Employers, ever so more now in light of the COVID-19 pandemic, are attempting to protect themselves against employee statutory regulations and rights by insisting that new persons entering their business sign and enter into independent contractor agreements. Independent contractors are after all, specifically excluded from the application of employment legislation. All of their employment rights are governed by the contract. However, does this type of “employment contract” really protect the employer?
CCMA arbitrators and Labour Court officials are hesitant to bar potential employees from accessing protection in terms of Labour Legislation just because they are termed independent contractors or consultants. The 2002 amendments to section 200A of the Labour Relations Act and Section 83A of the Basic Conditions of Employment Act states that any 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 or wording of the contract, if any one or more of the following factors are present:
- The way the employee works is subject to the control or direction by the employer.
- The employee’s hours of work are subject to the control or direction of the employer.
- Whether the employee is a part of employers’ organisation.
- Whether the employee has worked for the employer for an average of at least 40 hours per month over the last three months.
- Whether the employee is solely economically dependent on employer.
- Whether the employee is provided with tools of trade or work equipment by the employer.
- Whether the employee is only permitted to work for or render services to the employer.
The abovementioned test is known as the “dominant impression” test and must be applied to all independent contractor agreements before a potential employee will be excluded from the application of employment legislation. The dominant impression test is applied by directly applying the employment circumstances of the potential employee to the abovementioned factors. Reason dictates that the test is qualitative rather than quantitative. The nature of the relationship cannot be determined simply by comparing the number of indicators for and against the existence of an employment relationship. This is because certain factors will indicate far more about the substance of an employment relationship than others. For example, a term of a contract setting out an obligation to report to and answer to the employer on all tasks would certainly carry more weight in determining the employment relationship than the fact that the contract is simply titled an “Independent Consultancy Agreement”.
To avoid these disputes, independent contractor agreements need to be drafted carefully to ensure that the factors used in the dominant impression test are clearly addressed and are not included in the contract. Thereby immediately eliminating the CCMA’s and/or Labour Court’s duty to conduct the dominant impression test. Independent Contractor Agreements should be properly drafted by a legal professional. Employers are urged to spend a little money now on legal costs to protect yourselves by having these agreements professionally drafted rather than spending a lot of money on legal costs later on when these contracts are brought before the CCMA and Labour Court with devastating consequences.
For further information, please do not hesitate to contact us.