Distinguishing between an independent contractor and a labour broking arrangement.

In this section, we discuss the fundamental differences between an independent contractor and an employee in a labour broking arrangement. The two concepts can be unclear. Without distinguishing between the two arrangements, it may be difficult for an employer to choose between the two arrangements. An employee may also not fully understand the legal repercussions that come with being in any of the two arrangements. The purpose of this section is therefore to demystify the two concepts to allow employers and employees an opportunity, at the very least, to understand the legal consequences of each arrangement. We also look at the contemporary position in terms of South African law. At the end of the discussion, it is recommended that the South African position that seeks to protect employees provided by a labour broker is recommended for the Zimbabwean labour law jurisdiction.

Defining the two arrangements

An independent contractor resembles an employee under the purview of the Act. The major difference is that an independent contractor is not under the control of the employer.[1] Control, in this case, envisages a situation where the employer oversees the employee’s work. In a proper employment relationship, the employer provides the employee with any work-related instructions. Per contra, in an independent contractor relationship, the employer does not regulate the time, and way the contractor must undertakes his or her tasks. The employer is mainly interested in the results. The independent contractor relationship does not result in the payment of a salary but fees or commissions.[2] Tests to determine if an employment relationship is in existence have already been discussed in the foregoing section.

On the other hand, a labour broking arrangement envisages three parties. There is the employer party (the labour broker) and the client, who receives the services of the employee(s). There is the employee(s) who is attached and employed by the labour broker. The client does not have a contract with the employee but with the labour broker.[3] All the conditions of service for the employee are managed by the labour broker.[4] The contract of employment between the employee and the labour broker basically follows the requirements of the Labour Act. The contract or service level agreement between the client and the labour broker who is the employer is unique. We attach in the precedents section a model contract for a labour broker and a client.

The Labour Act (Chapter 28.01) position

The Labour Act’s position is that an independent contractor is not an employee.[5] Labour law does not apply to independent contractors.[6] The non-application of labour law means that an employer who engages an independent contractor does not have to pay for such statutory contributions as a pension, NEC contributions and any other taxes that apply to persons who work as employees. A salary is also not payable to an independent contractor. On separation, terminal benefits applicable in labour law will not apply to an independent contractor.

On the contrary labour brokerage arrangements are recognised in our law. Persons provided under labour brokerage arrangements are employees recognised in terms of the Act. In its current form, the recognition of labour broking is found in case law[7] and in terms of the Labour Amendment Act, 2021. Because the Labour Act applies to employees under a labour brokerage arrangement, it is expected that pension, NEC contribution, union dues, and Pay as You Earn (PAYE) tax are deductible from an employee’s wage or salary. Terminal benefits will apply to an employee under a labour broker. The only aspect that is peculiar to an employee in a labour brokerage arrangement is that the employer is the labour broker and not the client. It is the labour broker that is responsible for the payment of wages and salaries as well as the payment of terminal benefits on separation.

Vicarious Liability

Generally, an employer is vicariously liable for the actions of the employees. What this means is that an employer may end up paying a person, damages for the injury or harm caused by his or her employees in the normal course of doing business. Damages may accrue to the employer even in circumstances where the employer was not at fault. The rationale behind vicarious liability was outlined in Mkhwananzi v Totamirepi & Anor ZWBHC 118 – 2016 in which the court accepted that by engaging in business, an employer may increase the risk of harm to others. The employer has a better financial capacity to compensate victims of harm than the employee. These two notions, therefore, justify vicarious liability, as a rule, to protect the public from the harm that employees belonging to an employer may cause.

On the contrary, vicarious liability does not apply when an independent contractor arrangement is in place. In Masango & Others v Kenneth & Another SC 41 – 2015 the Supreme Court explained this position in the following terms:

“The authorities cited above also re-state the principle that a principal is liable for the delict of his agent where such agent is a servant but not where he is a contractor, sub-contractor or their servant”.

The foundation of this position is that in an independent contractor relationship, the person receiving the services of the contractor does not have control over the way the person so contracted operates. The manner and time of executing the work are all left to the direction of the independent contractor.  The “employer” is therefore not vicariously liable for the actions of the independent contractor.

Arguably, in a labour brokerage arrangement, the person benefitting from the services of employees provided by the labour broker is not to be held vicariously liable for the actions of the employees. The labour broker should be held liable. The labour broker is the employer. This will be the case where there is a clear written agreement showing the nature of the arrangement in place. It is also submitted that in the absence of a labour brokerage agreement both the labour broker and the employer should be held jointly and severally liable.

Labour Broking and Independent Contractor Arrangements in South Africa

The law providing for independent contractors in South Africa is not very different from the Zimbabwean law. In South Africa, the Labour Relations Act No. 66 of 1995 specifically excludes independent contractors from the purview of the South African Labour law.  This is not surprising; the two legal jurisdictions share a similar common law. In terms of this common law, three types of contracts of employment existed, that is locatio conditio operarum (the letting and hiring of personal services in return for money), locatio conditio aperis (the letting and hiring of services by an independent contractor), and locatio conditio rei (the letting and hiring of a thing for money). It is the common law rules behind locatio conditio operis that form the basis of the independent contractor relationship as we know it today. This type of contractor is not covered by the labour laws in South Africa and so is the case in Zimbabwe.

The way labour broking is regulated in South Africa is commendable. It does not create avenues for the abuse of the system by unscrupulous employers. There is a lot that the Zimbabwean labour law jurisprudence can learn from South African Labour law as far as regulating labour broking arrangements is concerned. In terms of the South African Labour Relations Act,[8] a person employed under a labour broking arrangement is deemed to be the employee of the labour broker.[9] The Act also clarifies that if a person is an independent contractor, such a person will not be deemed to be the employee of either the labour broker or the client receiving the services of such a person.[10] Certain contraventions of the law makes the client and the labour broker jointly and severally liable for damages in favour of the employee. Such contraventions include breaches of a collective bargaining agreement, breach of a binding arbitration award, a breach of the South African Basic Conditions of Employment Act; and a breach of a determination made in terms of the Wage Act.[11]  The law in South Africa is also such that an employee can be on a labour brokerage arrangement for only three months with one client and a breach of this rule makes the employee permanently employed by the client.[12] In our view, this is a better way of regulating labour broking as it protects employees from being subjected to poor labour standards.

The discussion on labour broking and independent contractor arrangements will not be complete if a review of David Victor and 200 Others v CHEP South Africa (Pty) Ltd[13] is not undertaken. CHEP South Africa (Pty) Ltd had an independent contractor agreement with C Force in 2014. The service level agreement, forming the basis of the independent contractor relationship, stipulated that C Force would condition and repair pallets on behalf of CHEP. C Force would supply the labour and the tools, and the materials required for the process would be supplied by CHEP. The labour provided by C Force worked for CHEP for more than three months. The 201 employees were aggrieved by the arrangement and applied to the Commission for Conciliation, Mediation and Arbitration (CCMA) for an order declaring them as employees of CHEP. This was given the provisions in the Labour Relations Act that stipulated that if employees earn below a certain threshold and are provided by a labour broker, they become the employees of the client on a permanent basis after working for a client for more than three months.

Upon a close assessment of the agreement between the two companies, CHEP and C FORCE, a commissioner for CCMA concluded that a labour brokerage arrangement, rather than an independent contractor relationship existed between the parties. The net effect of this finding was that the employees were declared to be employees of the CHEP. On appeal to the Labour Court, the finding by the CCMA commissioner was overturned leading to a Labour Appeal Court application. The Labour Appeal Court proceedings upheld the decision of the CCMA commissioner. The basis of the decision by the Labour Appeal Court is discussed next.

It was the Labour Appeal Court’s finding that when assessing whether an independent contractor or a labour broking arrangement is in existence, it is the substance of the relationship rather than the form that is important.[14]

Several factors must be taken into consideration.[15] The service level agreement between the parties utilised man hours for the calculation of the fees payable to C Force which meant that labour was indeed provided to CHEP. It was because of this labour that C Force charged fees, pointing to the existence of a labour broking arrangement. Other factors that the court took into consideration included the fact that CHEP had control over the employees provided by C Force. The court observed:

          “Where a client contractually controls the overall work process of persons who work at its premisses, as well as their conduct and behaviour, such persons ordinarily will be deemed to work for the client.”

The fact that the required raw materials, plant, and equipment were supplied by CHEP, that the process of pallet conditioning formed an integral part of CHEPs business and that CHEP controlled the hours of work showed that G Force was a labour broker. Having found that a labour broking arrangement existed, the Labour Appeal Court concluded that the provisions in the Labour Relations Act that deems an employee to be permanently employed by the client applied in the circumstances.

The case illustrates the robust nature with which South African labour law protects employees who are under a labour brokerage arrangement. If a client utilises the labour for more than 3 months, the employees will become those of the client rather than those of the labour broker. This protects employees from being subjected to poor labour standards on the pretext that a labour brokerage arrangement is in place. This is the kind of protection one would recommend for the Zimbabwean jurisdiction.

Conclusion

The discussion above illustrates the distinct nature of a labour broking arrangement and an independent contractor relationship. The two arrangements are different. A person under a labour broking arrangement is considered an employee under the purview of the Labour Act. An employee under an independent contractor arrangement is not regarded as an employee. We note further that, labour broking in Zimbabwe is not as highly regulated as one would ascertain from the South African jurisdiction. The position in South Africa is such that if a person is employed for a period of more than three months, they become an employee for the client if they earn below a set threshold. David Victor and 200 Others v CHEP South Africa (Pty) Ltd shows the test that has been applied by the Labour Appeal Court in South Africa to determine if a labour broking arrangement is in place. In essence, it is the substance of the arrangement rather than the form that is more instructive.


[1]              Jacobus Hendrik Saayman v Christiaan Andreas Visser & Others Case Nr: 1267/01 (South Africa) held: “Unlike an employee, an independent contractor is generally not subject to the control or the instructions of the employer as to the manner in which he or she performs the work or produces the result”.

[2]              Masango & Others V Kenneth & Another SC 41 – 2015.

[3]              See David Victor and 200 Others v CHEP South Africa (Pty) Ltd

[4]              See McGregor M (2014), Labour Law Rules, Siber Ink CC, South Africa.

[5]              See Section 1 of the Labour Act (Chapter 28.01).

[6]              Masango & Others V Kenneth & Another SC 41 – 2015.

[7]              Schweppes Zimbabwe V Stanley Takaendesa LC/107/2014.

[8]              No. 66 of 1995.

[9]              Section 198(2) of the South African Labour Relations Act No. 66 of 1995.

[10]            Section 198(2) of the South African Labour Relations Act No. 66 of 1995.

[11]            Section 198(4) of the South African Labour Relations Act No. 66 of 1995.

[12]            See McGregor M (2014), Labour Law Rules, Siber Ink CC, South Africa.

[13]            JA/55/2019

[14]            See David Victor and 200 Others v CHEP South Africa (Pty) Ltd at paragraph 39.

[15]            David Victor and 200 Others v CHEP South Africa (Pty) Ltd.

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