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Independent Contractor v Employee Status

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11 January 2010
Independent Contractor v Employee Status
Only employee’s can enjoy the protection of the Labour Relations Act.  If you are not an employee you will not be able to refer an unfair dismissal dispute to either the CCMA, a Bargaining Council or the Labour Court.
In terms of Section 200A of the Labour Relations Act 66 of 1995 one will be presumed to be an employee, unless the contrary is proven, regardless of the form of the contract if any one or more of the following factors are present:
(a).  The manner in which the person work is subject to the control or direction of another person;
(b).  The person’s hours of work are subject to the control or direction of another person;
(c). In the case of a person who works for an organisation, the person forms part of that    organisation;
(d)  the person has worked or that other person for an average of at least 40 hours per month over the  last three months;
(e). The person is economically dependent on the other person for whom he or she work or renders services;
(f).  The person is provided with tools of the trade or work equipment by the other person; or
(g).  The person only works for or renders services to one person.
A Code of Good Practice: Who is an employee has also been issued in terms of the Labour Relations Act and must be read with Section 200A of the LRA.
The presumption of section 200A is only applicable if in individual earns less than R149 736 per annum.  Should an individual earn a salary in excess of R149 736, the presumption will not be applicable and other tests must be applied to determine the status of the individual as an employee or independent contractor.  There are various tests that have been formulated, but the test mostly applied is that of the dominant impression test.
The dominant impression test regards no single indicator as decisive but requires that there is looked at the contract as a whole in order to determine whether you are an employee or an independent contractor.   
The courts have over time distilled primary characteristics of an employment contract that distinguish it from that of a contractor:
    The object of the contract of service is the rendering of personal services by the employee to the employer. The services are the object of the contract.
    The object of the contract of work is the performance of a certain specified work or the production of a certain specified result.
    According to a contract of service the employee will typically be at the beck and call of the employer to render his personal services at the behest of the employer.
    The independent contractor, by way of contrast, is not obliged to perform the work himself or to produce the result himself, unless otherwise agreed upon. He may avail himself of the labour of others as assistants or employees to perform the work or to assist him in the performance of the work.
    Services to be rendered in terms of a contract of service are at the disposal of the employer who may in his own discretion subject of course to questions of repudiation decide whether or not he wants to have them rendered.
    The independent contractor is bound to perform a certain specified work or produce a certain specified result within a time fixed by the contract of work or within a reasonable time where no time has been specified.
     The employee is subordinate to the will of the employer. He is obliged to obey the lawful commands, orders or instructions of the employer who has the right of supervising and controlling him by prescribing to him what work he has to do as well as the manner in which it has to be done.
    The independent contractor, however, is notionally on a footing of equality with the employer. He is bound to produce in terms of his contract of work, not by the orders of the employer. He is not under the supervision or control of the employer. Nor is he under any obligation to obey any orders of the employer in regard to the manner in which the work is to be performed. The independent contractor is his own master.
    A contract of service is terminated by the death of the employee whereas the death of the parties to a contract of work does not necessarily terminate it.
    A contract of service terminates on expiration of the period of service entered into while a contract of work terminates on completion of the specified work or on production of the specified result. See Smit v Workman’s Compensation Commissioner at 61A- H.
In the case of SABC v McKenzie  the Labour Appeal court was of the opinion that the legal relationship between the parties must be gathered primarily from a construction of the contract which they concluded and from the realities of the relationship between them, not simply from the way they have  chosen to describe it.  Thus the court has to give effect to what the relationship really is and not what it purports to be.
In the case of LAD Brokers v Mandla (CA14/00 2001 (LAC) at para 18 the court, in the question whether an individual working for a temporary employment service placing individuals at clients are an employee of the employment service or the client, confirmed that if an individual provides his service to the client, not on the basis of the performance of a certain specified result, but places his personal services at the disposal of that client and was throughout under the supervision control of that client, he was an employee of that client:
“On the basis of these authorities the learned judge concluded that this is clearly a unique and sui generis tripartite relationship where the person who is provided by the temporary employment service to a client renders service, not to the temporary employment service, but to the client (although he is remunerated by the temporary employment service.) It is accordingly a fiction that the person concerned renders services to the temporary employment service even when it is the employer of the person whose services are provided to the client through the temporary employment service, according to the learned judge. On the facts he thus found that the relationship between Weatherford and the respondent was that of employer and employee in terms of the definition of employee contained in section 213 of the Act. The respondent provided his services to Weatherford not on the basis of the performance of a certain specified work (selling the fruits of his labour) or on the basis of producing a certain specified result (as it would have been in the case of an independent contractor) but placed his personal services at the disposal of Weatherford and was throughout under the supervision and control of Weatherford’s senior personnel. On this basis he was an employee of Weatherford. One cannot fault this part of the reasoning of the learned judge
According to the courts the nature of the relationship between the parties must be determined primarily by the terms of the agreement.   With primarily it is meant that the contractual terms can never be taken entirely on face value.
A true independent contractor:
•    will be a registered provisional taxpayer
•    will work his own hours
•    runs his own business
•    will be free to carry out work for more than one employer at the same time
•     not be subject to usual “employment” matters such as the deduction of PAYE or UIF from his invoice, will not receive a car allowance, annual leave, sick leave, 13th Cheque and so on.

Please contact us, if you are not sure whether you are an independent contractor or an employee and you feel that you were unfairly dismissed. Our team of national legal experts will be able to help you in determining your status and to refer an unfair dismissal dispute.  Contact us today!
Me. Lezanne Bouwer
(LLB, LLM (labour law))
General Manager: Legal Assistance

[1] Liberty Life Association of Africa v Niselow 1996 17 ILJ 673 (LAC

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