Are you an employee or an independent contractor? What is the difference?

Are you an employee or an independent contractor? What is the difference?
11 Mar 2021

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 organisation 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 organisation 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 which 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, organisation 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):

a) the manner in which the person works is subject to the control or direction of another person, organisation or company;
b) the person’s hours of work are subject to the control or direction of another person organisation or company;
c) in the case of a person who works for an organisation or company, the person forms part of that organisation or company;
d) the person is economically dependent on the other person, organisation or company for whom he or she renders services;
e) the person is provided with tools of trade or work equipment by the other person, organisation or company; or
f) the person only works for or renders services to one person, organisation 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, organisation, 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 concerns 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 to 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.

See also:

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
Fadia Arnold
Fadia Arnold

Fadia Arnold was admitted as an Attorney of the High Court of South Africa in 2011 after completing two years of article clerkship. She obtained her Bachelor of Social Sciences... Read more about Fadia Arnold

Share


Labour Law articles by


Labour Law articles on GoLegal