A common issue raised in many labour disputes is whether a person is an employee or an independent contractor. While it is true that both independent contractors and employees offer their labour to businesses and/or persons, it is important that employers pay particular attention to the important differences. This is to ensure that they either contract with or employ through the correct avenues while applying the correct legal principles.
One of the first distinguishable traits of an employment relationship is that it is governed and regulated by our labour laws, particularly, the Labour Relations Act, whereas an independent contractor relationship stems from our common law. Section 213 of the LRA defines an employee as:
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Any person, excluding an independent contractor, who works for another person or for the State and who receives, or is entitled to receive, any remuneration; and
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any other person who in any manner assists in carrying on or conducting the business of the employer.
There are many instances where an independent contractor agreement may be disguised as an employment contract, and sometimes even relied on as an employment contract to seek relief or recourse from the other party. Whenever a party is required to determine whether or not a person is an employee or an independent contractor, the courts have developed certain tests to apply where disputes arise:
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The Control Test:
This test determines that should one party (the employer) have the right to supervise and control the work of another party (the employee), the person being supervised would be deemed an employee.
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The Organisation Test:
This test determines whether a party would be deemed to be part and parcel of an organisation and focuses on the extent to which that a party is integrated in an organisation.
In SABC v McKenzie (1999) 20 ILJ 585 (LAC) the court found that a person is an employee when they are ‘’part and parcel of the organisation’’ whereas the work of an independent contractor ‘’although done for the business, is not integrated into it but is only accessory to it’’.
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The Economic Test:
The focus of this test is to determine who profits from the services rendered, most importantly, whether the party rendering the services are doing so for their own benefit, or on behalf of another for their benefit.
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The Dominant Impression Test:
This is the most common test used by the courts to determine whether a person is deemed to be an employee. Considering the nature of the relationship the following criteria as listed in section 200A of the LRA are applicable:
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The manner in which the person works is subject to the control or direction of another person, organisation, or company.
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The person’s hours of work are subject to the control or direction of another person, organisation, or company.
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In the case of a person who works for an organisation or company, the person forms part of that organisation or company.
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The person is economically dependent on the other person, organisation, or company for whom he or she renders services.
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The person is provided with tools of trade or work equipment by the other person, organisation, or company.
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The person only works for or renders services to one person, organisation, or company.
It must be noted that there is no employment relationship with independent contractors, they simply provide a service and are paid to render such service. In Denel (Pty) Ltd v Gerber (2005) 26 ILJ 1256 (LAC); [2005] 9 BLLR (LAC) the Labour Appeal Court took account of the same list of factors set out in section 200A of the LRA, which also appear in section 83A (1) of the Basic Conditions of Employment Act 75 of 1997, but only as a guide. The court found that in considering the realities of the relationship, the contractual relationship the parties actually enter into is one of the factors that must be considered, even though the reality of relationship is the deciding factor. Substance must always be considered over form.
In conclusion, regardless of who has to prove whether there is or is not an employment relationship, it will be done with reference to the criteria set out in the aforementioned presumptions in the LRA or any other relevant factors a Court may take into consideration.
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