Germany: Work 4.0 – Agile Process And Organizational Methods Such As Scrum And Their Correct Design

Last Updated: 3 May 2018
Article by Alexander Möller
Most Read Contributor in Germany, September 2018

Discussions on the topic of "Work 4.0" are fashionable right now. The Federal Ministry of Labor and Social Affairs even felt obligated to publish a White Paper on this subject. It is therefore not surprising that the Ministry of Labor considers the subject area "Work 4.0" a "priority" (at least on its website); the same applies to the topics of temporary work / work contracts, subject areas that are of key importance in the context of "Work 4.0."

Work 4.0 and agile work processes

But what is "Work 4.0" and why is there tension between this modern form of work and a classic problem area to which employment lawyers have been exposed for a long time? According to the Ministry of Labor at least, it is not yet possible to define exactly what "Work 4.0" is, but one thing is certain: "Work 4.0" will be more networked, more digital, and more flexible. Public opinion also expects that working hours, work performance, and workplaces will change considerably; employees will work in flat hierarchies (or in deliberate and conscious "chaos") in order to find pragmatic, yet innovative, solutions (with ever more employees being "always on"), while classic forms of work will become a model of the past. The latter has been evident in a number of industries for some time, especially in the IT sector: In order to present the desired product, agile process and organizational methods have become commonplace, which are expected to promote the development of intellectual works in particular.

One of the best-known organizational methods is Scrum, which is essentially an agile process in the context of software development. Own employees and employees of other employers (and/or a group of various self-employed persons) try to develop a product under the guidance of a "product owner." Development usually takes place in several stages, where the regular (agile) exchange of information among participants is supposed to be particularly conducive to this goal. The product owner may give technical instructions, as he is responsible for determining and prioritizing the product properties, thus the person responsible for the project.

Third-party personnel use and agile work processes

Caution has been called for in such constellations not only since April 1, 2017. At that time, new rules on the hiring out of employees and the alleged excessive abuse of work contracts and service contracts entered into force. Since then, a wider public has also become aware of the fact that the use of external personnel in one's own company may be viewed with critical eyes. This applies all the more where the own employees may (or even should) give certain instructions to third-party employees. If third-party personnel are not employed in compliance with statutory provisions (e.g., self-employed persons are "fictitious" self-employed individuals or official services are in fact performed by concealed temporary workers, which is inadmissible), this has considerable financial consequences for the parties involved that sometimes may even entail negative media coverage.

Should agile process methods and other (new) forms of third-party personnel use outside the regular hiring out of employees therefore be avoided? Even if some consider this a necessary consequence, the answer to this question is clearly "no."

In connection with the new provisions that entered into force on April 1, 2017, the legislator stated that "the new rules should not stand in the way of the appropriate use of work and service contracts in modern forms of creative or complex project business, as found, for example, in the management consultancy or IT sectors in optimization, development, and IT implementation projects."

This clear position illustrates a certain openness to new forms of production and work, which is also reflected in the coalition agreement of the new "Grand Coalition," and therefore shows the future viability of appropriate constructions. The correct design will continue to be of key importance.

Contracts and agile work processes

First and foremost, a suitable formal basis needs to be established. Supervisory authorities initially look at the contractual basis to understand the process as such and to be able to assess the congruence of formal situation and established practice (because this is what is decisive in the end). The contractual parties need to reach agreement on the process and its course and record both carefully and comprehensibly. In Scrum, for example, the goal (i.e., the requirements for the product) and how it is to be achieved (usually in "sprints") must be defined. In addition, the parties must agree on the Product Owner and on the Scrum Master (a kind of arbitrator who, among other things, ensures that the basic rules of Scrum and, above all, the contractually stipulated process rules are observed). Furthermore, the contractual documents must clearly show that neither the Product Owner nor the Scrum Master have a classic employer's right to instruct the individual members of the Scrum team (issuing instructions on type, place, and time of the services is an essential criterion in the context of fictitious self-employment/unauthorized hiring out of employees).

Thus, the basic idea of Scrum (and an essential prerequisite to qualify as an independent activity) is the self-organization with regard to the execution and design of the services owed. A project should not be entirely planned from the beginning but should develop in the creative process; a rigid set of instructions is contradictory to this idea in terms of content, so that there is in fact no Scrum process in the end.

Established practice and agile work processes

A formally sound basis is necessary to avoid problems with supervisory authorities; what is much more important, however, is "established practice." The parties must pay scrupulous attention to comply with the agreed formal contents. In this respect, the Scrum Master has a key role to play: As a passive observer of the process, he will need to act when participants become "independent" or in the event of other undesirable developments, which he will then need to correct. He acts as a kind of internal auditor. Any intervention should be documented to prove due conduct of the process where necessary. Practical experience shows that public authorities reward internal control mechanisms when they are applied and take effect; conversely, allegations are substantiated more quickly when efficient control mechanisms are lacking. Additionally, a complete documentation helps to form the basis for any discussions with the contractual partner about the contractual performance.

The control mechanisms must always be proven in practice and monitored accordingly. Not least the "Daimler case" (the use of IT employees qualified as concealed use of temporary workers) makes it clear that even minor deviations from agreed contractual conditions may be sufficient to be exposed to the risk of concealed temporary work.

Conclusion

At a time when policy makers are depriving economic operators of creative options (increasing restrictions on temporary work, not least the abolition of the "parachute solution," or the announced tightening of part-time laws), companies should not be deterred from applying creative solutions. Provided that the framework conditions are formally and perfectly documented in business life, complex projects or simple services may continue to be performed by third-party personnel without any problems.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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