Who is an employee - the reality test

PROTECT A PARTNER (PTY) LTD v LAURA MACHABA-ABIODUN (2012) JR2062/2010 (LC)

extract from the judgement of GAIBIE, AJ

... it is also necessary to take judicial recognition of the overall employment background and the nature of employment relationships in modern day. In his article⁸  Professor Paul Benjamin („Benjamin‟) indicates that the statutory definition of an employee draws the line between employment and self-employment. Benjamin recognises that in recent years –

„...this line has become an increasingly contested terrain. Factors such as globalisation, deregulation and technological change have combined greatly to increase the variety of forms of employment. An increasing number of workers are now located in a grey area between employment and self employment.  In  addition,  many  employers  have  adopted  strategies  to disguise employment as self employment so as to avoid the requirement of labour law.

This shift has been described as the rise of “atypical” or “non-standard” forms of employment. These terms are generally taken to encapsulate employment other than full time employment for a single employer who controls the workplace. As Clive Thompson has commented: “The  standard  model of employment is now one of inherent  variability. Work has changed and is changing for both better and for worse”.‟

[51]    Benjamin also indicates that the negative implications of these developments have been recognised in government policy documents and he records the following excerpt from the green paper⁹  which preceded the promulgation of the Basic Conditions of Employment Act 75 of 1997 („the BCEA‟):

„The current labour market has many forms of employment relationships that differ from full-time employment. These include part-time employees, temporary employees, employees supplied by employment agencies, casual employees, home workers and workers engaged under a range of contracting relationships ...‟

[52]    In her article,¹⁰  Professor Rochelle Le Roux also comments on the diverse forms in which labour presents itself:

„Until recently there has been very little difficulty in using the contract of employment to draw that line. However, work continuously presents itself in new and diverse forms, and the reality must have dawned on even the most conservative labour lawyer that the continued reliance and the contract of employment will render labour law less and less relevant. So where and how should the line be drawn now?‟

Applicable legal principles

[53]    The scope of the definition of ‘employee’ in section 213 of the LRA was recently discussed in Workforce Group.¹¹ In that decision, the Court referred to the Sita judgment, where the LAC, without indicating the relative weight that should be accorded to each factor, identified the primary criteria for the purposes of determining an employment relationship as:

(a)      The employer‟s right of supervision and control;

(b)      Whether the employee forms an integral part of the organisation with the employer; and

(c)      The extent to which the employee was economically dependent upon the employee.

[54]    The LAC, in developing the reality test, cited with approval, Benjamin‟s article. Benjamin clearly indicates that it is not necessary to establish the existence of all three criteria for the purposes of deciding whether an employment relationship exists. In this regard, he makes the following proposal:

„It is suggested that the presence of any of these should, in normal circumstances, indicate that the person is an employee. The presence of a right of control should point to an employment relationship covered by labour legislation, unless the employer can show aspects of the relationship that make this inappropriate. It will be for the courts to delineate those factors that indicate that an employment relationship does not exist despite the presence of control. Where this is not the case, the courts could utilise the presence of economic dependence or the person‟s integration into the employer‟s organization  to  determine  whether  they should receive  the  protection  of labour law.‟¹² 

[55]    According to Benjamin, therefore, no one factor is decisive and it is possible in certain circumstances to declare that an employment relationship exists if only one of the three factors is satisfied.

[56]    Depending on the context, the three criteria must be applied in circumstances where there is a recognition that there may be many factors to be taken into account in relation to each of those criteria with different priority being given to those factors depending on the facts of each individual case.

Element of control

[57]    First, the element of control will be important. Traditionally, this element is determined by enquiring who makes the decision about what is to be done, the way in which it is to be done, the manner or the means by which it is to be done and/or the time when it is to be done? In addition, questions must be asked about who hires and fires the persons who must perform what is to be done, and who provides the material, the equipment or the tools to be used in performing what is to be done? These questions are, in the context of the control  element,  easy  to  answer  in respect  of  employees  who  are  either unskilled or semi skilled precisely because such employees fit neatly into the typical master-servant relationship. From time to time, our courts have, depending on the nature of the employment relationship, attempted to define the  control  element  in  narrower  terms,   requiring  in  its  basic  form  some element of hierarchical authority or subordinate relationship.¹³

[58]    In the context of skilled or expert employees, the element of control may not be decisive precisely because the employer may be less skilled or less experienced than the skilled employee and may not have the appropriate skill or discretion to decide how the work should be done. This was recognised in Medical Association of S.A. and Others v Minister of Health and Another.¹⁴

Whilst  it  is  settled  law  that  some  form  of  control  is  necessary  for  an employment relationship to exist, the exact nature, form or extent of control required in any particular case is less clear. Much will depend on the nature of the work to be performed and the relationship between the parties.

[59]    In such cases, the control element must be broadened to ask questions that are context appropriate. In the case of skilled employees, the appropriate question was posed by the Court of Appeal in Lane v Shire Roofing Company (Oxford) Limited [1995] IR LR 493 (CA), where Henry LJ stated that:

„In such cases the question is broadened to ask whose business was it? Was the workman carrying on his own business or was he carrying on that of his employers? The American Supreme Court, in United States of America v Silk (1946) 331 US 704, asks the question whether the men were employees “as a matter of economic reality”. The answer to this question may cover much of the same ground as the control test (such as whether he provides his own equipment and hires his own helpers) but may involve looking to see where the financial risk lies, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.‟

[60]    A  similar  approach  was  adopted  by  Cooke  J  in  Market  Investigations  v Minister of Social Security [1969] 2 QB 173 (HC), where he indicated that:

„The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors, which may be of importance, are such matters as whether  the  man  performing  the  services  provides  his  own  equipment, whether he hires his own helpers, and what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.‟

[61]    The above approaches to the element of control are also congruent with section 213 of the LRA which inter alia defines an employee as any other person who in any manner assists in carrying on or conducting the business of the employer.

[62]    The Employment Appeal Tribunal in the UK in Buchan v Secretary of State for Employment; Ivey v Secretary of State for Employment¹⁵ suggested that in its most reduced form the element of control would be reflected in the employer‟s power to terminate the employment relationship.

Organisation test

[65]    According to Benjamin, „...integration into the employer‟s organization is now a factor that may be taken into account in cases in which the conventional aspect of control and supervision are not present. The criticism of the organisation test in Smit must now be tempered by the fact that the statutory definition of an employee requires a court to consider whether the employee is  assisting  the  employer  conduct  its  business,  an  issue  to  which  the “organisation” test addresses itself.‟¹⁶

Economic dependence

[67]    The  applicant  contended  that because Abiodun  had  alternative means  of earnings independently of her employment with the applicant, she was not economically dependent. However, and despite her alternative means of earnings, Abiodun‟s evidence that the lion share of her income emanated from the applicant was uncontested.

[68]    In any event, and on the basis of the reality test, Abiodun has satisfied both the  control  and  the  organisation  tests,  and she  has  established  that  her income from the applicant was the dominant form of her earnings. To that extent she has satisfied that criteria too. However, and in so far as a contrary view exists in relation to determining the notion of „economic dependence‟,¹⁷  it is clear that Abiodun has discharged the onus, at the very least, in relation to the first two criteria.

Citations 

8 Benjamin, P. ‘An Accident of History: Who is (and Who should be) an employee under South African Labour Law,‟ (2004) 25 ILJ 787 at 789-790.

9 Id at 790.

10 Le Roux, R. ‘The Meaning of „Worker‟ and the Road Towards Diversification: Reflecting on Discovery, SITA and Kylie’,2009 (30) ILJ 49.

11 Workforce Group (supra) at para 5.

12 Above n 8 at 804.

13 Mhlongo and Another N.O. v Minister of Police 1978 (2) SA 551 (A); Roffey v Catterall, Edwards and Goudré (Pty) Ltd 1977 (4) SA 494 (N).

14 (1997) 18 ILJ 528 (LC).

15 [1997] IRLR 80.

16 At pages 803-804.

17 See in this regard Paul Benjamin‟s article at 803.