There is a clear distinction between an employee and an independent contractor, as each has its own distinguishable characteristics. Employers must pay particular attention to the very important differences to ensure that they either contract with or employ through the correct avenues and apply 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 (hereafter “LRA”), whereas an independent contractor relationship stems from our common law. Section 213 of the LRA defines an employee 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 the employer”.
In Phaka and 19 Others v UTI South Africa (PTY) Ltd and 2 Others, AJA Murphey re-enforced and supported the analysis of the arbitrator who said:
“The first part of the definition under section 213 reflects the common law concept of an employee. Under the common law, an employee is someone who works under a contract of service as opposed to a contract for services. The definition explicitly excludes independent contractors. The second part of the definition is much wider than the first and, but for the express exclusion, would cover independent contractors and even partners and brokers. The Courts distinguish between people ‘assisting in the carrying on or conducting of a business’ who would-be employees and those persons ‘performing work or services which have the effect of providing such assistance’ who, as independent contractors fall outside the scope of the definition of employees.”
There are many instances where an independent contract 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, section 200A of the LRA must be consulted and applied. It has been held that a person will be presumed to be an employee if any one of the following criteria listed in section 200A is applicable, these include:
- The manner in which the person works or his/her hours of work is/are subject to the direction or control of another person.
- The person forms part of the organisation.
- The person has worked for the other person for an average of at least 40 hours per month for the last three months.
- The person is economically dependent on the other person.
- The person is provided with tools of the trade by the other person; and
- The person only provides services to one person.
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. An independent contractor is not subject to the control and direction of a company or person to whom they are rendering a service too, this is contrary to an employee who will enter into an employment agreement and relationship with an employer. An employee’s hours and place of work, as well as his duties and remuneration, are dictated and agreed to by the employer. It is always important to consider the intention of the contracting parties to start the determination process.
In South African Broadcasting Commission v McKenzie (1999) 20 ILJ 585 (LAC). The court stated the following: “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 for 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 or the labour of others as assistants or employees to perform the work or to assist him in the performance of work. Services to be rendered in terms of a contract of service are at the disposal of the employer, who may, in his 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 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 regarding 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 on the production of the specified result.”
From the above analysis, we can accept that an employee’s contract of employment is a contract of service, whereas the independent contractor’s contract is for services to be rendered. In conclusion, an employee is contracted, either verbally or in writing to the employer, and whose relationship is regulated and must comply with the Labour Laws of South Africa. An independent contractor, on the other hand, is not protected by labour legislation, and the parties can only take civil action against one another as relief, should a dispute arise.
Article by: Shannel Arikum
Dispute Resolution Official – Pretoria