There is a clear distinction between an Employee and an Independent Contractor, as each has its distinguishable characteristics. There are, however, many instances where an independent contract may be disguised as an employment contract and sometimes even relied on to seek relief or recourse from the other party. It is essential to consider the intention of the contracting parties to start the determination process.

An Independent Contractor is not subject to the control or direction of the organisation, company, or person they are rendering a service to, which would be called their client. An Independent Contractor does the work as part of their business. Whenever a party is required to determine whether a person is an Employee or an Independent Contractor, Section 200A of the Labour Relations Act (LRA) must be consulted and applied. 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 is subject to the control or direction of another person, organisation, or company;
  • The person’s hours of work are subject to the control or direction of another person, organisation, or company;
  • The person forms part of the organisation or company;
  • The person has worked for the other person, organisation, or company for an average of at least 40 hours per month for the last three months;
  • The person is economically dependent on the other person, organisation, or company for whom they render services;
  • The person is provided with tools of trade or work equipment by the other person, organisation, or company;
  • The person only works for or renders services to one person, organisation, or company.

On the other hand, an Employee enters a contract of employment with an Employer, which creates an employment relationship and not a service provider relationship as with an Independent Contractor. It must be noted that there is no employment relationship with Independent Contractors, as they provide a service and are paid to render such service. An Employee’s hours and place of work, as well as their duties and remuneration, are dictated and agreed to by the Employer. Section 213 of the LRA defines an Employee as “Any person, excluding an Independent Contractor, who works for another person or the State and who receives, or is entitled to receive, any remuneration” and “Any other person who in any manner assists in carrying on or conducting the business of the Employer.”

Precedent Court judgments indicate that the focus in determining whether a person is an Employee is more on the nature of the relationship between the two parties rather than the wording of the employment contract or independent service provider contract. A written contract is only one of the main factors to consider. The Courts apply a “reality approach”, which involves assessing the reality of the relationship by considering all the relevant factors on a substance-over-form basis, the public interest, and the fact that parties have no license to take themselves out of the scope of the legislation artificially. The objective is to ascertain the true relationship between the parties. When considering the factors relevant to this question, no single indicator is regarded as decisive (although some are more influential than others), and a holistic examination of the relationship between the Employer and Independent Contractor is required to conclude whether the relationship is one of employment or not.

Suppose the service of an Independent Contractor wants to be retained. In that case, it is advised that a detailed written agreement be drafted, setting out the precise terms and conditions of the services being rendered and that there be no deviations.

Checklist for Employers:

  • The object of a contract with an Independent Contractor (or contract of work) is the production of a specified result.
  • The object of an employment contract (or service contract) is the rendering of personal services by the Employee.
  • An Independent Contractor may usually also perform through others.
  • The Employee must usually perform the services personally.
  • The time for performance by the Independent contract is usually specified.
  • The Employer may choose when to use the Employee’s services (subject to its duty to compensate the Employee).
  • The Independent Contractor works subject only to the contract.
  • The Employee usually performs their services under the Employer’s supervision and control.
  • The death of the Independent Contractor does not necessarily terminate a contract of work.
  • The death of the Employee terminates an employment contract.
  • A contract of work usually terminates on completion of the specified work or production of the specified result.
  • An employment contract terminates on the expiration of the period of service contracted. (Fixed-term contract).

Article By: Carl Ranger
Senior Dispute Resolution Official – CEO Training Department