An employee or an independent contractor?

Many companies engage workers on independent contractor agreements instead of employment contracts. This can result in disputes regarding whether or not the person can enforce labour law rights (such as claiming for an unfair dismissal in the CCMA). It is therefore important to understand the whether a person is an employee or an independent contractor.

Such matters are assessed by adopting an approach that puts substance over form. In other words, the reality of the relationship is assessed, rather than considering the form which the written contract takes.

The test that is applied to assess this, is referred to as the dominant impression test. It looks at various factors which are typical of an employment relationship. These factors include the extent to which the individual is integrated into the organisation, the extent of his or her financial reliance on on the company, whether or not the company provides the person with tools of the trade (work tools), and the degree of supervision and control the company has over the individual’s work.

Normally, an independent contractor produces an output or result, rather than providing the other party with productive capacity. An example of an independent contractor would be builder who is hired to produce a house. That builder would typically have a team of people who would do the work, and may even sub-contract the work to another person to perform. By contrast, the relationship between the builder and his own team members may be an employment relationship (depending on the facts).

Section 200A of the Labour Relations Act also contains a presumption that a person is an employee if certain factors are present. The section reads as follows:

“(1) Until the contrary is proved, a person, who works for or renders services to any other person, is presumed, regardless of the form of the contract, to be an employee, if any one or more of the following factors are present

(a) the manner in which the person works 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 for 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 works or renders services;

(f) the person is provided with tools of trade or work equipment by the other person; or

(g) the person only works for or renders services to one person.”

The factors in the presumption are among those forming part of the dominant impression test for determining the whether a person is an employee or an independent contractor. If one of the factors is present, the presumption applies, and the alleged employer has the onus of proving that the relationship is not one of employment.