Article 1 of the German Federal Lawyers’ Act explicitly guaranteed their independence and freedom from instructions, even as a law firm’s managing partners. The plaintiffs held initially 20 percent, after the resignation of one plaintiff 25 percent of the company’s shares. Resolutions during the partners’ meeting were passed with a simple majority. Their managing partner service agreement provided for a fixed monthly salary of EUR 6,500.00 gross plus a 13th monthly salary and a profit-based remuneration of 10 percent of the profit subject to bonus. Furthermore, they were entitled to continued remuneration in case of incapacity for work for a period of six months and an annual leave of 30 working days.
Decision of the German Federal Social Court
With its decision of June 28, 2022 (case no. B 12 R 4/20 R), the Federal Social Court dismissed the plaintiffs’ appeals against the decision of the Baden-Württemberg Regional Social Court. In case of a law firm – as generally in case of a German GmbH – the question of whether the managing partners are subject to mandatory insurance due to employment depends on whether they have the legal power under corporate law to determine the company’s fate. Due to their shareholding and the provisions in the articles of association, the minority shareholders did not have the legal power to determine the law firm’s fate. Furthermore, the managing partners’ contracts contained typical provisions indicating a dependent employment. Therefore, the managing partner were generally subject to social security contributions.
Only if a law firm’s managing partners have a blocking minority or are majority shareholders, they do not – according to current case law – qualify as subject to social insurance and do not have to pay contributions to the pension, health and unemployment insurance. In the future, it will be mandatory for lawyers to take this into account when establishing a GmbH. In particular, applications for exemption from compulsory insurance in the statutory pension insurance must then also be filed in good time before starting work as a GmbH’s managing director. With regard to health insurance, the question of whether one is subject to statutory insurance or can take out private insurance will then depend solely on the amount of the salary.