Jurisprudence endangers hundreds of thousands of jobs and the confidence of small and medium-sized businesses in reliable politics

According to the now available reasoning of a judgement of the Federal Social Court (BSG) of 24 November 2005 (Ref.: B 12 RA 1/04 R), the consequences for the labour market and the situation of small and medium-sized businesses in Germany are not yet foreseeable.

In the present judgement owners of small and medium-size enterprises in the form of the GmbH with the argumentation, them are sham-self-employed if necessary even retroactively to the contribution payment into the old age pension insurance obligated (see also our press release of 20.02.2006).


The suspicions have now become certainty, after examination of the reasons for the judgement:

As a result, every GmbH shareholder-managing director can expect to receive a five-digit pension insurance decision with retroactive effect for up to five years. This may force some GmbHs to file for insolvency. The consequence with approx. up to 1 million GmbHs in Germany: Hundreds of thousands of jobs are lost, which were so far also contribution payers in the legal pension insurance. Ironically, the GmbH shareholder-directors who have survived or will survive their new pension insurance obligation financially then take their place.

The prevailing party in this lawsuit, the federal pension insurance, will surely take this as an opportunity to fill its ailing coffers. Legitimized by supreme court decision. By broadening the assessment base, it sees this in turn as a long-term perspective for solving the financial problems in the pay-as-you-go system of statutory pension insurance, which has not been functional for decades.


However, if you look closely, the exact opposite is the case:

The consequence of this is a further administrative hurdle, which in turn makes it more difficult for entrepreneurs in Germany to do their job: Namely, to create jobs. If this would succeed with only 20% of 5 million already unemployed, the pension insurance would have gained 1 million contributors! Now, arithmetic games are not tasks of our courts, because they decide according to the facts of the case and the existing legislation. All the more it is now up to the politicians to revise such consequences of the case law by amending the relevant legal basis for action. And this not least in order to restore the confidence of small and medium-sized businesses in a reliable policy.

The economic consequences are already being hotly debated: Some associations are already considering filing a constitutional complaint. The examination of the basis for this is in progress. It is agreed that such rulings lead to the forced punishment of groups of people we so need now: Entrepreneurs whose daily consideration is to create jobs with expansions of their business. Bogus self-employment versus proclamation of self-provisioning.

Such discussions do not promote location policy either at home or abroad. It will be interesting to see how the dialogue between associations, trade unions, politicians and their pension experts will develop.


A look across the borders to our neighbours helps:

While in Germany, despite objective knowledge of the “brain death” of the pension insurance, the next reform of the reform is planned, there one has already found years ago passable ways into funded procedures. A reform that is now also being demanded by some members of parliament for the payment of civil servants’ pensions, which are a burden on the tax coffers. Even 100 days after taking office, the new government thus remains challenged.


by Dr. Johannes Fiala and Ralph C. Kiening


by courtesy of

www.channelpartner.de (published on 06.03.2006)


in Confectionery Production, No. 5, Volume 11, 14 March 2006)


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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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