Labour Relations Act, 1995 (Act No. 66 of 1995)

Codes of Good Practice

Who is an Employee

Part 2 : The Presumption as to who is an Employee
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12. The 2002 amendments to the LRA and BCEA introduce a provision into each Act creating a rebuttable presumption as to whether a person is an employee and therefore covered by the Act. These provisions are found in section 200A of the LRA and section 83A of the BCEA. These sections only apply to employees who earn less than a threshold amount determined from time to time by the Minister of Labour in terms of section 6(3) of the BCEA.1

 

13. A person is presumed to be an employee if they are able to establish that one of seven listed factors is present in their relationship with a person for whom they work or to whom they render services. Before examining the seven factors, it is necessary to describe the general operation of the presumption.

 

14. Subject to the earnings threshold, the presumption applies in any proceedings in terms of either the BCEA or LRA in which a party ('the applicant') alleges that they are an employee and one or more of the other parties to the proceedings disputes this allegation.

 

15. In order to be presumed to be an employee, an applicant must demonstrate that —
(a) they work for or render services to the person or entity cited in the proceedings as their employer; and
(b) any one of the seven listed factors is present in their relationship with that person or entity. (These factors are discussed in paragraph 18 of the Code.)

 

16. The presumption applies regardless of the form of the contract. Accordingly, a person applying the presumption must evaluate evidence concerning the actual nature of the employment relationship. The issue of the applicant's employment status cannot be determined merely by reference to either the applicant's obligations as stipulated in the contract or a "label" attached to the relationship in a contract. Therefore a statement in a contract that the applicant is not an employee or is an independent contractor must not be taken as conclusive proof of the status of the applicant.

 

17. The fact that an applicant satisfies the requirements of the presumption by establishing that one of the listed factors is present in the relationship does not establish that the applicant is an employee. However, the onus then falls on the "employer" to lead evidence to prove that the applicant is not an employee and that the relationship is in fact one of independent contracting. If the respondent fails to lead satisfactory evidence, the applicant must be held to be an employee.

 

18. The presumption comes into operation if the applicant establishes that one of the following seven factors is present —
(a)"the manner in which the person works is subject to the control or direction of another person "

The factor of control or direction will generally be present if the applicant is required to obey the lawful and reasonable commands, orders or instructions of the employer or the employer's personnel (for example, managers or supervisors) as to the manner in which they are to work. It is present in a relationship in which a person supplies only labour and the other party directs the manner in which he or she works. In contrast, control and direction are not present if a person is hired to perform a particular task or produce a particular product and is entitled to determine the manner in which the task is to be performed or the product produced. It is an indication of an employment relationship that the "employer" retains the right to choose which tools, staff, raw materials, routines, patents or technology are used. Likewise, the fact that an employer is entitled to take disciplinary action against the person as a result of the manner in which the person works is a strong indication of an employment relationship.

(b) "the person's hours of work are subject to the control or direction of another person"

This factor will be present if the person's hours of work are a term of the contract and the contract permits the employer or person providing the work to determine at what times work is to be performed. However, the fact that the contract does not determine the exact times of commencing and ending work does not entail that it is not a contract of employment. Sufficient control or direction may be present if the contract between the parties determines the total number of hours that the person is required to work within a specified period. Flexible working time arrangements are not incompatible with an employment relationship.

(c) "in the case of a person who works for an organisation, the person forms part of that organisation"

This factor may apply in respect of any employer that constitutes a corporate entity. It does not apply to individuals employing, for instance, domestic workers. The factor will be present if the applicant's services form an integrated part of the employer's organisation or operations.

A person who works for or supplies services to an employer as part of conducting their own business does not form part of the employer's organisation. Factors indicating that a person operates their own business are that they bear risks such as bad workmanship, poor performance, price hikes and time over-runs. In the case of employment, an employer will typically bear these types of risks.

(d) "the person has worked for that other person for an average of at least 40 hours per month over the last three months"

If the applicant is still in the employment of the employer, this should be measured over the three months prior to the case commencing. If the relationship has terminated, it should be measured with reference to the three-month period preceding its termination.

(e) "the person is economically dependent on the other person for whom he or she works or renders services"

Economic dependence will generally be present if the applicant depends upon the person for whom they work for the supply of work. An employee's remuneration will generally be his or her sole or principal source of income. On the other hand, economic dependence will not be present if the applicant is genuinely self- employed or is running their own business. A self-employed person generally assumes the financial risk attached to performing work. An important indicator that a person is genuinely self-employed is that he or she retains the capacity to contract with others to work or provide services. In other words, an independent contractor is generally free to build a multiple concurrent client base while an employee is bound to a more exclusive relationship with the employer.

An exception to this is the position of part-time employees. The fact that a part-time employee is able to work for another employer in the periods in which he or she is not working does not affect his or her status as an employee. Likewise, the fact that a full-time employee may be able to take on other employment that does not conflict with the interests of their employer in their spare time is not an indication of self-employment.

(f) "the person is provided with the tools of trade or work equipment by the other person"

This provision applies regardless of whether the tools or equipment are supplied free of cost or their cost is deducted from the applicant's earnings or the applicant is required to re-pay the cost. The term "tools of trade" is not limited to tools in the narrow sense and includes items required for work such as books or computer equipment.

(g) "the person only works for or renders services to one person"

This factor will not be present if the person works for or supplies services to any other person. It is not relevant whether that work is permitted in terms of the relationship or whether it involves "moonlighting" contrary to the terms of the relationship.

 

19. If any one of the factors listed in the preceding paragraph is established, the applicant is presumed to be an employee. An "employer" that disputes that an applicant is an employee must be given the opportunity to rebut the presumption by leading evidence concerning the nature of the working relationship. After hearing this evidence, and any additional evidence provided by the applicant or any other party, the presiding officer must rule on whether the applicant is an employee or not.

 

20. In cases in which the presumption is not applicable, because the person earns above the threshold amount, the factors listed in the presumption (and discussed above) may be used as a guide for the purpose of determining whether a person is in reality in an employment relationship or is self-employed.2

 

1 With effect from 14 March 2003, the threshold amount is R115 572 (GNR 356 GG 25012 of 14 March 2003). Previously, the amount was R89 455,00 per annum (GNR 1439 of 13 November 1998). For the purpose of determining whether an employee falls within this threshold, an employee's earnings are calculated as gross pay before deductions (i.e. income tax, pension, medical aid contributions and similar payments), but excluding contributions made by the employer in respect of the employee.
2 Denel (Pty) Ltd v Gerber at para 201.