In-house lawyers – numerous questions still remain BSG, 3.4.2014, B 5 RE 3/14 R and others

At the end of August 2014, the Federal Social Court (BSG) presented the long-awaited reasons for its three judgments dated 3 April 2014 concerning exemption from compulsory statutory old-age pension insurance for in-house lawyers. In many cases, the clarity hoped for has not materialised. In three fundamental judgments dated 3 April 2014, the BSG established that in-house lawyers work for their employers on a dependent basis, and are therefore subject to compulsory insurance in all branches of the social insurance system. In particular, there can be no exemption from the statutory old-age pension scheme for work as an in-house lawyer in favour of membership of the professional pension scheme for lawyers (see July 2014 Newsletter). An in-house lawyer is a lawyer, not because he is an in-house lawyer, but because he acts as a lawyer separately, independently of and parallel to this on the basis of an admission to practice, to be issued solely for this purpose. Both functions must be seen separately from one another as a fundamental rule (so-called “Double-profession theory”).

It had been hoped that the eagerly awaited reasons for the judgments would provide clarification, in particular concerning the scope of the legal validity of the exemption notifications issued to in-house lawyers, and on the scope of the protection of confidence called for. Nevertheless, important questions remain unanswered. Only the following two cases are clear.

No exemption notification to date

Applications for exemption from compulsory insurance under the statutory old-age pension scheme for work as in-house lawyers that were still outstanding as at 3 April 2014 or applications received after this date will be rejected by the Deutsche Rentenversicherung Bund (DRV Bund) with brief standard formulations, with reference to established constitutional-law and professional-law case law concerning the occupational profile of lawyers under the Federal Lawyers’ Code (BRAO) and without checking on a case-by-case basis. Legal advisors who are in a fixed service or employment relationship with a specific employer (in-house lawyer), will not work as a lawyer in this capacity. The BSG explicitly rejects protection of confidence for the “unlawful administrative practice in deviation from the law” of the DRV Bund with its 4-criteria theory (“legal advising, legal brokering, legal decisions, legal constitutive work”).

Exemption notification is available – the same work?

By contrast, holders of a favourable exemption decision can – according to the BSG – trust in the continued legal validity of this, as long as they continue in the same employment for which they have received the exemption. Authoritative therefore is the wording of the respective exemption notification. Because, over the years, the DRV Bund (or its predecessor institution Bundesversicherungsanstalt für Angestellte – BfA) has chosen very differing formulations in the exemption notifications. Exemption was in part (only) person-related, in part job-related, but without limitation to a specific employer. It is only since roughly 2006 that exemptions have been issued for a specific employer and a specific job. Differences can therefore result on a case-by-case basis depending on the “exemption-notification generation”.

Other circumstances that could create protection of confidence

In addition, a number of further case scenarios are conceivable which can create individual protection of confidence in another way. For example, persons who have received written (or telephone) information from DRV Bund when changing employer, stating that there is no need for renewed application, should enjoy protection of confidence.

Need for action on the part of companies?

The employer has an entitlement to information from the inhouse lawyer concerning whether an exemption notification has been received, and if so to submission thereof. The employer must include this with the remuneration documents (Section 8 Subsection 2 No. 1 Rules of Procedure for Contributions – BVV) and submit it to the auditing services of the DRV on request during a government tax audit. If it is possible to submit an exemption notification, this must be checked in terms of its scope. If it is not possible to submit an exemption notification, the employer must register the in-house lawyer with DRV Bund and pay the old-age pension insurance contributions to the latter. Otherwise, the employer could render himself liable to criminal punishment based on the withholding of social insurance contributions (Section 266a StGB).

Summary

The decision on whether in-house lawyers can be exempt from compulsory insurance under the statutory old-age pension scheme in future, is the reserve of the legislator. This would require an amendment to the Federal Lawyers‘ Code (BRAO). In-house lawyers who are not in possession of an exemption notification must be registered with the DRV Bund immediately. If an exemption notification has been received, this must be checked in terms of whether it still covers the current activity, or whether protection of confidence could apply in the specific individual case in certain circumstances.