of Damocles against almost all self-employed persons.

In the Bundestag hearing on 6 May 2019, none of the MPs who had taken part spoke to Thomas Liebel, the Deputy Federal Chairman of the BDZ, who had been invited as an expert, about the questionable positions of his trade union vis-à-vis self-employed workers (as evidenced by the verbatim record). The written statement of the BDZ had already been available to the committee for a few days, dated 2 May 2019. As a reminder: the self-employed were not in demand.

Our preliminary assessment of the law

The intensified fight against undeclared work, day labour exchanges, smuggling and trafficking in human beings is to be strongly welcomed in order to be able to collect evaded taxes and social contributions.

However, the law passed by the GroKo together with the AfD has given the Financial Supervisory Authority for Undeclared Work such far-reaching powers that all self-employed people in Germany are now de facto under a general suspicion of bogus self-employment. The extensive powers to enter business premises, to inspect documents, to examine "incipient" projects, etc., intervene to such an extent in the working life of self-employed persons that constitutional questions also arise here.

The federal government has thus put the hitherto sharpest "weapon" against self-employed workers into its legal holster. It remains to be seen how often it will draw these against the self-employed, how often it will be wrong with its suspicions (via FKS).

It cannot be assumed that tomorrow the (armed!) FKS units will storm the offices of self-employed people, especially since the increase in FKS staff is to extend to 10,000 by 2026 and the unit already has major internal problems, as Spiegel Online reported.

But in any case, the legal uncertainty among the self-employed and their clients continues to increase - with all the associated economic, financial and social problems that this entails for our side. Especially as it is not defined according to which circumstantial evidence customs may suspect the self-employed at all.

Against this background, it is extremely questionable that neither the BMF nor the Finance Committee of the Bundestag were interested in the assessment of self-employed organisations, although the self-employed are a "target group" of the law.

Both the VGSD and other self-employed organisations are registered in the register of associations of the Bundestag; it would have been easy for the members of the Finance Committee to query the register for "self-employed" and to ask our side for an assessment (if not already the BMF).

During the parliamentary deliberations, the members of the Bundestag did not notice that the law far-reachingly interferes with the rights of self-employed persons - even those self-employed persons who are wrongly suspected of bogus self-employment. This depth of intervention is far greater than that of the DRV's status assessment procedures, which have been with us for so long.

As the Federal Interior Minister Horst Seehofer (CSU) told the ARD capital studio in June, : "You have to make laws complicated. Then it won't be so noticeable. We don't do anything illegal, we do the necessary. But even the necessary is often questioned inadmissibly."

The VGSD is your lobby

The law shows once again how important it is to represent the interests of the self-employed - without an influential voice we are not heard. The more association members we have, the more we can achieve and address more issues at an early stage and analyse possible consequences for us.

The VGSD will closely monitor the implementation of the law by the FKS. We cannot replace the lawyer for members who should become acquainted with the FKS within the scope of a check for suspected bogus self-employment: However, we ask them to inform us about their cases.

Please post this article on your channels, draw the attention of other self-employed persons and discuss the subject at meetings with other self-employed persons in order to sensitise them to the risks described.