When is an Independent Contractor actually an Employee?

Given the tough economic climate and the relatively high cost of employment, workforce flexibility becomes one of the most important considerations for any business. This is actively hampered by restrictive legislation which regulates Fixed-term and Temporary Employment and effectively makes it impossible for an employer to structure its’ business to make use of this form of employment.

An emerging trend has been the use of independent contractors, however this is not as simple as it seems. Section 200A of the Labour Relations Act, 1995 (Act 66 of 1995), Presumption as to who is an Employee, sought to answer this question to a certain extent, and when read along with the Code of Good Practice, seems to favor a combination of tests, including the old “Dominant Impression” test. This definition and test was created, in part following the judgement in Denel (Pty) Ltd v Gerber [2005] 9 BLLR 849 (LAC) which sought to answer this question. 

The challenge that this creates is that the contract between the “Client” and the “Contractor” no longer presents any protection for the deemed employer as the test does not account for the form of the contract but rather the true nature of the relationship between the parties.

This distinction was again recently tested when the question was brought before the CCMA by Uber. Uber makes use of an App to match willing drivers with willing commuters and then facilitates the payment for this service, taking their commission from the transaction. This type of a-typical employment is an emergent trend in the so-called “gig” economy and does pose advantages over the older public transportation systems, however when confronted with the question of whether these drivers were employees, the CCMA found that when applying the various required tests, these drivers and partner-drivers are, in-fact, employees as defined in the Labour Relations Act.

This clarifies that the logical assumption is not accurately or effectively captured in our law and that liability for such contractor-relationships can still afford the so-called independent contractor the rights and privileges of a full-time employee.

It therefore remains extremely important for the client to seek knowledgeable advice prior to appointing any person(s) as an independent contractor.