The California Labor Commission recently ruled that an Uber driver, Barbara Ann Berwick, was indeed an employee and not an independent contractor. This ruling was reached against the backdrop of a class action suit against Uber (and its competitor Lyft) by drivers who want to be classified as employees and not as independent contractors.
Johan Botes, Director in the Employment practice at Cliffe Dekker Hofmeyr explains that the decision in the United States is of interest to employees and employers in South Africa because the distinction between employees and independent contractors still causes tension in the South African workplace.
“Employees are afforded significant legal rights and benefits under our employment legislation. Independent contractors, on the other hand, do not benefit from the statutory and other protection afforded to employees but may be able to arrange their income tax affairs with slightly more latitude than employees. Whereas a party may terminate the contract of an independent contractor in terms of the agreed termination provisions, only employees may be dismissed from employment. Accordingly, only employees could claim that they have been unfairly dismissed, or that they were the victims of unfair labour practices – two employee-specific rights under the Labour Relations Act (LRA),” Botes explains.
Botes notes that South Africa’s employment tribunal, the Commission for Conciliation, Mediation and Arbitration (CCMA) determines disputes from independent contractors claiming to be employees. Sections of the LRA and the Basic Conditions of Employment (BCEA) provide statutory presumption - and a Code of Good Practice - that the CCMA uses to determine whether a party is an employee or true independent contractor.
“Various factors are considered, including whether the manner in which the person's work is subject to the control or direction of the other person; the person's hours of work are determined by the other party; the person is part of the organisation; the person works for the other for at least 40 hours per month for the past three months; the person is economically dependent on the other; the person is provided with tools of the trade by the other; or whether the person only works or renders service to the one other party.
“If the person earns below the Earnings Threshold established in terms of the BCEA, the statutory presumption applies if any one of the seven factors listed is present. The presumption may be rebutted by leading evidence to prove that the true relationship is indeed one of an independent contractor and a client and not that between an employee and employer. However, it is often difficult to prove that parties are independent contractors where these factors are present,” he says.
“Entrepreneurs who feel strangled by the bureaucracy of an employment relationship may benefit from arranging their affairs as independent contractors. However, where employers or employees utilise independent contractor agreements to mask the true relationship between them this could have disastrous consequences for both parties,” Botes adds.