It is not always easy to judge whether social insurance institutions classify a job as self-employed or as dependent employment. The classification depends on the circumstances surrounding how the work is done as a whole and the defining characteristics. For example, the criteria include whether the work is carried out on the basis of instructions, and whether the employee is integrated into the employer’s work organization.
Self-employment at clinics is largely excluded
There was long-standing controversy regarding whether physicians were permitted to work as self-employed at hospitals. Drawing on the assistance of service providers such as “Rent-a-doc” enabled clinics to easily compensate for periods with heavy workloads by hiring fee-based physicians. Following the decision by the Federal Social Court of Germany dated June 4, 2019, this is now only possible in very rare exceptions. Instead, fee-based physicians are required to pay social security contributions as hospital employees. The Federal Social Court of Germany is of the opinion that the fact that fee-based physicians do not have any entrepreneurial discretion speaks in favor of their classification as dependent employees. Moreover, they are also integrated into the hospital’s organizational and disciplinary structures with regard to working hours and work rooms, clothing and operating resources such as medical equipment, for example, as well as quality assurance and control mechanisms. The Federal Social Court of Germany does not regard the nationwide shortage of physicians as grounds for the social law regulations not to apply.
Enrollment examinations are also not a self-employed activity
In view of this, the ruling by the State Social Court of Berlin-Brandenburg dated December 22, 2020 comes as no surprise: The ruling states that, for example, standardized tests held at the public health department, which had to be carried out using the computers there due to data protection reasons, speak against self-employment as a fee-based physician for enrollment examinations. Nor could the State Social Court identify an entrepreneurial risk on the part of the fee-based physician as the plaintiff received a fixed fee of 60 euros for each examination performed, and was not subject to the risk of non-payment despite the service being provided.
What applies for medical practices?
If a panel physician employs a substitute physician (locum tenens) due to illness or vacation, there is also the risk of additional claims from the social insurance organizations due to pseudo self-employment. For example, the fact that the locum tenens uses the practice premises, keeps office hours and works with the existing staff speaks in favor of the classification as dependent employment. Although the Federal Social Court of Germany established as early as 1959 that a locum tenens doctor is self-employed if he stands in for the practice owner, assuming the role of the employer as a consequence (Federal Social Court, ruling dated May 27, 1959, Ref. 3 RK 18/55).
New case law makes self-employed substitution at group practices more difficult
However, the German Pension Insurance (Deutsche Rentenversicherung) has a different view in some cases. A more recent ruling by the Federal Social Court of Germany from October 19, 2021 strengthens this position: The case involved the substitution for one physician from a group practice by arrangement in individual cases due to vacation or illness. According to the Federal Social Court of Germany, the locum tenens doctor was a dependent employee because she was bound by instructions with regard to the assignment of patients. She was also integrated into the work processes of the group practice as a result of the division of labor with the practice staff and the free use of facilities and equipment. The Federal Social Court rules that the locum tenens doctor also did not temporarily fulfill the role of the employer. Instead, she had only provided the medical services on a substitute basis, rather than temporarily assuming the role of a partner at the group practice.
In particular, group practices have to carefully consider whether they intend to use self-employed substitutes as they face the risk of subsequent demands for contributions from social insurance institutions. Whether a group practice or an individual practice, it is always essential to take special care when drawing up contracts for sick leave and vacation replacements. It is also important to stipulate that the locum tenens doctor is not obliged to comply with instructions by the organization, and has the right to determine the means of therapy themselves. However, the assessment ultimately depends on how substitution is actually carried out in the specific case.
Consequences of pseudo self-employment
For example, if the German Pension Insurance discovers cases of pseudo self-employment when auditing a hospital operator or practice owner, they will be required to paid the social security contributions in arrears. The hospital operator or the practice owner will then have to pay not only the employer’ contributions, but also those of the employee to the social security institution. The remuneration paid to the locum tenens (net wage) is extrapolated to calculate the gross wage. In turn, this may result in additional claims amounting to tens of thousands of euros. Ignorance does not represent a valid defense against payments in arrears, and the authorities always assume negligence as a minimum. In the worst case, employers may even face criminal procedure.
The requirements of self-employment for fee-based physicians at hospitals and medical practices frequently involve pitfalls. Clearly establishing the boundaries in the contractual agreements is not sufficient. The assessment also depends on exactly how the contractual relationship is put into practice. In case of doubt, hospital operator or practice owners need to initiate a status determination procedure with the German Pension Insurance. The pension insurance organization then issues a binding decision regarding the classification of the physician as an employee or as self-employed.