Article by EOHCB
Disguised employment is a significant reality in the South African labour market and has been dealt with in a number of reported decisions.
The Employment Relationship Recommendation, 2006 of the International Labour Organisation states that a “disguised employment” relationship occurs when the employer treats an individual as other than an employee in a manner that hides his or true legal status as an employee”.
It is an established principle of our law that the label attached to a contract is of no assistance where it is chosen to disguise the relationship. A contract that designates an employee as an independent contractor, but in terms of which the employee is in a subordinate or dependent position, remains a contract of service. In other cases, employers have claimed that a person who was formerly an employee has been “converted” into an independent contractor.
If the person has previously performed the same or similar work as an employee, this is a very strong indication that he or she remains an employee. Likewise, the fact that other employees employed by the same employer, or by other employers in the same sector, to perform the same or similar work under similar conditions are classified as employees may be a factor indicating that the person is an employee.
A person is presumed to be an employee if any one of the 7 factors listed in the LRA – section 200A – or the BCEA section 83A - is present in the relationship between that person and the person for whom they work or to whom they render services. It must be emphasized that not all of these factors must be present – only one of them needs to be present.
In legal terms, a presumption is the acceptance of a fact or state of affairs as being true and correct. There are two types of presumption, a rebuttable presumption and an irrebuttable presumption. A rebuttable presumption means that the fact or state of affairs is presumed to be true and correct until it can be proved otherwise, whereas an irrebuttable presumption is a fact or state of affairs that cannot be disproved.
When is there a presumed Employer / Employee relationship?
1. The manner in which the person works is subject to the control or direction of another person;
The manner in which the person works is subject to the control or direction of another person. 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. In other words, the person is required to obey the work performance instructions of the employer. This requirement 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.
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. For example, you call in a painting contractor to repaint your office block. You do not tell him what scaffolding to use, or how to erect the scaffolding. You do not tell him how to scrape the old paint off the walls, nor do you tell him what undercoat to apply or how many coats of paint to apply. You will probably only have a say in the choice of colour, and perhaps the type of paint that you want - matte finish, glossy finish, eggshell enamel or whatever. But apart from that, the employer will have no say over how the job is done, or the materials used.
In an employment relationship, the "employer" has the right to choose which tools, staff, raw materials, work performance specifications, etc. are to be used. Furthermore, a strong indicator of an employment relationship is where the "employee" is subject to the employer's disciplinary code, company policies and procedures.
2. The person’s hours of work are subject to the control or direction of another person;
If the person's hours of work are stipulated, usually in a contract or letter of appointment and the contract permits the employer to determine the hours of work, then this will be a strong indicator of an employment relationship. 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. Flexible working time arrangements are also found to be present in an employment relationship.
3. In the case where a person works for an organisation, the person is a part of that organisation;
This will probably apply in respect of any employer that is a corporate entity. It would not apply for example to a person employing a domestic worker - although in such instances, the domestic worker is obviously an employee. The factor will be present if the employee's services form an integral part of the employer's organisation or operations.
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 close corporation (cc) and who renders services to another organization, does not form part of that other person's organization. Indications that the person operates his own business are that they bear 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.
4. The person has worked for that other person for an average of at least 40 hours per month over the last three months;
5. The person is economically dependent on the other person for whom that person works or renders services;
This means that the person for whom the employee is working, is generally the sole source for the supply of work, and will be the employee’s sole source or principal source of income. Economic dependence will not normally be present if the person is genuinely self-employed or is running his/her own business.
An important indicator to self-employment is that the person is free to contract with other companies or persons to do work for them or to provide services to them. The fact that a self-employed person might only have one “client” does not necessarily mean that they are an employee of that client. If other factors are present, such as some of those mentioned, it will not necessarily form an employee-employer relationship.
Part time workers - the fact that a part-time worker is able to work for another employer during those periods in which he is not working, does not change his status as an employee. The same would apply to a full-time employee who has an after–hours, supplementary income-producing job. He remains an employee of the employer.
6. The person is provided with tools of trade or work equipment by the other person;
It is of no consequence whether the tools or equipment is supplied to the employee free of charge, or whether the employee pays for them. This provision includes equipment such as the provision of telephones, computers etc.
7. The person only works for or renders services to one person;
This condition will not be present in the case of a self-employed person, because such a person is free to do work for or supply services to any number of other persons or organizations.
We hope that you have found this information helpful in the structuring of your salon business. For any advice, explanations, business support or labour support, the EOHCB is at the service of its members.
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