Independent contractor or employee? The true state of affairs | Legal Legends

THIS QUESTION has been considered in a number of countries around the world. For example, in California, certain drivers have been ruled employees despite Uber having ‘employed’ them as independent contractors. What’s the significance between the two? In the case of employees, the Basic Conditions of Employment Act and Labour Relations Act (LRA) apply, and you would have to register for the Skills Development Levy, UIF, Workman’s Compensation, SITE and PAYE, which entail continuous monetary contributions. Ending an employee’s employment is also far harder than terminating an independent contractor. The LRA ensures that certain procedures, including disciplinary hearings, are followed before an employee can be dismissed. Independent contractors on the other hand are often simply issued a notice of termination. In South Africa, the NEDLAC Code of Good Practice sets out seven factors to determine whether someone is in fact an employee. These factors apply regardless of the form of a contract. For example, placing a label on the relationship such as a ‘Sub-Contractor Agreement’, ‘Agency Agreement’, ‘Independent Contractor Agreement’ and so on, even if recorded in the contract itself, cannot be taken as conclusive proof that that worker is an independent contractor. In practice, if a worker can establish that one of the seven factors is present, unless the ‘employer’ can then prove otherwise, the worker is regarded as an employee.

1. The manner in which the person works is subject to the direction of another person

If a worker is subject to the demands, orders or instructions of the ‘employer’ or employer’s personnel as to the manner in which the worker is required to work, this factor is generally presumed to be present. In contrast, this factor is not present if a person is hired to perform a task and is entitled to determine themself the way in which the task is to be performed. If the head office of the company operating a ride sharing app instructs its drivers on exact directions to take for each trip, and how they should behave and dress, this factor would most likely be present.

2. The person’s hours of work are subject to the control or direction of another person

If a worker’s daily working hours or total monthly work hours are set out in a contract, this factor may indeed be present. An Independent Contractor Agreement, which requires the worker to work between 9 am and 5 pm every weekday, would certainly be indicative of this factor being present.

3. In the case of a person who works for an organisation, the person forms part of that organisation

For example, at a manufacturing plant, if a worker is hired to operate the machinery, which performs a core function of the manufacturing plant, this factor will most likely be present.

4. The person has worked for the other person for an average of at least 40 hours per month over the last three months

This factor is self-explanatory and is predominantly present if a worker works for a full nine-hour per day work week per month for an ‘employer’.

5. The person is economically dependent on the other person for whom he or she works or renders services

This is generally present if the worker is dependent on the ‘employer’ as their sole or principal source of income. With the exception of part-time employees, the Code says that this factor won’t generally be present if a person is genuinely self-employed or still has the capacity to contract with other people to provide services.

If the driver of a ride sharing app is entirely dependent on the owners of the app as a source of income, and the driver is not discernibly selfemployed or does not have the time to build relationships with other possible ‘employers’, then this factor will in all likelihood be present.

6. The person is provided with the tools of trade or work equipment by the other person

In our ride sharing example, if the employer provides the driver with the vehicle to be used, whether the vehicle is provided free of charge or not, this factor will most likely be present.

7. The worker only works for or renders services to one person

A writer working for two seperate blogs and a news outlet would generally be regarded as an independent contractor and not an employee. The lines between employees and independent contractors are often blurred and require careful navigation. EM