Very often the lines between an independent contractor and an employee are blurred, meaning employers believe that they have entered into a contract with an individual service provider (“SP”) as an independent contractor, yet the SP after weeks of rendering the service may come to believe that he/she is an employee.
Simply put, if the SP is an employee, he/she will be entitled to all or most of the protections afforded to employees under our labour laws and South Africa has a vast array of labour laws providing substantial protection to employees. It is not possible for employers to be familiar with all of these legislations and therefore it is important that any relationship entered into between a SP and an employer be clearly defined, so that the SP is not presumed or deemed to be the employee of the employer.
All goes well in the work environment until services are terminated, and should the SP believe that the termination was premature and he/she is therefore unhappy, he/she may refer a dispute to the CCMA or Bargaining Council for unfair termination (dismissal). It is at these forums that the employer will have to prove that the relationship was one of “Independent Contractor – Company” as opposed to “Employer – Employee”.
What then is the test at the Labour forums in order to determine this relationship? Whilst every matter is obviously considered on its own merits and Commissioners and Labour Court judges look at an overall evaluation, there is a basic guideline that most Labour forums would follow in arriving at a determination.
Section 200A of the Labour Relations Act 66 of 1995 (“the LRA”) : Presumption as to who is an employee, stipulates a list of presumptions where if any one criteria is present, the individual is presumed an employee. The onus then moves to the employer to prove the contrary. In terms of said section, The Code of Good Practice of: Who is an Employee, was issued [published in Government Gazette 29445 of 1 December 2006]. It should be read with Section 203 of the LRA.
Note that the above section does not apply to those individuals earning above the Basic Conditions of Employment Act (“BCEA”) threshold. The current BCEA threshold is R205 433.30 per annum, calculating to R17 119.44 per month.
There are “7 Presumptions” to bear in mind:
- The manner in which the person works is subject to the control or direction of another person;
- The person’s hours of work are subject to the control or direction of another person;
- In the case of a person who works for an organisation, the person forms part of that organisation;
- The person has worked for that person for an average of at least 40 hours per month over the last 3 months;
- The person is economically dependent on the other person for whom he or she works or renders services;
- The person is provided with tools of trade or work equipment by the other person;
- The person only works for or renders services to one person.
In cases where the employee earns above the BCEA threshold, the above “7 Presumptions” may be considered as a guide for the purposes of determining whether a person is in reality self-employed or an employee (Denel Pty Ltd v Gerber, at para 201). The courts adopt the “Dominant Impression Test”, where a series of factors are considered in order to determine whether or not the SP is in fact an employee. A note of caution when it come to the Labour and Employment arena:
- equity and fairness prevail above all else; and
- it is substance over form, meaning regardless of what is written into a contract, the Labour forums examine that factors around the work relationship and what in actuality transpired in the work environment, as opposed to what is written into that contract of service.
To test whether your independent contract is likely to be deemed an employee of your business we invite you to make use of our Smart Questionnaire as part of our firm’s Tech Enabled Law. By answering a few short questions on our interactive questionnaire, you will obtain a quick and accurate indication of whether your relationship with your independent contractor will be deemed to be that of employer and employee. To start with the Smart Questionnaire, either –
- Click on the link – https://sstlaw.n-abler.biz/Home/Selection; or
- Visit the Tech Enabled Law page on our website at sstlaw.co.za
Should you require any assistance with the evaluation of your relationship with your independent contract or the revision of your current independent contractor agreements, please feel free to contact one of our experienced labour law attorneys.
BSoc Science, LLB, AdvDip in Labour Law
Labour Law Department
Phone: 012 361 9823