It is to be noted that numerous organizations within the South African labour market, will attempt to circumvent the rights and protection afforded to employees in respect of both the Basic conditions of Employments Act, 75 of 1997, and Labour Relations Act, 66 of 1995, by entering into an Independent Contractor Agreement with an employee, instead of an Employment Contract.
The Code of Good Practice, Notice 1774 of 2006, also provides for clear guidance and assistance, to safeguard both employees and employers against unwanted and unsolicited claims against a party to said agreements.
In the distinction between employees and independent contractors, several key factors must be considered by a Company when they decide to appoint an Independent Contractor over an Employee. The courts have applied a variety of test to make the distinction between an Independent Contractor and an Employee clear, with consideration to each case circumstances.
These factors include the following:
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Nature of the Relationship:
Employees enter into a contract of employment with an employer which creates an employment relationship and the employee works under the direction and control of the organization.
An Independent contractor provides a service and are paid to render that specific service or produce a specific result. They operate their own distinct business and are not subject to the control or direction of the client.
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Integration into Business Operations:
Employees are typically integrated into the core business operations of the employer.
An Independent contractor maintain their own separate business and may provide services to multiple clients, therefore retaining their economic independence.
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Extent of Control:
Employers exercise significant control over employees, including work hours, tasks, and methods.
An Independent contractor has more autonomy and control over how they perform their work without relying on constant directions from their clients.
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Permanence of Relationship:
An Employment relationship is usually ongoing and long-term that will only cease when the Employee passes away.
Contracts with independent contractors are often project-based or for a specific duration and may be performed by another employee within the Independent Contractor’s organization.
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Ability to Subcontract:
The Employees do not typically subcontract work to others. They are appointed to perform services in line with their Employer’s operations and or business.
Independent contractors may subcontract parts of their work to other individuals or businesses.
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Integral Work:
The Employees perform work that are integral to the employer’s business and in association with the core business of their employer.
The work performed by independent contractors may or may not be directly tied to the core business of the client, providing a specific service to their client or producing a certain result for them.
Summary
While employees work within an established employment relationship, independent contractors operate as separate entities providing specialized services. It’s essential for both parties to understand their rights, protections, and obligations based on their classification. The “dominant impression” test will be the most accurate and effective means to determine the classification of a worker. It is important to emphasize that the circumstances of each specific matter needs to be considered, and legal advice should be sought when determining employment status.
