Employment law update – Independent contractors v employees

October 1st, 2013

By Talita Laubscher and Monique Jefferson

In Kambule v Commission for Conciliation, Mediation and Arbitration and Others [2013] 7 BLLR 682 (LC), the applicant referred an unfair dismissal dispute after his services as a radio presenter were terminated by the third respondent, Kaya FM 95.9. The Commission for Conciliation, Mediation and Arbitration (CCMA) found that Kambule had failed to prove that he was an employee of the station and accordingly dismissed the matter

Kambule then took the matter on review to the Labour Court where Lagrange J was required to determine whether Kambule was an employee or an independent contractor. Lagrange J found that the ruling on a person’s employment status is a jurisdictional question and as such, if a party takes the ruling on review, it can be set aside on the grounds that the ruling was wrong as opposed to applying the normal review test, namely that it was a ruling that a reasonable arbitrator could not make.

Kambule was engaged as a radio personality in terms of an 18-month contract. The contract was terminated after there had been concerns by management about the manner in which Kambule handled certain political issues on the show. In this regard, the respondent had issued Kambule with a letter stating that he was required to handle political issues more ‘even-handedly’. The letter stated expressly that, had Kambule been an employee, the letter would have been tantamount to a final warning but, given the fact that Kambule was a contractor, the letter served to put him on terms and record that a further material breach of the same or similar nature could result in the termination or non-renewal of the contract.

Kambule raised no objection to being referred to as an independent contractor in the letter and instead responded by requesting that the concerns in the letter be formally withdrawn. He also refused to handle political issues more even-handedly in the future. His contract was accordingly terminated. The respondent argued that the letter was issued to Kambule not because of his failure to obey instructions, but rather because he had exceeded the boundaries in exercising his discretion over the content of the show.

In considering the terms of the contract, the court noted that certain terms were indicative of an employment relationship:

  • The contract made reference to a ‘total cost to company salary’ paid monthly as consideration for Kambule’s services.
  • It suggested that the station would develop a relationship with the applicant for up to five years with annual ‘salary reviews’.
  • The station reserved the right to deduct employee taxes and other applicable statutory deductions from the amounts paid to Kambule.
  • However, in the event that the respondent was exempt from making deductions in respect of tax then the tax liability would fall on Kambule.
  • The station also undertook to reimburse Kambule for all expenses, disbursements and costs incurred in discharging his duties and he was further entitled, but not obliged, to join the station’s medical aid scheme at his own expense.

There were, however, other terms that weighed against the finding of an employment relationship. For example, the contract expressly stated that Kambule was self-employed and was not an employee of the station and would not represent himself as being an employee. He was also entitled to pursue other lawful business interests at the same time, provided that he did not perform work for direct competitors of the radio station.

Lagrange J found that one cannot determine whether an individual is an employee or not simply by considering the number of factors determinative of an employment relationship and comparing them with those factors that are against the existence of an employment relationship. Instead, the test is qualitative rather than quantitative and some factors may suggest a lot more about the substance of the relationship than others and thus more weight should be attached to such factors. A critical element when determining whether an individual is an employee is the extent to which the individual is economically independent from the employer. In addition, the extent of the employer’s supervision and control over the individual as well as whether the individual is integrated into the employer’s organisation are important.

Kambule argued that he was under the supervision and control of the station in that he had fixed working hours, was required to ask permission to take time off broadcasting, the content of his show was vetoed by the station and he had been disciplined by the station about the content of his show. He also pointed out that he was subject to a restraint in terms of which he was restrained from performing work for other radio stations in southern Africa and any other businesses competing with the station. He pointed out that he was provided with a workstation as well as broadcasting equipment and technical support for the production of the program, and also business cards and branded clothing.

Kambule had furthermore entered into an arrangement with the station where, in exchange for advertising, he was provided with free accommodation and use of a Cadillac. He alleged that these benefits constituted company benefits. He further alleged that he worked exclusively for the station and was tota­lly economically dependent on it.

The respondent’s case, on the other hand, was that Kambule was not under its supervision and control. Although the respondent had the right to veto the content of the show, this was to ensure that the applicant did not exceed the bounds of his mandate in the contract. Furthermore, any changes to the content of the show would be made in conjunction with Kambule and thus he was not subject to direct orders from the respondent insofar as the content was concerned.

In addition, Kambule was the sole member of a close corporation that submitted invoices to the respondent for the services that he rendered. These invoices contained value-added tax and the applicant had declared to the South African Revenue Service that the close corporation did not receive more than 80% of its income from the station. The close corporation also employed three other people who assisted in developing the content for the show but were not paid by the station. Furthermore, Kambule was free to do as he wished outside the broadcasting hours, save for being available to attend a few meetings and functions at the station for marketing purposes.

Lagrange J found that, while Kambule was an integral part of the programme team, he was free to pursue his interests independently and was not required to be entirely economically dependent on the respondent. The fact that he had chosen not to pursue other commercial activities was not because he was prohibited from doing so. As regards the fact that Kambule had to work fixed hours determined by the respondent, the court found that this was the nature of live programming and the hours spent on preparation for the programme were instead under Kambule’s own control.

Kambule furthermore exercised considerable discretion over the content and manner of the programme subject only to broad parameters and the regulatory constraints of broadcasting. Any fundamental changes were done in conjunction with him and the request to tone down the manner in which he handled political issues was not because of the radio station’s right to supervise and control him, but rather because he was not acting within the constraints of his brief. Thus, Lagrange J found that Kambule was not under the supervision and control of the respondent.

The court then considered the fact that invoices in respect of Kambule’s services were submitted in the name of the close corporation and found that this was indicative of an independent contractor arrangement. The fact that the station provided technical infrastructure and assistance to enable the applicant to conduct the show was furthermore understandable given the nature of the work. As regards the business cards and branded clothing, the court held that this was to enable Kambule to market himself and the show and was not a factor indicative of an employment relationship.

The court therefore concluded that Kambule was an independent contractor as he had brought his services to the station and not his creative and commercial capacity. Furthermore, he had the right to pursue other work at the same time.

In the circumstances, the review application was dismissed and no order was made as to costs.

Talita Laubscher BIur LLB (UFS) LLM (Emory University USA) is an attorney at Bowman Gilfillan in Johannesburg.

Monique Jefferson BA (Wits) LLB (Rhodes) is an attorney at Bowman Gilfillan in Johannesburg.

This article was first published in De Rebus in 2013 (Oct) DR 62.