Labour Law

MRL 3702 – Chapter 3

Chapter 3

• Defining who is considered an 'employee' within the context of South African

labour law. This is a key question, because labour legislation applies to
employees, but not to everyone who performs work. The chapter will discuss the
statutory definition of 'employee' as it is in the Labour Relations Act (LRA), Basic
Conditions of Employment Act (BCEA) and Employment Equity Act (EEA). It will
also address the distinction between employees and independent contractors,
because the latter are excluded from the protections of labour legislation. Finally,
the chapter introduces the concept of non-standard employment, including
discussion of fixed-term employees and temporary employment services (TES).
3.2.1 The definition of ‘employee’

Statutory Definition of 'Employee'

• Importance: Labor law in South Africa centres around the employment relationship, highlighting the
importance of an accurate employee definition.
• Core Legislation: Key labour relations principles are found in the Constitution, Labour Relations Act (LRA),
and other legislation.
• Definition: The LRA defines an employee as:
• "...any person, excluding an independent contractor, who works for another person or for the State and
who receives, or is entitled to receive, any remuneration".
• "...any other person who in any manner assists in carrying on or conducting the business of an employer".
• Equivalence: This definition mirrors that found in Section 1 of both the Basic Conditions of Employment Act
(BCEA) and the Employment Equity Act (EEA).
• Wide Coverage: Part (a) of the statutory definition has wide coverage.
• Exclusions: Certain categories are excluded from this definition.
• Section 2 of the LRA excludes members of the National Defence Force.
• The BCEA excludes certain categories, such as unpaid agency workers and individuals in charitable
organizations.
Case Law Related to the Statutory Definition
• Examples and Case Law Related to the Statutory Definition

• Expanded Definition: Labour law extends the definition of "employee" to offer protection against unfair discrimination and unfair
dismissals.

• Legality of Employment: The courts consider whether a valid contract exists and the legality of the employee's work status,
especially regarding foreign employees needing work permits.

o In Discovery Health Limited v CCMA, it was held that if a person is party to a valid contract, it does not imply that the person
will enjoy protection against unfair dismissal and other protections in labour legislation.

• Section 23(1) of the Constitution: Section 23(1) of the Constitution provides that everyone has the right to fair labour practices.
The question of whether the contract was valid directly affects the application of Section 23(1).

• Who is the True Employer: Courts may need to identify the true employer, especially in cases of labour broking or corporate
structures.

o In cases like Buffalo Signs Co Ltd & Others v De Castro & Another (1999), the courts examine the relationships between
parties and the close corporate to ascertain who the "true" employer is.

• "Independent contractor" exclusion: The definition of an employee specifically excludes an independent contractor.
3.2.2 The distinction between employees and independent contractors
— the tests developed by the courts and the legislative presumption
as to who is an employee

• Distinction Between Employees and Independent Contractors

• Importance of Distinction: The distinction between employees and independent contractors is important
because labour legislation applies to employees but not to independent contractors.

• Defining the Line: Both employees and independent contractors perform work for payment. Labour
legislation doesn't define "contract of employment", "contract of the independent contractor" or the
concept of "work". To make this distinction, one has to look outside legislation to determine a number of
tests.

• Evolving Tests: Courts have formulated numerous tests over the years to differentiate between the two.

• The Control Test

• Nature of the Test: The control test looks at the degree of supervision and control exercised over the
worker.
Application: An early formulation of the control test can be found in Colonial Mutual Life Assurance Society
Ltd v Macdonald AD. The key aspect of this test is to determine if the "master not only has the right to
prescribe to the worker what work has to be done, but also the manner in which such work has to be done".

Limitations: The control test's reliance on control as the distinguishing feature has become increasingly
specialized. The less actual control exercised by the employer, the more difficult it becomes to distinguish
employees from independent contractors.

Modern Context: The control test is less pertinent and obvious in modern work environments, especially
where large numbers of employees have specialized skills and training.
The Dominant Impression Test

• Overall Impression: The dominant impression test entails considering all indications or factors to determine whether the worker
is, in essence, an employee or an independent contractor.

• Factors Considered: Factors that courts consider to ascertain a dominant impression:

o The right of the employer to supervise the person.

o The extent to which the worker depends on the employer for the performance of duties.

o Whether the worker is allowed to work for another.

o Whether the worker is obliged to perform their duties personally.

o Whether the worker is obliged to work for another in terms of an employment contract.

o Whether the worker is paid according to a fixed rate or by commission.

o Whether the worker provides their own tools and equipment.

o Whether the employer has the right to discipline the worker.

Conti…
• Not Sole Indicator: The existence or absence of control is only one factor and not the sole
indicator.

• Supervision and Control: The greater the degree of supervision and control, the stronger the
probability will be that it is a contract of service.

• Holistic Approach: All factors create a "dominant impression" that weighs up all the relevant factors
and then determines whether the worker is performing duties as an employee.
Examples of Applying the Dominant Impression Test

• Examples of Applying the Dominant Impression Test

• Smit v Workmen's Compensation Commissioner: This case illustrates the application of the
dominant impression test. The court had to decide whether Smit, who was employed on a
commission basis and could not perform certain acts without authority, was an employee or not. The
court considered the lack of supervision and control, the method of payment, and the freedom Smit
had in performing his duties. The court came to the conclusion that Smit was not an employee.
Other Considerations

• "Multiple" Test: Some judgments of the Labour Appeal Court suggest that the realities of the
relationship cannot be reduced to a single test, so all the relevant facts and circumstances are
required.

• "Team Production": The courts have also resorted to what may broadly be called a 'productive
capacity' test.

• Intention of the Parties: The label the parties choose for their relationship is only a point of
departure.
Legislative Presumption as to Who is an Employee

• Section 200A of the LRA: In 2002, Section 200A was added to the LRA and BCEA to provide guidelines in
determining whether someone is an employee.

• Presumption: If one or more of the listed factors are present, a person is presumed to be an employee.

• Factors: These factors include:

o The manner in which the person's work is subject to the control or direction of another person.

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

o The person has worked for the other person for an average of at least 40 hours per month over the last
three months.

o The person is economically dependent on the other person for whom they work or renders services.

o The person is provided with tools or trade equipment by the other person.

o The person only works for or renders services to one person.

Conti…
• Purpose: These presumptions aim to assist individuals approaching the CCMA or Labour Court by
establishing a person's status as an employee, subject to limitations.

• Limitations: It only applies to instances where someone wants to establish their status as an
employee for purposes of the application of legislation based on the common law.
3.3.1. Non-standard employment

• Definition: Non-standard employment includes forms of employment that differ from the traditional,
permanent, full-time employment model.

• Traditional Employment: Traditionally, permanent full-time employment is standard unless

otherwise expressed. A permanent employee typically has an ongoing employment relationship with
continued benefits until terminated fairly.

• Increasing Prevalence: Fixed-term, part-time, and temporary employment are increasingly

common.

• Temporary Employment Services: Employers may approach a temporary employment service to

make persons available to perform duties during times of need.
Fixed-Term Employees
• Definition: Fixed-term contract employees are employed for a specified period or until a specific project is complete.
• Usage: These employees are generally regarded as temporary employees and are often utilized as casual workers.
• Rights: Generally, fixed-term employees are entitled to all the protection afforded by labour legislation.
• Reasons for Use: Employers express a need for fixed-term employees based on the temporary nature of the work or for a
project of limited duration.
• Circumvention(the action of overcoming a problem or difficulty): Fixed-term contracts are sometimes used to
circumvent protections against unfair dismissal.
• LRA Provisions: Section 186(1)(b) of the LRA addresses the use of fixed-term contracts.
o It states that non-renewal of a fixed-term contract can constitute a dismissal if the employee reasonably expected
renewal.
o Section 198B of the LRA limits the use of fixed-term contracts for employees earning below a certain threshold.
Justifiable Reasons
• According to Section 198B(4), offering fixed term employment may be justifiable if the employee is:

o Replacing someone temporarily absent.

o Employed on a temporary increase of work not expected to endure beyond 12 months.

o A student or recent graduate for training or experience.

o Employed to work exclusively on a specific project with a limited or defined duration.

o A non-citizen with a work permit for a defined period.

o Employed for seasonal work.

o Employed for an official public works scheme or similar.

o Employed in a position funded by an external source for a limited period.

Threshold: Section 198B only applies to employees earning below a specified threshold and creates exceptions to the
general rule that fixed-term contracts may not be longer than three months.
Part-Time Employees

• Definition: Part-time employees work fewer hours than full-time employees, either daily or weekly.

• Protection: They are defined in labour legislation and enjoy protection against unfair dismissal.

• Vulnerable Persons: Similar to fixed-term employees, part-time workers are often engaged in career
progression and excluded from the usual security and career progression associated with full-time
employment.

• Section 198C: Section 198C of the LRA provides protection for part-time employees earning below the
specified threshold.

• Comparable Treatment: A comparable full-time employee doing the same or similar work, must receive
similar work, seniority, experience and skills.

• Access to Opportunities: A part-time employee must have the same access to opportunities as a
comparable full-time employee.
Temporary Employment Services (TES)

• Definition: A TES, also called a labour broker, is described in section 198 of the LRA as any person who, for reward, procures for
or provides to a client other persons who perform work for the client and who are remunerated by the temporary employment
service.

• Function: TES organizations often furnish the services of a TES, either to provide persons to perform non-core functions.

• Triangular Relationship: A triangular relationship exists to split the functions of the employer between the TES and the client.
The primary responsibilities are to pay and manage the human resources component of employment, while the client may direct
work and locations and is responsible for the employees working conditions.

• Deeming Provision: A person whose services have been procured for, or provided to, a client by a TES is deemed to be the
employee of the TES and the client is deemed a 'joint employer'.

• Joint and Several Liability: A TES and their client are jointly and severally liable if the TES, in respect of any of its employees,
contravenes:

o A collective agreement that regulates terms and conditions of employment.

o A binding arbitration award that regulates terms and conditions of employment.

o The BCEA.

o A sectoral determination made in terms of the BCEA.

3.4 Other categories of employees

• Overview: Besides fixed-term, contract workers, probationary employees, manual employees, part-
time employees, and piece workers, other categories of employees exist, such as public servants
and senior and junior employees. Employees of labour brokers and their employers were discussed
previously. Regardless of their category, all employees are protected by labour legislation, although
the level of protection may vary depending on the specific category.
Probationary Employees

• Purpose: An employer may subject an employee to a probationary period to assess their skills,
service, and abilities. Employers may also want to determine how compatible the worker is with
fellow employees.

• Assessment: The probationary period provides an opportunity to test a new one and determine
whether to provide the employee with an opportunity to test one another and to determine whether
to continue working with each other for a long period of time in a healthy employment relationship.

• Fair Treatment: An employer may not use the probationary period to avoid treating employees
fairly.

• Duration: The length of the probationary period is generally required to be determined in advance
and to allow for assessment of a reasonable period. This will depend on the nature of the job itself,
normally, or grounds for dismissal of a length.
Conti…
• Performance Evaluation: Schedule 8 to the Code of Good Practice: Dismissal requires that, during the probationary period, the
employee should be assessed and the employee should, where appropriate, be given reasonable evaluation, instruction, training,
guidance or counselling in order to allow them to render a satisfactory service.

• Confirmation/Termination: During or on completion of this probationary period one of three things may happen:

o An employee’s employment may be confirmed.

o The probationary period may be extended subject to further conditions.

o The employee’s performance may be considered unsatisfactory and their services terminated due to poor performance.

• Protection: It is easier to dismiss a probationary employee than permanent employees, especially in respect of protection
against unfair discrimination or unfair labour practices.
Senior and Junior Employees

• Functions: Some people perform certain functions that one would not normally associate with the
functions of an employee.

• Exercising Functions: Because of the functions exercised by senior managers one may think that
that they are not employees.

• Employer: A powerful manager may have the power to both appoint and dismiss people. Should
this powerful manager be treated in the same way as the workers on the factory floor, or should they
be treated differently?

• Application of Labour Legislation: In spite of the fact that senior managerial employees may act
more like employers, for the most part they still are employees for purposes of the application of
labour legislation.
Public Servants and Private Employees

• Definition: The term 'public servant' is not defined in the LRA or any other relevant statute. For the
purposes of this paragraph, however, the approach adopted in section 7(2) of the Public Service Act,
Proclamation 103 of 1994 (PSA) is followed, refers to appointments made below.

• Legal Relationship: The legal relationship between employers and employees in the private sector. As
part of the structure, the relationship between the State and its employees (and the corresponding normal
contractual principles still apply.

• Rights: At same rights in relation to public service. The LRA makes specific provision for the
establishment of bargaining councils with jurisdiction over public service.

• Bargaining Councils: The Public Service Co-ordinating Bargaining Council (PSCBC) has been
discussed in chapter 17. The parties to the PSCBC negotiate terms and conditions of employment.

• Labour Legislation: All employees, including public servants are treated like all employees and the
principles regulating employment discussed in chapter two and the principles in light of the contained in
the Constitution, and the rules applicable to all employees.
3.5 The Identity of the Employer

• Importance of Identifying the Employer: It is important to identify the employer who is responsible
in borderline or difficult situations. In practical terms, if employees feel their rights have been
infringed, the correct employer (legal entity) must be identified in the respondent matter.

• Unfair Dismissal Disputes: Identifying the employer is especially important in unfair dismissal
disputes.

• Multiple Entities: The employee might allege that they have been unfairly dismissed and the
employer will respond that there was no employment relationship or that another company or close
corporation was in response, either there was no employment relationship or that another company
or close corporation was the employer.

• Corporate Veil: It is sometimes necessary to lift the corporate veil to identify the true employer.
Considerations for Identifying the Employer

• Reality of Relationships: In all matters to ensure the question of who the employer is will consider all the realities of
the relationships to ensure the question of who the employer is all the realities of the relationships and close corporation
close corporation will consider all the realities of the relationships to ensure the question of who the employer is will
consider all the realities of the relationships and close corporation. This means that the question as to who the employer
is will consider all the realities of the relationships and close corporation and close corporation.

• Close Corporations: Close corporations must be carefully examined to ascertain who the true employer is.

• Determining the True Employer: The Labour Court and Labour Appeal Court consider the realities of the relationships
to ascertain what appears to be a different relationship. The true employer may be someone else in the relationship.

• Substance Over Form: Courts will consider the substance over the form of the relationship.

• Piercing the Corporate Veil: Section 200B was inserted into the LRA to address the piercing of the corporate veil.
Section 200B of the LRA
Section 200B of the LRA states:

• For the purposes of this Act and any other employment law, 'employer' includes one or more persons who carry on
associated or related activity or business by or through an employer if the intent or effect of their doing so is or has been
to directly or indirectly defeat the purpose of this Act or any employment law.

• If more than one person is held to be the employer of an employee in terms of subsection (1), those persons are jointly
and severally liable for any failure to comply with the obligations of an employer in terms of this Act or any other
employment law.

• Purpose of Section 200B

• The purpose of the Labour Relations Amendment Act is to prevent employers from hiding behind corporate structures or
outsourcing arrangements to avoid their obligations under labour law.

• Section 200B is intended to defeat the ability of employers to utilize corporate structures to defeat obligations under this
law.

• The Labour Court also made it very clear that the purpose of Section 200B of the LRA provides a general test for
determining whether a particular person or entity is the true employer of a particular employee.
Cases
• Colonial Mutual Life Assurance Society Ltd v Macdonald 1931 AD 412 (at 434-435) This case provides a formulation of a
test to distinguish between employees and independent contractors, focusing on the level of control exerted by the employer. It
emphasizes whether the master retains control over the manner in which the work has to be done.

• Medical Association of SA & Others v Minister of Health & Another (1997) 18 ILJ 528 (LC) In this case, the Labour Court
used the factors discussed in the Smit decision to assist in gaining the dominant impression that part-time district surgeons were
in fact employees of the state. The court made its decision based on the fact that the doctors rendered personal services and
were obliged to pay a contractual salary, among other factors.

• SABCK v McKenzie (1999) 20 ILJ 585 (LAC) This case identified the Appellate Division in the Smit v Workmen's
Compensation case test for drawing the distinction between employee and independent contractor.

• Davies v Fripp Is referenced in the determination of the balance of probabilities between a reciprocal relationship in the context
of employment.

• Assign Services (Pty) Ltd v National Union of Metalworkers of SA & Others (Casual Workers Advice Office as Amicus
Curiae) (2019) This case relates to the meaning of 'employee'.

• Strategic Liquor Services v Mvumbi NO & Others (2009) This case relates to the meaning of 'constructive dismissal'.
Conti…
• Murray v Minister of Defence This case concerns a military policeman and the general contractual duty of 'fair dealing' towards
its employees.

• Old Mutual Assurance Co SA v Gumbl (2007) In this case the specific clause surpassed the ordinary level to grant the right to
a hearing before dismissal.

• Boxer Superstores v Mbenathi & Another (2007) Relates to a contractual right.

• Denel (Pty) Ltd v CCMA & Others (2008) Labour court decision regarding the details of how the parties interacted with each
other, Ms. Gerber was in reality an employee of Denel.

• State Information Technology Agency (SITA) (Pty) Ltd v CCMA & Others (2008) Labour Court's approach to adding
'economic dependence' as a further factor when determining whether not there is an employment relationship.

• Kumbule v Commission for Conciliation, Mediation & Arbitration & Others (2013) It is necessary to tell us far more about
the substance of the relationships between applicant.

• Myeni v Workforce Staffing (Pty) Ltd Some factors are almost sufficient to establish an employee relationship.

• Enforce Security Group v Fikile & Others (2017) Labour appeal court premised on the continued existence of an automatic
termination clause termination by Temporary Employment Services (TES).