Employee vs Contractor

 Are you an Employee?

In the modern times, well through out the ages employment has been the part of the economic system that forms the very essence of human socio-political and economic life. The realm of employment has had quite the story since the dawn of mankind and you best believe the story ain’t over yet, no not by a long shot. The fate of the world has hung on the relationship between employer and employee for thousands of years. Every economic age that humanity has lived has been carried on the back of the employee. Sadly the appreciation employees have received has at times been less than that of a left toe nail. Employers have often taken advantage of this relationship. As a wise man once said, “employers ghost it when they make profit” (not my words)lol. More so from the first Industrial revolution up until the present modern era the relationship of employer and employee has become very dynamic and in many ways has also become quite a bit of a pickle to identify especially in legal terms. There is a fine line between an employee, a contractor/service provider or a slave. Yes slavery is alive my fellow humans beings. My Labour law lecturer always started a lecture by saying, “labour law, isn’t it wonderful”. Well without rambling on let me “launch a probe into this matter”.

Every country has its own labour law regime. The differences in the labour laws are mainly distinguished from conservative to liberal schools of though that mainly differ on the nature of employment contracts. The International Labour Organization (ILO) regardless of these differences in approach was established to protect the rights of workers and to create labour standards and legal uniformity for its member states. The ILO was established in 1917 as part of the Treaty of Versailles to  help establish social justices principles especially the with regards to the rights of workers and currently has 187 member states. With regards to the matter at hand The ILO adopted the Employment Relations Recommendations, 2006 (No 197), a standard that provides member states with guidelines on how to establish the existence of the employment relationship. Though these are recommendations member states often adopt such recommendations either partly or in full or apply the principles when drafting related legislation. 

The following factors should be taken into account:

The work is carried out under the instructions and control of another party;

The worker is integrated into the organization of the enterprise;

The work is to be done mainly for the benefit of the other party;

The work is carried out personally by the worker;

The work is performed within specified working hours; or

The work requires the provision of materials, machinery and tools by the party who requests the work to be done.

Further to the ILO Regulations 197 the dominant impression test was applied by courts mainly in common law jurisdictions to determine whether a person/worker was indeed an employee. The South African case below and table show how the test was applied. The test is still applied by courts and and snuggled itself in Legislation concerning the same.

Smit v Worken’s Compensation Commissioner 1979 (1) SA 51 (A) case:

Dominant impression test.

There is no single factor that independently and conclusively determines the existence of a contract of employment.

Therefore all aspects should be considered and the court must look at the ‘dominant impression’.

CONTRACT OF EMPLOYMENT vs

INDEPENDENT CONTRACTOR:

The object of the contract is to render personal services.

The object of the contract is to perform a specified work or produce a specified result.

The employee must perform services personally.

The independent contractor may usually perform through others.

The employer may choose when to make use of the services of the employee.

The I.C must perform work (or produce a result) within the period fixed by the contract.

The employee is obliged to perform lawful commands and instructions to the employer.

The I.C is subservient to the contract, not under the control or supervision of the employer.

The contract terminates on the death of the employee.

The contract does not necessarily terminate on the death of the contractor.

The contract terminates on the expiry of a period of service in the contract.

The contact terminates on the completion of work or the production of a specified result.

National legislation within ILO member states largely adheres to these ILO recommendations and case law regarding the establishment of an employment relationship  largely reflects these principles including those already established under common law and older legislation. In South Africa one of the first countries to recognize fair labour practices as a Constitutional right defining what an employee was became significantly important. The Code of Good practice 2006 (South Africa) which was adopted  from the ILO Regulations was adopted and made the standard for interpreting legislation in as far as defining what an employee entails. Save for the guidelines stated above the Code of Good practice acknowledges how some employers try to evade the title of employee and use quite cleverly worded contracts that classifies employees as contractors for example. Therefore a contract that classifies an employee as a contractor or otherwise will not be enforceable as such and the law will recognize the worker as an employee should he/she fall into the recognized guidelines. So lets take a look at these guidelines and examine how they have been adopted and are used in the labour relations dimension.

The work is carried out under the instructions and control of another party

A court may find that there is a contract of employment even if the employer exercises a relatively low degree of control over the employee. The factor of control or direction will be present if the person is required to obey the lawful and reasonable commands, orders or instructions of the employer or the employer's personnel, as to the manner in which they are to work. 

Should the person only provide his labour to another who then provides the tools, work schedule, methods and instructions to said person then that person can be deemed to be an employee.

 The person's hours of work are subject to the control or direction of another person

Should the contract specify the total number of hours of work or make provision for flexible working time, this could be compatible with a contract of employment. The absence of stipulated hours of work in a contract will not necessarily mean that it is not a contract of employment. Sufficient control or direction may be present if the employer is entitled to determine the number of hours that the person is required to work within a specified period - per day, per week or whatever.

It will be interesting to see how this will evolve in an increasingly digital global village. 

In the case of a person who works for an organization, the person forms part of that organization:

This largely applies with regard to companies and other organizations. It would not apply for example to a person employing a domestic worker - although in such instances, the domestic worker is obviously an employee.  A person who works for or supplies services to an employer as part of conducting his own business interests does not form part of the employer's organization. Therefore, a person who, for example, has a registered business entity and who renders services to another organization, does not form part of that other person's organization. A person who operates his own business bears risks such as bad workmanship, poor performance, price increases and so on. In the case of an employment relationship, the employer will typically bear these risks, and not the employee.

The person has worked for that other person for an average of at least 40 hrs per month over the last 3 months;

This provision of time indicates an ongoing relationship which establishes employment. The times vary from country to country but usually it is between 40 to 45 hours over 3 months.

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

If the one person is economically dependent on the other to the extent that his/her income and work activities depend on that one person or organization then that person is an employee.

 Part-time employees are generally free to render services to other employers during their off- time, the capacity to do so does not affect the persons status as an employee.

A contractor will alternatively be able to provide service to different clients and other entities, without having to report to or be under the control of another person in matters primarily to do with how he/she conducts the work.

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

Should the one person be provided tools of trade by another then there is a high probability that an employment relationship exist. For example a telephone technician with a specialized company vehicle, tools and equipment who largely responds to repair damages on the telephone system. Such person can be deemed to be an employee. A contractor on the other hand would bring his/her own tools of trade while working absent instruction from another.

The person only works for or renders services to one person/organization.

Well, this one might confuse the “connoisseurs”.lol. But just to clear the air of course seasonal and part time worker can still work for other employers and be recognized as employees still.

So, in essence these are the guidelines as per the ILO regulations which are largely drawn from common law, various other legislative provisions and principles. The matter surrounding the definition or what constitutes an employee is quite vast and also encompasses the status of “employees” conducting illegal work or who have the status of an illegal emigrant and so forth.  Part 2 will explain further.