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July 2016

The Bavarian State Social Court in Munich presented the brokerage with a challenge. On June 3rd, 2016 it had decided under the file number L 1 R 679/14 that a broker who is part of a broker pool is subject to pension insurance.

According to Section 2 sentence 1 No. 9 SGB VI, self-employed persons who are subject to compulsory insurance and who regularly do not employ any employees subject to compulsory insurance in connection with their self-employment and in the long run essentially only work for one client.

It was obvious that the broker was self-employed as a registered businessman and was not employed for remuneration. The court also recognized that the broker is essentially free to organize his activities and determine his working hours. He is not bound by instructions, especially not in relation to A. Service AG.

Whether A. Service AG is the 1: 1 Assekuranzservice AG from Augsburg can at best be speculated.

The court had long dealt with the question of whether the realtor works on a long-term basis and essentially only for one client.

The court then held that a client is any natural or legal person or majority of persons who, by way of an order or in any other way, entrusts another person with another activity, mediates them, or markets or sells products according to a specific organization - and leaves the marketing concept. The decisive factor is not belonging to a specific professional group, but the presence of typical job characteristics. Those who are self-employed without employees subject to compulsory insurance are typically not in a position to earn such substantial earnings that they could cover themselves outside of the statutory pension insurance obligation. An activity only for one client indicates an economic dependency and thus also typifying social need for protection, without a specific economic need for protection in individual cases being important. The court is dealing with a judgment of the Federal Social Court of April 23, 2015 under the file number B5RE 21/14 R.

In this decision, the Federal Social Court took the view that anyone who only works for one client is economically dependent and in need of social protection. The Federal Social Court had based on the fact that it did not even matter whether there was a contractual relationship between the self-employed person and the client and whether the self-employed person had a legally enforceable claim for remuneration.

The regional social court is guided by these views. It meant that the broker was in fact economically dependent on the AG. Without this he could not broker any insurance contracts. Only through the connection to the AG would the broker be able to pursue his brokerage activity with sufficient prospect of economic success. Without this connection, a significantly smaller number of insurance companies would be available to the customer. The broker said in the proceedings that it was difficult to work as a sole broker to work with insurance companies. According to the court, the plaintiff ultimately only gained market access by using the services of the AG. After all, several years after starting his activity as an insurance broker, the plaintiff still almost exclusively carried out his brokerage activities through the AG. Therefore, the court was of the opinion that the possibility to independently broker financial statements with companies not listed in the pool of the AG was still limited.

Also, 1: 1 is not comparable to a dental clearing house, where only the medical remuneration is billed. The decisive difference is that the broker enjoys considerable competitive advantages over established independent sole brokers through the cooperation.

In this context, the broker would outsource his administration to the AG, also in view of the fact that the documentation requirements have increased considerably in recent years. This also speaks for an economic dependency, so the court.

The court further elaborated the principles of the decisions of the Federal Social Court. If the Federal Social Court thinks that a contractual relationship and enforceable compensation claims do not matter, the economic dependency for the broker results precisely from the fact that he receives his compensation from the AG. The existence of such a direct and economically almost exclusive remuneration claim is an indication of a sole contractual relationship with the AG itself.

As a result, the individual brokers are not to be regarded as clients of the plaintiff, but rather the AG.

The decision is not final. In view of the case law of the Federal Social Court, it is questionable whether it can be successful.