INDEPENDENT CONTRACTOR – NOT JUST ANY CONTRACT WILL DO
18 July 2017
In terms of the common law, “dismissal” was only possible if there also existed a contract of employment with an employer. The Labour Relations Act, number 66 of 1995, (the “LRA”) extended this concept to include those who render service without the protection of a traditional employment contract. But rendering service (with or without a contract) does not necessarily make one an employee (after all, independent contractors also render service) and the LRA only protects employees from unfair dismissal and unfair labour practices. So how does one differentiate between an employee and an independent contractor?
The LRA defines an employee at section 213 as (a) 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 (b) any other person who in any manner assists in carrying on or conducting the business of an employer. This publication also ran an article in June of 2012 concerning the rebuttable presumption as to who is an employee and saw that the list as to who qualifies as an employee is vastly inclusive.
It is fair to say that the LRA throws the net as to who is an employee very wide, with some notable exceptions: the South African Secret Service, National Defence Force, National Intelligence Agency, Magistrates and Judges.
In contrast, an independent contractor contract can be defined as one regulating specific work between an employer and an independent contractor in terms of which the contractor undertakes to create, build, fix, or modify something within a certain period of time for a certain sum of money to be paid by the employer on production of an invoice. Upon completion of the agreed task, the contract comes to an end. An independent contractor can sue the employer for breach of contract in a civil court if aggrieved.
The CCMA and the courts have been faced with many interpretational issues concerning who qualifies as an employee. The one constant among these cases is that the courts have no tolerance for employers who try to disguise their employer/employee relationships in an attempt to escape their statutory responsibilities towards employees.
The main difference between an employee and an independent contractor comes down to provision and control: what does the principal (the employer-party) provide to the agent (the employee-party) and how much control does the principal have over the work performed by the agent.
In a proper employment relationship, the object is normally to render personal services by the employee to the employer at the behest of the employer. The employee must obey all lawful and reasonable instructions given by the employer in relation to work performed and the way in which the work should be performed.
In contrast, an independent contractor relationship has the object of producing a certain specified service or result and the independent contractor is not obliged to personally perform work unless specifically so agreed. The independent contractor is able to perform the work in whatever manner they deem fit and is not obliged to obey more than cursory instructions about how to do the job.
The LRA in section 200A has provided seven guidelines to assist in determining if a person is an employee in terms of the LRA. Where one of these factors is present, the onus then falls on the employer to lead evidence as to why the person is not in fact an employee. If a company wishes to dispute that a person is an employee yet the person’s working hours and manner of working are prescribed, the person is economically dependent on- and only works for the company or is provided with tools of trade, the company may have a difficult time dissuading the CCMA or Courts that the person is not an employee.
It is important for employers to ensure that they consult the LRA (and Invictus) as to whether a proposed independent contractor contract is valid or whether the person would be deemed an employee in terms of the definitions and tests prescribed in the LRA. The CCMA can level hefty sanctions where the employer has failed to comply with the provisions of the LRA or attempted to call an employment contract by a different name in order to escape liability.