In a reconsideration application that came before the Financial Services Tribunal (FST) recently, the applicant, a security company, took issue with a determination by the Pension Funds Adjudicator (first respondent).
The Adjudicator ordered the Private Security Sector Provident Fund (second respondent) to register a security guard (third respondent) as a member from September 2013 to January 2016 and from February 2018 to August 2019. The security company was ordered to pay the member’s arrear contributions, plus late-payment interest, to the fund.
The security company contended that the guard had not been an employee during those periods. It said he was an independent contractor from 18 August 2013 to 31 February 2016 and was employed in terms of a learnership agreement from 1 February 2018 to 21 August 2019.
Factors that determine whether someone is an employee
But the FST said it was “evidently clear” that the nature of the relationship between the company and the guard was that of employer-employee, irrespective of how the contract was worded.
The tribunal drew attention to section 200A(1) of the Labour Relations Act (LRA), which states that, until the contrary is proved, a person who works for, or renders services to, any other person is presumed, regardless of the form of the contract, to be an employee, if any one or more of the following factors are present:
- The manner in which the person works is subject to the control or direction of another person;
- The person’s hours of work are subject to the control or direction of another person;
- In the case of a person who works for an organisation, the person forms part of that organisation;
- The person has worked for that other person for an average of at least 40 hours per month over the last three months;
- The person is economically dependent on the other person for whom he or she works or renders services;
- The person is provided with tools of trade or work equipment by the other person; or
- The person only works for or renders services to one person.
The Basic Conditions of Employment Act (BCEA), in section 83A, contains identical provisions to those in section 200A of the LRA.
The FST also drew attention to the fact that, in terms of section 199 of the LRA, a contract of employment, whether concluded before or after an applicable collective agreement or arbitration award comes into operation, may not:
- Permit an employee to be paid remuneration that is less than that prescribed by the collective agreement or arbitration award;
- Permit an employee to be treated in a manner that is less favourable than that prescribed by that collective agreement or arbitration award; or
- Waive the application of any provision of that collective agreement or arbitration award.
The tribunal’s decision shows the panel’s displeasure with the idea that an employer can word a contract in such a way as to negate its statutory obligations or to create the impression that a person who fulfils the presumptive conditions of section 200A (or section 83A) is not an employee.
As a result, it dismissed the security company’s application.
Qualification to the presumptive factors
To avoid potential misunderstanding, the FST’s observations about the factors that determine whether a person is an employee require further explanation. Perhaps because it was not relevant to the reconsideration application, the tribunal did not refer to the provision of section 200A of LRA that excludes using any of the seven factors as a presumption for being an employee.
In terms of sub-section (2) of section 200A, the seven criteria do not apply to people who earn above the threshold determined by the Minister of Employment and Labour under section 6(3) of the BCEA. With effect from 1 March 2022, the minister increased the earnings threshold to R224 080.48 a year (R18 673.37 a month).
Where a person earns above the threshold, and a dispute arises over whether the person is an employee or an independent contractor, the court or tribunal will apply what is called the dominant impression test. This test concentrates on three aspects:
- The employer’s right to supervision and control;
- Whether the employee forms an integral part of the employer’s organisation; and
- The extent to which the employee is economically dependent on the employer.
The dominant impression test was established in the case of State Information Technology Agency (SITA) (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (2008) and reaffirmed in Goliath v SA Broadcasting Corporation SOC Ltd and Others (2022).
Click here for a commentary by Webber Wentzel on the Goliath case.
In the case of persons who earn below the threshold, note that the presumption of being an employee is qualified by the phrase “until the contrary is proved” in section 200A(1).
The National Economic Development and Labour Council (Nedlac) has drawn up a “Code of good practice: who is an employee”, which was issued in terms of section 200A(4).
Nedlac’s code states that in the case of employees who earn less than the threshold, the employer may lead evidence to rebut the presumption and establish that they are not an “employee”.
For example, if the person who claims to be an employee establishes that he or she has worked for the other person for an average of at least 40 hours over the past three months, he or she must be presumed to be an employee. The “employer” may, however, lead evidence that that person is an independent contractor engaged to perform a particular task. The court or tribunal will then have to determine whether that person is an employee, the code says.
