In South Africa a president has taken hold of the employment sector where employers engage the services of an employee without formalizing their relationship in a written contract, believing that in so doing they are circumventing the Labour Relations Act (LRA). This, they believe, makes their employees “Independent Contractors” and they are thus not liable for any protections and entitlements under the LRA.
It is important to note that in defining an “employee,” the act makes no mention of a “contractor” or anything other than an “employee.”
Section 1 of the LRA defines an “employee” as:
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 any other person, who in any manner, assists in carrying on or conducting the business of an employer.
Section 200A of the Act continues, stating that an employee is:
A person who works for, or renders services to, another person, is presumed, until the contrary is proved, to be an employee, regardless of the form of the contract, if any one or more of the following factors is present:
i. The way the person works is subject to the control or direction of another person,
ii. the person’s hours of work are subject to the control or direction of another person,
iii. in the case of a person who works for an organisation, the person is a part of that organisation,
iv. the person has worked for that other person for an average of at least 40 hours per month over the last three months,
v. the person is economically dependent on the other person for whom that person works or renders services,
vi. the person is provided with tools of trade or work equipment by the other person, or
vii. the person only works for or renders services to one person.
The independent contractor is not a contract of employment at all, rather it is a contract of work and can be defined as the hiring/letting of piece work in a mutual contract where the independent contractor undertakes to create, build or repair a material thing within a certain period in return for which the employer agrees to pay an agreed upon reward in return.
In South Africa, common law recognizes the distinction between a contract of service (where the party provides a service in subordination to the authority of the employer) and a contract for service (where the party provides a non-subordinated service only answerable to the service deliverables contracted).
South African courts are not bound by the terms or labels used by the parties used in establishing the service relationship. In other words, stipulating in the contract of service that a party to the agreement is an “independent contractor” when in reality the relationship is that of an employer-employee will not sway the courts to view the relationship as anything other than an employment relationship, as in the case where an employee works more than 24 hours in a month – even with a contract that states otherwise – will be seen as an appointed permanent employee.