An employee is defined in LRA s 213 and excludes an independent contractor but it is still necessary to determine the true nature of any contractual relationship on the basis of the facts of each case.   The courts have adopted various tests over the years.    Contracts of work were distinguished from contracts of service;  factors such as producing a result, commission and lack of supervision or direction as to the result were considered to be vital.   This was described as a “multi-factoral” approach.   The “dominant impression” test was also applied.  In 2002 statutory amendments to the LRA and BCEA introduced a rebuttable presumption to be applied in certain circumstances and various factors were listed.   In 2006 the ILO adopted the “Employment Relationship Recommendation, 2006”.

Until now little attention has been given by the LC to a LAC case decided in March 2008 by Davis JA (State Information Technology Agency v CCMA [2008] 7 BLLR 611 (LAC)) in which a new approach to the determination of the nature of the contract was adopted.

In December 2009 in Pam Golding Properties (Pty) Ltd v Erasmus [2010] JOL 24963; (2010) 31 ILJ 1460 (LC) Van Niekerk J refused to review and set aside an award in which the CCMA commissioner decided that an “estate agent” was not an independent contractor despite the terms of an agreement designed by the “employer” to achieve that purpose.

In para [14] Van Niekerk J states:

“This judgment is indicative of what seems to me to be a new approach to the determination of the nature of the contract, one that accounts for recent legislative development (in the form of section 200A) and developments in international labour standards.   This approach adopts a test that is markedly different from the test based on any making over of productive capacity to another person, and can certainly be said to have confined that test to the status of historical curiosity.   The test established in State Information Technology Agency v CCMA [2008] 7 BLLR 611 (LAC) is more closely aligned with the “dominant impression” test, though not identical to it, and more in tune with developments internationally and on the domestic legislative front.   Davis JA held that when a court determines the question of an employment relationship, based on the legislative presumption of employment in section 200A and the judgment in Denel, three primary criteria apply.   These are:

(a)     an employer’s right to supervision and control;

(b)     whether the employee forms an integral part of the organisation with the employer;

(c)     the extent to which the employee was economically dependent upon the employer (at paragraph [12] of the judgment)”.

Van Niekerk J goes on to state in para [15]:

“The latter criterion, not relevant in the traditional formulation of the “dominant impression” test, has assumed a degree of importance.   In the course of its judgment, the LAC cited Benjamin’s article “An Accident of History: Who is (and Who Should Be) an Employee under South African Law” (2004) 25 ILJ 787, where Benjamin argues:

‘A starting point is to distinguish personal dependence from economic dependence.   A genuinely self-employed person is not economically dependent on their employer because he or she retains the capacity to contract with others.   Economic dependence therefore relates to the entrepreneurial position of the person in the marketplace.   An important indicator that a person is not dependent economically is that he or she is entitled to offer skills or services to persons other than his or her employer.   The fact that a person is required by contract to only provide services for a single ‘client’ is a very strong indication of economic dependence.   Likewise, depending upon an employer for the supply of work is a significant indicator of economic dependence’.

Benjamin suggests further that the presence of any one of the factors of the employer’s right of supervision and control; the employee forming an integrated part of the organisation of the employer; and the employee’s economic dependence on the employer would be sufficient to indicate that the person is an employee”.  [footnote omitted]

Comment

The decision in Pam Golding Properties (Pty) Ltd v Erasmus needs to be contrasted with a decision of the LAC in Sanlam Life Insurance Ltd v CCMA (2009) 30 ILJ 2903 (LAC) where it was held that a financial adviser was not an employee after pointing out that it was necessary to have regard to the terms of the contract governing the relationship and the LAC in that case applied the decision of Niselow v Liberty Life Association of Africa Limited 1998 (4) SA 163 (SCA) which Van Niekerk J regarded as having been overtaken by events.

All rather confusing and hopefully the LAC will provide fresh guidance when it has the opportunity to reconsider this important matter which is of considerable importance to everyone concerned with these matters.