Are you an employee or an independent contractor?

07 Apr 2021 11:00 am by Fadia Arnold

Are you an Employee or an Independent Contractor? What is the difference?

Often Independent Contractors are completely unaware that they are not Employees as defined in South African labour legislation. This article gives some welcome clarity on the differences between an Employee and an Independent Contractor and the recourse and protection each has, or does not have, respectively.

Written by Fadia Arnold, Attorney at Arnold Law Legal Consultancy, for LexisNexis South Africa

Introduction
Often Independent Contractors are completely unaware that they are not Employees as defined in South African labour legislation and therefore unprotected by labour legislation. Independent Contractors frequently assume that they have signed employment contracts as Employees when in fact, to the contrary, they have signed Independent Contractor agreements with an organization or company or person. This article will provide some clarity on the differences between an Employee and an Independent Contractor and the recourse and protection each has, or does not have, respectively.

Independent Contractors versus Employees
The protection provided by South African labour law legislation to Employees is founded in the Labour Relations Act 66 of 1995, as amended (hereinafter referred to as “the LRA”) and the Basic Conditions of Employment Act 75 of 1997, as amended (hereinafter referred to as “the BCEA”). A clear distinction, in the aforementioned labour legislation, is drawn between Employees and Independent Contractors. Independent Contractors provide a service and are hence paid to render that particular service. An Independent Contractor is not subject to the control or direction of the organization or company or person, which would be called his, her or its client.  Essentially, the Independent Contractor is doing the work as part of his or her or its own business. On the contrary, Employees enter into a contract of employment with an Employer which creates an employment relationship and not a service provider relationship.

What other factors determine the difference between an Employee and Independent Contractor?
Court judgments indicate that the focus in determining whether a person is an Employee or not, 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. The aforementioned written contracts are only one of the main factors to consider.

Other factors that the Court will consider can be found in the LRA and states that until the contrary is proved, for the purposes of the LRA, a person who works for, or renders services to, any other person, organization or company is presumed, regardless of the form of the contract, to be an Employee, if any one or more of the following factors are present (inclusive but not limited to):

  1. the manner in which the person works is subject to the control or direction of another person, organization or company;
  2. the person’s hours of work are subject to the control or direction of another person organization or company;
  3. in the case of a person who works for an organization or company, the person forms part of that organization or company;
  4. the person is economically dependent on the other person, organization or company for whom he or she renders services;
  5. the person is provided with tools of trade or work equipment by the other person, organization or company; or
  6. the person only works for or renders services to one person, organization or company.

It is important to remember that the presence of the above-mentioned criteria means that employment is presumed, unless the contrary is proved. The obligation to prove that the relationship was not one of employment then falls on the Employer (person, organization, company). Persons earning above the new threshold will need to prove that there is an employment relationship. Regardless of who has to prove whether there is or is not an employment relationship, it will be done with reference to the criteria set out in the aforementioned presumptions in the LRA or any other relevant factors a Court may take into consideration.

Conclusion
To avoid confusion, or lack of labour legislation protection if a dispute arises, it is highly recommended that when entering into any contract which surrounds a working relationship that one thoroughly peruses the contract. If necessary, for example if the wording is vague or unclear, it is highly recommended to have a labour law specialist peruse the contract to ensure you are either an Employee with the full protection of labour legislation or determine that you are an Independent Contractor, where if a dispute arises between yourself and the client, your recourse would not be within the labour forums and Court’s jurisdiction but rather in a civil court in most cases.

Fadia Arnold
Arnold Law Legal Consultancy