Economic dependence and parental protection: A comparative analysis of Austrian and Slovenian labour and social security rights of economically dependent self-employed parents

Introduction: Why focus on the parental protection of economically dependent persons?

Labour law protection for working parents allows them to take a break from work to devote themselves to their family responsibilities and protects them against dismissal during that time. Maternity protection specifically recognises the fact that potential dismissal poses a risk to the physical and mental well-being of pregnant workers and workers who have recently given birth or are breastfeeding. This includes the risk of encouraging workers to voluntarily terminate their pregnancies, ¹ or put their family planning on hold due to an unsecure working environment. But more and more workers are not – or not fully – included in these protective schemes.

As parental protection is granted mainly to workers engaged in the employment relationship based on an employment contract, people working on other legal bases, such as the self-employed, do not enjoy this protection. Even where some entitlements exist, the fear of losing clients might hinder parents from taking (full) advantage of parental leave, as in the case of economically dependent self-employed persons, in whose case the loss of a main client exposes them to risks very similar to those mentioned above.

While self-employment covers a broad spectrum of social and economic situations and cannot be approached in a uniform way, ² numerous studies show that such workers face challenges and lack protection in different areas, such as labour and social protection, working conditions and collective representation. ³ Their protection has therefore been a concern for individual countries, as well as for the EU, for several years. ⁴

This article examines the situation of a specific category within self-employment: the economically dependent self-employed (hereinafter, the EDS). This group is particularly vulnerable due to the economic dependency on one (main) client, and therefore requires special protection. There is no clear-cut definition of the EDS. However, drawing from different (but similar) definitions in the literature, ⁵ the term ‘the EDS’, as used in this article, refers to the self-employed who (1) do not employ other persons ⁶ and (2) depend on one client for all or most of their income (i.e. being economically dependent on this client). In this respect organisational dependency, as one of the variables chosen by the Eurostat to define the economically dependent self-employed, ⁷ is not considered to be a defining element, as it indicates bogus self-employment.

A group report led by Supiot in 2000 describes the EDS as ‘workers who cannot be described as employees, and yet are economically dependent on a single client.’ One of the report's main findings is that, due to their economic dependency, this group should be entitled to certain social (security and labour) rights. Since then, the perpetual challenge facing labour and social law is if, how and to what extent the scope of protective standards should be extended to the EDS. Furthermore, they are currently in the spotlight due to their growing number and a recognised need to ensure they are better protected, both at national and European level. ⁸

There are many contributions within labour law scholarship that address the question of the personal scope of labour law and whether protection should be granted only to employees, or whether other categories of workers, such as the EDS, should be included. ⁹ For example, Rosioru argues that fundamental (labour) rights should be attached to the notion of risk. Similarly, Fusco suggests rethinking the allocation criteria of labour protection and adopting ‘economic subordination’ as the main criterion. ¹⁰ In recent years, the issue of the EDS has become one of the most popular topics in labour law literature. ¹¹ However, the focus to date has not been on their parental protection rights. There is an apparent lack of literature focusing on the importance of parental protection for the self-employed, much less for the EDS. As pointed out by Chieregato, despite the rise in non-standard employment (including self-employment), limited attention has been paid to inequalities in accessing and using work-life-balance (WLB) measures - parental protection rights being an important part of them - across occupational levels or employment contracts. ¹²

In addition, in the field of social security, most studies take a general approach to the social protection of the self-employed or the EDS, ¹³ without specific emphasis on parenthood-related benefits. We suggest looking at parental protection of the EDS more closely, as the risk of not being covered by parental benefits, especially by maternity and paternity benefits, is particularly high among the self-employed. ¹⁴

We hope to contribute to the debate on the challenges concerning the social and labour law protection of the EDS, for one, by adding an in-depth analysis of this particular field of law to the picture, and further, by stressing the importance of taking an intersectional approach to labour and social protection. Besides their specific socio-economic position, the experiences and opportunities of the EDS are shaped by other factors, such as their gender. As it is still mainly women who engage in unpaid care work in the home, not taking parental protection into consideration means not taking their lived experiences into consideration. In acknowledging the relationship between work and social reproduction, gender offers a lens to more fully appreciate the possibilities of disrupting and reshaping work in ways that ‘deliver not precariousness, but rather arrangements which genuinely enhance the opportunities for workers to engage in decent work.’ ¹⁵

Parental protection rights are important measures to enable gender equality in the workplace – and beyond. While much effort has been put into fostering a more equal distribution of unpaid care work between women and men in recent decades, particularly at the European level, their effectiveness is limited as they do not reach into all realms of work to the same extent. The Directive (EU) 2019/1158 on Work-Life Balance for Parents and Carers ¹⁶ takes atypical forms of employment into consideration, but the self-employed are still not included in the scope. A large majority of female workers worldwide are not adequately protected in case of maternity, and amongst the groups which are more frequently excluded from protection in law and in practice, are the self-employed. ¹⁷ The risk of not being adequately covered by financial parental benefits has also been recognised as being the highest among the self-employed. According to Matsaganis et al., in 2014 in the EU as a whole, on average around 46% of self-employed women were at risk of not being eligible for maternity benefits. ¹⁸ Furthermore, the remuneration for maternity leave for the self-employed is often lower than for employees, and in some countries is paid at a flat rate level for those in self-employment, while in the case of employees, it usually reflects the level of the previous income. ¹⁹ According to the European Institute for Gender Equality, seven Member States do not offer parental leave to the self-employed, while in other countries, self-employed parents are entitled to parental leave, but there are still differences in the requirements concerning the duration of self-employment and the sector in which self-employed parents work. ²⁰ Further, within the group of working mothers, the ‘fact that dependent self-employed workers do not equally benefit from social protection, including maternity leave payment, poses a challenge to the principle of equity among working women. Indeed, they are discriminated over women in regular dependent employment, given that they often only have access to maternity leave payments at a minimum level.’ ²¹

In this article, we address this shortcoming and address the following research question: Why and to what extent should the EDS benefit from parental protection?

We suggest a comprehensive approach to parental protection as a whole set of rights, covering social security as well as employment protection rights, such as the right to protection against dismissal. This approach recognises that the actual uptake of leave entitlements depends strongly on the availability of financial support and job protection measures during absence from work.

Therefore, in this article, the term ‘parental protection rights’ covers (1) employment protection rights, including the protection of the employment status while on leave, protection against dismissal, and rights aiming to ensure the health and safety of pregnant workers and workers who have recently given birth. Further, ‘parental protection rights’ include the (2) social security rights that concern parents and their children. In general, the purpose of social security is the protection that society provides in the event of the materialisation of a social risk that results in a loss or a significant reduction of income or an increase in costs through a process of broader or narrower social solidarity. ²² As parenthood is presumed to cause temporary work incapacity (due to childbirth and childcare), it calls for income replacement benefits. Moreover, having a family increases living costs, and cost-compensating benefits are also granted.

An important factor in respect of the scope of those rights is the employment status. Although there are national differences concerning the (partial) inclusion of the (economically dependent) self-employed across the EU, one of the main factors for eligibility is the distinction between the employee and the self-employed. ²³

To address this issue, we have analysed and compared the legal status and parental rights of the EDS in two neighbouring European countries, Slovenia and Austria. Comparison of these two countries is relevant for many reasons. Firstly, they both represent developed continental European countries with comparable legal traditions and socio-economic contexts. Regarding labour law, they share the traditional binary system, consisting of employment contracts and civil law contracts. Secondly, because they are neighbouring countries, their comparison is highly relevant from a practical point of view, due to the free movement of workers and issues around social security coordination. Thirdly, their comparison is instructive at a structural level due to the fact that both states have legally recognised the EDS, albeit in different forms and to different extents.

The article is structured as follows. After giving a brief overview of the legal definition of the EDS with reference to international frameworks, the definitions and legal status of the EDS in Austria and Slovenia are analysed and compared. This lays the groundwork for an overview of parental protection rights in both countries, focusing on the difference between employees, the traditional self-employed and the EDS. This analysis is accompanied by a comparison highlighting the advantages and disadvantages of the national frameworks and a discussion on what scope of parental protection should be granted to the economically dependent self-employed. We conclude with a reflection on common problems and possible solutions.

The economically dependent self-employed: definition and challenges

The first question that must be addressed, is about the scope: Who are the EDS, and why do they deserve our attention?

The EDS fall between the concepts of employment and self-employment. They do not fit into the traditional definition of employees, mainly because of a lack of personal dependence, which is still considered to be the main element of the employment relationship, ²⁴ and therefore they do not enjoy the same level of protection as employees. However, they cannot be identified as genuinely (independent) self-employed either, ²⁵ since they receive their income (mainly) from one client or a small number of clients, which makes them economically dependent on them. According to the European Economic and Social Committee, profound economic and social changes affect the nature of self-employment, moving it beyond the traditional notion of independent work that is recognised in the countries of the European Union. ²⁶

The EDS are often referred to as an intermediate category. Formally, they are self-employed and perform services for clients under a contract different to an employment contract. However, they are also economically dependent on a single client for all or most of their income, and therefore, ²⁷ their situation can be very close to the situation of employees. This is particularly true where there is no clear organisational separation between the EDS and the client, and they perform the same tasks as employees of the client.

At this point, a distinction must be made between the EDS and a disguised employment relationship, also known as bogus self-employment. ²⁸ According to the International Labour Organisation (ILO), disguised employment gives ‘an appearance that is different from the underlying reality, with the intention of nullifying or attenuating the protection afforded by law’. ²⁹ In the case of the bogus self-employed, it consists of disguising the nature of the relationship by engaging the worker in a civil, commercial or cooperative contract instead of an employment contract, while directing and supervising the working activity in a manner incompatible with the independent status of self-employment. In this way, the worker is deliberately misclassified as an independent, self-employed person when in reality, he or she is in a subordinate employment relationship. ³⁰ Since the self-employed in the disguised employment relationship should legally be considered as employees, both in Austria and Slovenia, they are not discussed further in this article. Our focus lies on the EDS, who receive most of their income from one client while still having authority over working methods, work content, time and place.

Economically dependent work is often the consequence of an employers’ strategy to reduce costs and to evade labour regulations, with the aim of excluding workers from the protection legally granted to employees. ³¹ In many cases, economically dependent self-employment is not a voluntary decision, but one forced by external factors such as the outsourcing of production or restructuring of the company with the resulting redundancies. ³² The EDS can be found in many different sectors such as hospitality businesses, catering, media, editing, teaching and training, marketing, telemarketing, advertising, entertainment, administration, accounting and social services, but also in more traditional sectors, such as transport, the building industry and domestic work. ³³ Using the definition of the EDS chosen in the context of the 2017 module, Eurostat findings show that the dependent self-employed are mainly present in the construction sector and in the human health and social work activities, followed by professional, scientific and technical activities, transportation and storage, education and information and communication. ³⁴

According to Eurofound, the EDS ³⁵ have lower levels of job quality, less autonomy over their work ³⁶ and are generally in a more precarious situation with lower levels of income and job security than other groups of self-employed persons. ³⁷ The 2017 Labour Force Survey (LFS) ad hoc module on self-employment also showed that the percentage of self-employed persons who are able to influence both the content and order of tasks is the lowest among self-employed with one client or one dominant client. They rely heavily on the functioning of work relations with their main client, due to their economic dependence, and they are exposed to increased work-related insecurities. They do not benefit from maternity leave payments to the same extent as employed women and often have access to maternity leave payments at a minimum level only. ³⁸ As a response to their economic vulnerability, some countries already provide the EDS with (limited) social protection ³⁹ and labour law rights. In those countries, economic dependence becomes the basis for specific labour and social law rights not granted to other types of self-employed workers but less extensive than the rights accorded to employees. ⁴⁰ Although personal dependency is the main factor in determining the employee status, economic dependency and the imbalance of bargaining power legitimize, therefore, protective labour and social laws. ⁴¹ In other words, dependency, albeit economic not legal, justifies (limited) labour and social protection.

Although the majority of workers in Slovenia as well as in Austria still work in the employment relationship (either standard or non-standard), ⁴² self-employed persons represent an important part of both labour markets. The share of self-employed people in the total employment market is around 11% in Austria and 12% in Slovenia, while the EU-27 average is around 14%. ⁴³ In 2017, 18.2% of self-employed people in the EU-28 reported having only one client or a dominant client. The percentage of the self-employed who had only one client or one dominant client is higher than EU average in both countries, as 19.7% of the self-employed in Austria and 21% of the self-employed in Slovenia depend on one major client. ⁴⁴

The need for parental protection in the light of economic dependence

In most legal systems, a distinction is made between maternity protection and parental leave, with the former only being granted to mothers. Maternity protection generally aims to improve health and safety protection for pregnant workers and those who have recently given birth. ⁷² It follows social as well as health protection purposes. At the European level, the Directive on Maternity Protection prescribes 14 weeks of maternity leave, two of which are compulsory. ⁷³ The scope is limited to employees. Measures such as the ban on exposure to dangerous activities and substances clearly have health protection purposes. The protection against termination of employment, on the other hand, reacts primarily not to the physical condition of the mother but her economic vulnerability. These rights are generally limited to employees, as they respond to the risks typically associated with the employment relationship and personal dependence.

In addition, Directive 2010/41/EU on the application of the principle of equal treatment between men and women engaged in an activity in a self-employed capacity prescribes measures to ensure that female self-employed workers and the female partners of the self-employed may be granted sufficient maternity benefits enabling interruptions in their occupational activity for at least 14 weeks. Article 18 states that ‘the economic and physical vulnerability of pregnant self-employed workers makes it necessary for them to be granted the right to maternity benefits.’ The European Parliament consistently called on the Commission to boost maternity protection for self-employed women, linking the Directive's purpose of equal treatment to the availability of maternity protection. ⁷⁴ Explicit reference is made not only to their physical, but also to their economic, vulnerability. ⁷⁵

As the protective purpose of some labour law regulations is not the personal but the economic dependency of workers, ⁷⁶ the (partial) exclusion of the EDS from these areas is questionable. The EDS tend to be economically vulnerable due to their dependency on one major client; this vulnerability becomes particularly apparent during pregnancy. ⁷⁷ It is not only personal instructions that can induce female employees to expose themselves to risks to their pregnancy during work; this might also result from economic constraints that force self-employed women to expose themselves to health risks, for example, through an increased workload and the ‘waiving’ of breaks. The responsibility for health protection rests solely on the worker, who has to weigh it up against her own economic and professional interests. Of course, this responsibility comes with autonomy, which is a key feature of self-employment. However, this argument fails to precisely recognise those constraints that do not lie in the personal but the economic dependency of the self-employed. The fear of losing their one major client increases the pressure for the EDS. From this point of view, also excluding the EDS from health protection measures, such as the ban on exposure to dangerous activities and substances, is highly questionable. For the EDS, the risk of losing their one main client due to pregnancy-related work interruptions de facto amounts to a termination, but without the accorded protection.

Besides the immediate risks relating to pregnancy and birth, childcare responsibilities also pose social challenges. As a result, parental protection rights in respect of the reconciliation of paid and unpaid work are granted to all working parents, regardless of their gender. ⁷⁸ At the European level these rights have recently been revisited through the work-life balance Directive. ⁷⁹ As these rights ensure women's participation in the workforce and promote the equal distribution of care work, they function not only as labour protection rights but also as equal treatment measures. ⁸⁰ The new Directive grants two months of non-transferable parental leave to each parent to encourage fathers, in particular, to take their share. ⁸¹ It further includes ten days of voluntary paternal leave. ⁸² Reacting to the ‘growing flexibilisation of the labour market’, ⁸³ the work-life balance Directive grants its rights to non-standard workers, such as part-time workers, fixed-term contract workers and temporary agency workers. However, this is not sufficient as ‘an increasing number of workers, such as those on zero-hours contracts, those self-employed or involved in the “platform economy”, as well as domestic workers, trainees and volunteers’ ⁸⁴ might still be excluded.

While employees have the right to parental leave periods, the self-employed are expected to manage their time independently. This is especially difficult for the EDS. While it might be argued that the self-employed determine their own working hours, it cannot be overlooked that the ‘loss’ of working hours due to childcare responsibilities is not merely a question of rearranging a work schedule. If one has to shoulder the unpaid care work for a family, it is very unlikely that there will be enough hours left in the day to ‘independently’ earn a living.

On the social security of parents, and most importantly an entitlement to benefits, research shows that where maternity/paternity schemes are insurance-based, the self-employed generally are mandatorily insured and therefore eligible. However, they often face de facto problems due to different eligibility criteria and receive lower benefits. ⁸⁵

Parental protection in Slovenia and Austria: differences between employees and the EDS

This section provides a comparison of the national legislations in search for a rationale for possible solutions. It approaches the question of what scope of parental labour law and social protection is, and should be, granted to the EDS. After providing a broader overview of parental protection legislation in both countries, the comparison focuses on the most important areas of parental protection: (1) protection against unlawful dismissal, (2) health protection, (3) parenthood-related leave, and (4) benefits and allowances.

Parental protection in Slovenian legislation can be divided into two groups of rights. The first group consists of rights deriving from the employment relationship on the basis of the ZDR-1. ⁸⁶ Their goal is providing employment protection to employees due to, and during, pregnancy and parenthood. Except for the above-mentioned limited labour law protection that is granted to the EDS if they invoke their status, the self-employed are not entitled to these rights. The second group comprises rights derived from the parental insurance and family benefits schemes, both regulated in the Parental Protection and Family Benefits (Zakon o starševskem varstvu in družinskih prejemkih; ZSDP-1). ⁸⁷ As all the self-employed are subject to compulsory insurance in all four existing social insurance schemes, including parental insurance, they are entitled to all rights deriving from parental insurance scheme, including: maternity, paternity and parental leave, the right to compensation benefits during this leave, the right to work part-time due to parenthood and the payment of social security contributions for this, the payment of social security contributions in the case of ceasing work due to caring responsibilities for four or more children, the right to compensation during a breastfeeding break and payment of social security contributions during a breastfeeding break. The same applies to the rights to health services required for the purpose of pregnancy, preparation for childbirth, childbirth and postnatal care that are guaranteed in the compulsory health insurance. Family benefits are granted to all parents, regardless of their employment status.

Parental protection rights in Austria are regulated in a number of different Acts. Regarding labour protection rights, the Maternity Protection Act (Mutterschutzgesetz, MSchG) ⁸⁸ grants maternity leave and parental leave to female employees. Parental leave for fathers and co-mothers is regulated by the Paternity Leave Act (Väter-Karenzgesetz, VKG), ⁸⁹ which grants a short period of birth-related leave as well as parental leave to employees only. These Acts also include protection against dismissal. While female employee-like freelancers are partially included in the MSchG, which grants them maternity leave, freelancers and self-employed individuals are generally not entitled to this under the VKG. ⁹⁰ A short period of birth-related leave is available to them under the Family Time Bonus Act (Familienzeitbonusgesetz, FamZeitbG). ⁹¹

In respect of social security rights, the Parental Benefit Act (Kinderbetreuungsgeldgesetz, KBGG) ⁹² applies to all parents, independent of any previous self-employed or salaried employment, requiring only that any gainful employment is suspended for the period of entitlement. Maternity benefits (Wochengeld) are regulated separately under the two Social Security Acts, the General Social Security Act for employees ⁹³ and the Commercial Social Security Act for the self-employed. ⁹⁴

Conclusion

To ensure adequate enjoyment of parental protection rights for the EDS, their legal recognition is crucial. The main problem in Slovenia is that to obtain EDS status, one has to notify one’s status to the employer and enforce it. This (too) often results in the fact that the self-employed do not enforce this status and are therefore not entitled to limited labour law protection, although de facto, economic dependence still exists. The advantage of the Austrian system lies in the possibility of adapting labour and social protection systems to fit the specifics of different groups of self-employed persons. However, it is questionable whether the current Austrian legislation adequately takes into account the needs of all groups that can be defined as EDS, given the low level of labour protection enjoyed by individual groups. Further, as Brameshuber suggests, ‘the existence of the intermediate category’ of the free service contract and, more particularly, the economically dependent and therefore employee-like free service contract workers and their partial inclusion into employment rights, hinders a wider discussion of the criteria defining the employment relationship. ¹¹⁹

This has also been pointed out, beyond the Austrian case, by the European Economic and Social Committee ¹²⁰ and Rosioru: ¹²¹ While, on one hand, the undeniable advantage of creating intermediate levels of protection for certain professional categories lies in the (limited) social security and labour law rights conferred to members of these intermediate groups, protective rules may be distorted, and persons who traditionally within the scope of labour law can find themselves excluded and/or reclassified into the intermediate categories.

In Austria as well as in Slovenia, the EDS are included in social rights frameworks but widely excluded from labour rights. Although the differences between employment and self-employment regarding their autonomy in structuring their work schedule justify the focus of labour protection rights on employees, these prototypical categories do not reflect the reality of the EDS. Further, social and labour rights cannot be analysed completely separately, as insurance-based entitlements often vary depending on the employment status. Social and labour rights correlate; without social security, people are reluctant to make use of their labour rights and vice versa. This is particularly true in respect of the protection against dismissal, as, for example, the historical development of maternity protection shows, whereas the early leave regulations were not effective due to the risk of losing one's job. ¹²²

As has been argued with regard to specific fields of labour law, such as the entitlement to paid holidays or the right to collective bargaining, the social protection of the economically weaker party is one of the main goals of labour law. ¹²³ The risks which lie in being the weaker party become particularly apparent during pregnancy and parenthood. ¹²⁴ As women carry the burdens of unpaid care work disproportionally, this is also an equal treatment issue. Therefore, different parental protection rights need to be adjusted to fit diverse working arrangements and ensure protection when needed.

The main challenge remains what scope of labour and social protection should be granted to the EDS. From a social security perspective, they are exposed to similar traditional social risks to dependent workers; ¹²⁵ this includes parenthood. Consequently, they need the same protection and should be equally covered. Furthermore, social risk is nothing other than the risk of losing one's economic security, as social security is a public mechanism of providing income security when social risks materialise, or of preventing them. This implies that social security should be granted equally to all economically active persons in need of social protection. However, some differences may still occur due to the nature of the circumstances in which the work is performed, which in itself does not justify a difference in the scope of rights but calls for an adapted way of exercising them. In this regard, we agree with authors who suggest that social security systems should be neutral in terms of employment status, but sufficiently specific in implementing the rules with regard to the different forms of work and occupational groups they cover. ¹²⁶

Since, in the case of the EDS, the main feature of the dependent employment relationship, i.e. personal subordination, does not exist, we can conclude that there is no need for full protection under labour law. Regarding traditional self-employment, the lack of personal subordination translates to the fact that they determine their own working hours and conditions, that they do not need to fear dismissal, and therefore are not in need of entitlement to parental leave and protection from dismissal. While this might be true for the traditional self-employed, it overlooks how people in new forms of self-employment face problems similar to employees.

To start with, deficits regarding decent work should be addressed in all forms of employment relationships. ¹²⁷ But even further, the need for (some) labour protection for the EDS cannot be disputed, although it is not based on personal but economic dependence. In this regard, we have shown that protection against dismissal, particularly during periods of absence due to parental leave, and health protection during pregnancy and breastfeeding form the minimum standard of parental protection in labour law which should be granted to all workers notwithstanding their employment status. Although they are formally independent in their working decisions, their decisions (also regarding family) are de facto strongly influenced by the relationship with their main client. The constraints the EDS face due to their economic dependence result in a limitation of their autonomy, which needs to be countered through labour law instruments.

Coming back to our research question of the scope of parental protection that should be granted to the EDS, we can conclude that some protection is already in place, but it is insufficient and no longer fully reflects the organisation of different forms of work. Social security and (at least a limited scope of) labour protection should be granted equally to all economically active persons, thus also, or nowadays, particularly, to the EDS. As pointed out several times by the Slovenian Constitutional Court, the legislator must respond to the changes occurring in society by adopting appropriate legislation, which is even more true when those changes affect human rights and fundamental freedoms. This is required by the principle of adapting the law to social conditions, which is one of the principles of the rule of law. ¹²⁸ In this respect, changes are necessary both in the area of labour and social security law, as their purpose is to secure the existence and free development of each individual in the constantly changing social relations of the workplace.