Employee Status of a Theatre Director

Federal Labour Court, Decision of Dec. 2, 2025 – 9 AZB 3/25

In its decision of December 2, 2025 (Ref. 9 AZB 3/25), the Federal Labour Court ruled that a plaintiff serving as the general director of a municipal theatre is an employee within the meaning of Section 5 (1) sentence 1 of the German Labour Court Act (ArbGG) and Section 611a of the Civil Code (BGB). Despite extensive artistic freedom in shaping the repertoire, casting roles, and assigning directing duties, the Federal Labour Court affirmed the plaintiff’s employee status, as the artistic director’s contract, in conjunction with the municipal theatre’s bylaws and rules of procedure, established comprehensive subordination to instructions and external control. A decisive factor was that the mayor, as the superior, exercised process-oriented legal supervision and, in the event of a conflict, had comprehensive powers of intervention that could override the decisions of the general artistic director.

A. Facts of the Case

The parties are in dispute over the admissibility of legal action before the Labour Courts in the context of an unfair dismissal proceeding.

The plaintiff worked as General Director (1st Artistic Director) of a theatre operated as an independent agency of the defendant city for a period of five years on the basis of a “Director’s Contract” concluded on July 7, 2021. He was responsible, in particular, for independently designing the program, casting roles, and assigning directing and conducting duties. In addition, the plaintiff – in agreement with the administrative director – was responsible for concluding and terminating contracts, in particular permanent employment and service contracts, as well as for concluding, renewing, or not renewing fixed-term employment or service contracts. The plaintiff received a gross monthly salary of €15,000.00 plus an annual bonus amounting to 60% of a gross monthly salary.

The artistic director’s contract provided that, while the plaintiff was subject to the legal supervision of the mayor as his employer, he was not subject to the mayor’s technical supervision with respect to artistic decisions. The plaintiff was required to report and obtain approval for secondary employment and to submit a certificate of incapacity for work before the end of the third day of incapacity. He was entitled to continued pay in the event of illness for up to six weeks, as well as to 45 calendar days of paid vacation annually, which had to be reported to the legal entity and was generally to be taken during the theatre’s vacation period. However, he was not required to document his daily working hours. The plaintiff was also not required to use the office provided to him.

Together with the Administrative Director, the General Director formed the theatre’s two-person management team. The in-house operating bylaws and rules of procedure referenced in the contract governed the organization of the theatre, the duties of the management team, and the powers of the management committee and the mayor as the employer in detail.

The defendant city terminated the contractual relationship with the plaintiff without notice by letter dated August 1, 2024. The plaintiff subsequently filed an action for unfair dismissal with the Erfurt Labour Court and asserted a claim for continued employment.

The defendant challenged the admissibility of the legal action before the Labour Courts and moved for referral to the Regional Court on the grounds that the plaintiff was not an employee within the meaning of Section 5 (1) sentence 1 of the German Labour Court Act (ArbGG) and Section 611a of the German Civil Code (BGB), but had been working under a freelance contract.

The Erfurt Labour Court (see decision of Oct. 30, 2024 – 5 Ca 1430/24) and – subsequently, on appeal – the Thuringia Regional Labour Court (decision of Jan. 27, 2025 – 2 Ta 81/24) affirmed the plaintiff’s status as an employee and the jurisdiction of the Labour Courts.
With the admitted appeal, the defendant continued to pursue before the Federal Labour Court the referral of the legal dispute to the Regional Court that it sought.

B. Reasons for the Decision of the Federal Labour Court

The Federal Labour Court dismissed the appeal as unfounded, classifying the plaintiff, who was employed as a general director, as an employee within the meaning of Section 5 (1) sentence 1 of the German Labour Court Act (ArbGG) and Section 611a of the German Civil Code (BGB), and consequently affirming the jurisdiction of the Labour Courts.

In the opinion of the Federal Labour Court, the present case concerns a civil dispute between an employee and an employer arising from an employment relationship, such that, pursuant to Section 2 (1) No. 3 lit. a) of the German Labour Court Act (ArbGG), the Labour Courts have jurisdiction.

I. Not a “sic non” case

The Federal Labour Court first confirmed the Regional Labour Court’s view that this is not a so-called “sic non” case, in which the claim can only be well-founded if the legal relationship is classified as an employment relationship, such that the mere assertion of this legal claim opens the legal avenue to the Labour Courts. Since the validity of the extraordinary termination would also have to be reviewed under the standard of Section 626 of the German Civil Code (BGB) even within the context of a contract for services, the success of the main claim does not depend on the plaintiff’s status as an employee. The mere legal assertion of being an employee is therefore insufficient to establish the jurisdiction of the Labour Courts.

II. No Application of Section 5 (1) Sentence 3 of the German Labour Court Act (ArbGG)

In the opinion of the Federal Labour Court, the plaintiff is also not a legal representative of the defendant city within the meaning of Section 5 (1) sentence 3 of the German Labour Court Act (ArbGG). As the first plant manager and a member of the management of the municipal enterprise, he did not represent the city as a legal entity, but merely in matters concerning the municipal enterprise established by it, subject to the instructions of the mayor as the city’s actual legal representative.

III. Definition of “employee” under Section 5 (1) sentence 1 of the German Labour Court Act (ArbGG), 611a of the German Civil Code (BGB)

In assessing whether the plaintiff is an employee within the meaning of Section 5 (1) sentence 1 of the German Labour Court Act (ArbGG), the Federal Labour Court based its decision on the definition of an employee codified in Section 611a of the German Civil Code (BGB). According to this provision, an employee is a person who, on the basis of a contract under private law, is obligated to perform work subject to instructions and external control in a relationship of personal dependence in the service of another. The right to issue instructions may concern the content, performance, time, and place of the work. A person is subject to instructions if they cannot, in essence, freely organize their work or determine their working hours. The degree of personal dependence also depends on the nature of the respective activity. To determine whether an employment contract exists, an overall assessment of all circumstances must be made. If the actual performance of the contractual relationship indicates that it is an employment relationship, the designation in the contract is irrelevant.

The Federal Labour Court clarified that the right to issue instructions under an employment contract is characterized by being person-specific and process-oriented – in contrast to the task-specific and results-oriented instructions given to a self-employed person. To determine whether an employment relationship exists, a comprehensive assessment of all circumstances must be made, taking into account constitutional considerations, in particular the freedom of the arts under Art. 5 (3) of the Basic Law (see BAG 30 Nov. 2021 – 9 AZR 145/21, NZA 2022, 623, para. 36 et seq.). An employment relationship can only be assumed if the circumstances indicating personal dependence are given sufficient weight within the required comprehensive assessment or if they characterize the legal relationship (see BAG Dec. 1, 2020 – 9 AZR 102/20, NZA 2021, 552). If the actual performance of the contractual relationship indicates that it is an employment relationship, the designation in the contract is irrelevant (see BAG 17 Dec. 2024 – 9 AZR 26/24, NZA 2025, 1243, para. 20 et seq.).

IV. Subordination to Instructions Despite Artistic Freedoms

Despite the far-reaching freedoms in the artistic sphere, the Federal Labour Court affirmed the plaintiff’s obligation to follow instructions. The artistic director’s contract provided for comprehensive legal supervision by the mayor as the superior, which could extend not only to work results but also to procedural processes. The right to issue instructions was thus also process-oriented. The rules of procedure provided for a comprehensive right of intervention by the mayor in the event that the general director and the administrative director, as the responsible heads of the institution, could not reach an agreement, including in matters left to their independent discretion. In the event of a conflict, the mayor could therefore fully override the general director’s decision.

V. External Control Through Organizational Integration

The Federal Labour Court further found that the plaintiff’s work was subject to external control due to his integration into the theatre’s organization, which was strongly oriented toward the division of Labour. The theatre’s management structure provided for close cooperation between the General Director and the Administrative Director, as well as oversight by the Mayor and the Theatre Committee, whose decisions could override those of the General Director in the event of a conflict. The administrative director, too, could ensure in all areas that the mayor’s decision superseded that of the general director. In addition, close cooperation and coordination with the theatre’s works committee was required, as the committee could demand information from the theatre management at any time regarding the conduct of business and the status of the municipal enterprise. The obligation to report and obtain approval for secondary employment, as well as the requirement to submit a certificate of incapacity for work starting on the third day of illness, further underscored the integration into the operational organization.

VI. Overall Assessment

In its comprehensive assessment, the Federal Labour Court concluded that the mayor’s authority to issue instructions and the degree of external control resulting from the plaintiff’s close integration into the theatre’s work organization carry significant weight and do not allow the work to appear essentially independent. In contrast, factors that would suggest a freelance relationship – such as the freedom to organize one’s own working hours and the lack of a specified workplace – take a back seat. The distinctive feature of the case lies in the fact that, in the event of a conflict, the administrative director could secure decisions from other bodies in all areas of responsibility, significantly restricting the artistic director’s freedom. Even the freedom of the arts under Article 5(3) of the Basic Law and a potentially stricter standard of review cannot, in the opinion of the Federal Labour Court, alter this, since the nature of the work, due to the contractual arrangement, does not prove to be so independent that the legal relationship could be regarded as a freelance arrangement. The Federal Labour Court emphasized that the specific nature of the General Director’s work does not have a decisive influence on the classification of the legal relationship, since the work can be performed, depending on its structure, both within the framework of an employment relationship and within the framework of a freelance service relationship.

Since the interpretation of the contract (pursuant to Sections 133 and 157 of the German Civil Code) already establishes the existence of an employment relationship, the question of the actual performance of the contract is irrelevant in the present case.

C. Practical Note

The decision makes clear that the classification of a worker as an employee or an independent contractor does not depend on the contractual designation or the nature of the work, but solely on the specific factual structure of the contractual relationship. The decisive factor is whether the employer’s right to issue instructions is structured in a manner that is more personal and process-oriented – and thus typical of an employee – or more task-oriented and results-oriented.

Contracts that – as in the present case – provide for comprehensive legal supervision as well as far-reaching rights of intervention by the employer and integrate the worker into a highly division of labour-oriented organizational structure regularly lead to a finding of employee status – even if there are far-reaching freedoms in the core artistic area. Nor can the freedom of the arts under Article 5 (3) of the German Basic Law (GG) compensate for de facto integration typical of an employee.

The decision is likely to have a ripple effect beyond the specific case on comparable situations in the cultural and creative industries – such as managerial positions at other cultural institutions, festival directors, or museum directors in similarly division-of-Labour-based organizational structures. Legal entities of cultural institutions should review their existing organizational structures and, if necessary, adapt them to avoid the unintended classification of a contractual relationship as an employment relationship – or consciously accept the consequences of an employment relationship, in particular the applicability of the Unfair Dismissal Protection Act, the Continued Remuneration Act, and other protective provisions under Labour law.