Find the difference between an employee and independent contractor
A common issue that frequently arises in labor disputes is determining whether a person is classified as an employee or as an independent contractor. The distinction between these two roles is essential, as each carries distinct implications. An employer-employee relationship is regulated by labor legislation, while the relationship between an independent contractor and their employer is governed by common law principles. Understanding the nature and consequences of these classifications is fundamental.
Employees are entitled to labor rights that are enshrined in labor laws, which aim to protect them from exploitation. In contrast, independent contractors have certain rights under common law, but they typically receive much less protection, if any, compared to employees. This article will explore how the law defines an employee and the elements that contribute to recognizing an employment relationship.
The legal definition of an employee is broad and can encompass various work arrangements that are akin to an employment relationship. Section 213 of the Labour Relations Act (LRA), which mirrors the definition in the Basic Conditions of Employment Act (BCEA), defines an employee as any person—other than an independent contractor—who works for another person or the State and is entitled to receive remuneration. This definition extends to individuals who assist in carrying out the business of an employer. This wide definition is designed to cover as many people as possible under the protection of labor laws, although it explicitly excludes independent contractors.
In the landmark case of SABC v McKenzie (1999), the Labour Appeal Court identified key characteristics that distinguish an employment relationship from that of an independent contractor. The main difference lies in the object of the contract. In a contract of service (employee relationship), the primary objective is the rendering of personal services to the employer, and the employee is typically at the employer’s beck and call to perform these services. On the other hand, an independent contractor is hired to complete specific tasks or deliver certain results, and they have more autonomy in how the work is carried out. Independent contractors are not under the direct control of the employer and are not obligated to follow instructions regarding how the work is done.
The employee is subordinate to the employer, who has the right to supervise and control the employee’s work. In contrast, an independent contractor is not under the employer’s supervision and is generally considered equal to the employer in terms of managing the work. The employment relationship typically ends with the death of the employee, while the contract of an independent contractor may not be terminated by the death of either party. Additionally, a contract of service terminates at the end of a defined period of service, whereas a contract of work ends upon the completion of the specified task or result.
The Labour Appeal Court’s decision in McKenzie provides critical guidance on distinguishing between an employee relationship and an independent contractor arrangement. Additionally, the Code of Good Practice: Who is an Employee? offers further guidelines for determining whether a person qualifies as an employee.
Section 200A of the LRA and section 83A of the BCEA create a rebuttable statutory presumption for individuals earning less than a prescribed threshold (currently R205,433.30). These provisions outline factors that may indicate a person is an employee, regardless of the contract’s form. For instance, if the person’s work is controlled or directed by another, their hours are controlled, or they are economically dependent on the employer, they may be deemed an employee. Other factors, such as receiving tools or working exclusively for one employer, can also indicate an employee relationship.
These sections of the LRA and BCEA effectively prioritize the substance of the relationship over its formal label. If uncertainty exists about whether a person is an employee, the CCMA can be approached for an advisory award. This decision can provide clarity and serve as a basis for resolving any disputes regarding the nature of the contract.
In conclusion, whether a contract is considered one of employment or independent contracting depends on the specific circumstances of each case. Reviewing the agreement’s terms and the surrounding context can offer guidance. If there remains any doubt, seeking an advisory award from the CCMA can clarify the nature of the relationship. Employers are encouraged to seek labor law advice to ensure compliance with relevant legislation.