INDIVIDUAL LABOUR LAW- MRL202-K
Chapter 2: Definition, identification and formation of employment contract
Definition of employment contract
Voluntary Agreement
Between two parties (employer and employees)
In terms of which the employee places Labour potential at
the disposal and under the control of their employer
In exchange for some form of remuneration by the employer
o Based on agreement - voluntary (no slavery)
Basic conditions of employment Act: section 48:
Subject to constitution, all forced labour is prohibited
No person may for his own benefit or benefit of
someone else, cause, demand or impose forced
labour in contravention of subsection (1)
A person who contravenes subsection 1 or 2 commits
an offence
Has to comply with law for valid contract - Else not binding
and enforceable
o Pivotal concept – work
Meaning - to place one's labour potential at the disposal and
under the control of another
o Remuneration can be in any form
o Contract of employment is a reciprocal contract
Element of control
o Some writers see the element of control as the only feature that
makes it possible to distinguish contract of employment from other
contracts
o By implication - if no control by one party over another, there is no
contract of employment
o But modern employment contracts may have very little control
included
o Sufficient that employer merely has the right to exercise control
over activities of employees
The fact that he does not exercise this right - doesn't mean
this right is absent and that it cannot be applied/enforced
Identifying employment contract
o What test do we use to distinguish between agents and employees
or independent contractors and employees?
o Importance of the distinction
Roman law also recognise the locatio conductio operis -
Forerunner of contract of an independent contractor
Becoming increasingly difficult to distinguish between
employment contract and contract of independent contractor
or
1
, Contract of independent contractor or - characterised by: fact
that one person has another person to do a specific job or a
specific piece of work
Person letting out the work – Principle
Person doing work – agent
Contractual relationship - not contract of employment,
but contract relating to performance of a certain piece
of work
Far less control by principal over contract than
employer over worker
Most SA Labour legislation applies only to ”employees”or
persons working for others in terms of a contract of
employment
Compensation for occupational injuries and Diseases Act -
Definition of employee: “a person who has entered into all
works under a contract of service with an employer”
Occupational Health and Safety Act - similar definition: “any
person who is employed by all who works for an employer
and he receives or is entitled to receive any remuneration or
works under the direction or supervision of an employer”
Labour Relations Act - Definition of employee:
Any person, excluding an independent contractor or
who works for another person or for the state and who
receives, or is entitled to receive, any remuneration;
and
Any other person who in any manner assists in
carrying on or conducting the business of an
employer
Note: labour legislation does not define contract of
service/concept of work
We have to look outside legislation to determine
meaning
Another important reason to distinguish - there can be
vicarious liability and the if there is employment contract
o Making the distinction
Control test:
Case: colonial Mutual Life Assurance Society v
McDonald 1931AD 412
o Relation of master and servant cannot exist
where there is a total absence of the right of
supervising and controlling the workmen under
the contract
Organisation test:
Based on assumptions that test of being a servant
does not rest on a submission to orders - depends
2
, upon whether a person is part and parcel of
organisation - extent of integration into organisation
Employees is part and parcel of organisation,
whereas independent contractor’s work, although
done for the business, is not integrated into it but is
only accessory to it
Problem - cannot always measure extent of
integration - rejected by Appellate Division as being
too vague
Multiple or dominant impression test:
Relies on various indications - examines a number of
factors:
o Right to Supervision
o Dependence of worker on employer it
performance of duties
o Weather allowed to work for another
o Whether required to devote specific time to
work
o Whether obliged to perform duties personally
o Payment according to a fixed rate/commission
o Does worker provide own tools and equipment
o Whether employer has right to discipline
worker
Note: existence/absence of control is only one factor -
although one of the most important
All factors together create a “dominant impression”
Case: Smit v Workmen's Compensation
Commissioner:
o Smit had been employed as an agent for an
insurance company - court had to decide
whether employee or not
o Held that contract is one of work and not one of
service - not an employee
Criticism: offers no guidance in answering question
Productive capacity test:
Independent contractor “sells the job” whereas
employees “sells his hands”
Independent contractor and four undertakes to deliver
the completed work
Case: SABC v McKenzie 1999:
o Revisited six crucial differences between
contract of employment and contract of work
are identified in the Smit Case
Object of contract of service is he
rendering of personal services, while
object of conduct of worker is
3
, performance of a certain specified
worker or production of a certain
specified result
Contract of service - employee will
typically be a better and core of
employer to render his personal
services, while independent contractor
or not obliged to perform the work
himself or produce the result himself,
unless otherwise agreed upon
Services to be rendered in terms of
contract of service are at disposal of
employer who may decide whether or
not she wants to have them rendered,
while independent contract that is bound
to before may certain specified
work/specified results within time fixed
by the contract/reasonable time
Employee subordinate to will have
employer - obliged to obey lawful
commands, orders were instructions of
employer who has right of supervising
and controlling him by prescribing to him
what work he has to do as well as
manner in which it has to be done.
Independent contractor is notionally on
a footing of equality with employer - a
bound to produce in terms of contract,
not by orders of employer, and also not
bound to obey orders of employer in
regard to manner in which work is to be
performed
Contract of service terminated by death
of employee whereas death of parties to
contract of work does not necessarily
terminate it
Contract of service terminates on
expiration of period of service ended in
to of contract of work to let on
completion of specified work/result
o Neither of the three Tests are satisfactory
Formation of the employment contract
o Requirement for valid employment contract (or else Void)
Agreement/consensus
As to Nature of contract
4
Chapter 2: Definition, identification and formation of employment contract
Definition of employment contract
Voluntary Agreement
Between two parties (employer and employees)
In terms of which the employee places Labour potential at
the disposal and under the control of their employer
In exchange for some form of remuneration by the employer
o Based on agreement - voluntary (no slavery)
Basic conditions of employment Act: section 48:
Subject to constitution, all forced labour is prohibited
No person may for his own benefit or benefit of
someone else, cause, demand or impose forced
labour in contravention of subsection (1)
A person who contravenes subsection 1 or 2 commits
an offence
Has to comply with law for valid contract - Else not binding
and enforceable
o Pivotal concept – work
Meaning - to place one's labour potential at the disposal and
under the control of another
o Remuneration can be in any form
o Contract of employment is a reciprocal contract
Element of control
o Some writers see the element of control as the only feature that
makes it possible to distinguish contract of employment from other
contracts
o By implication - if no control by one party over another, there is no
contract of employment
o But modern employment contracts may have very little control
included
o Sufficient that employer merely has the right to exercise control
over activities of employees
The fact that he does not exercise this right - doesn't mean
this right is absent and that it cannot be applied/enforced
Identifying employment contract
o What test do we use to distinguish between agents and employees
or independent contractors and employees?
o Importance of the distinction
Roman law also recognise the locatio conductio operis -
Forerunner of contract of an independent contractor
Becoming increasingly difficult to distinguish between
employment contract and contract of independent contractor
or
1
, Contract of independent contractor or - characterised by: fact
that one person has another person to do a specific job or a
specific piece of work
Person letting out the work – Principle
Person doing work – agent
Contractual relationship - not contract of employment,
but contract relating to performance of a certain piece
of work
Far less control by principal over contract than
employer over worker
Most SA Labour legislation applies only to ”employees”or
persons working for others in terms of a contract of
employment
Compensation for occupational injuries and Diseases Act -
Definition of employee: “a person who has entered into all
works under a contract of service with an employer”
Occupational Health and Safety Act - similar definition: “any
person who is employed by all who works for an employer
and he receives or is entitled to receive any remuneration or
works under the direction or supervision of an employer”
Labour Relations Act - Definition of employee:
Any person, excluding an independent contractor or
who works for another person or for the state and who
receives, or is entitled to receive, any remuneration;
and
Any other person who in any manner assists in
carrying on or conducting the business of an
employer
Note: labour legislation does not define contract of
service/concept of work
We have to look outside legislation to determine
meaning
Another important reason to distinguish - there can be
vicarious liability and the if there is employment contract
o Making the distinction
Control test:
Case: colonial Mutual Life Assurance Society v
McDonald 1931AD 412
o Relation of master and servant cannot exist
where there is a total absence of the right of
supervising and controlling the workmen under
the contract
Organisation test:
Based on assumptions that test of being a servant
does not rest on a submission to orders - depends
2
, upon whether a person is part and parcel of
organisation - extent of integration into organisation
Employees is part and parcel of organisation,
whereas independent contractor’s work, although
done for the business, is not integrated into it but is
only accessory to it
Problem - cannot always measure extent of
integration - rejected by Appellate Division as being
too vague
Multiple or dominant impression test:
Relies on various indications - examines a number of
factors:
o Right to Supervision
o Dependence of worker on employer it
performance of duties
o Weather allowed to work for another
o Whether required to devote specific time to
work
o Whether obliged to perform duties personally
o Payment according to a fixed rate/commission
o Does worker provide own tools and equipment
o Whether employer has right to discipline
worker
Note: existence/absence of control is only one factor -
although one of the most important
All factors together create a “dominant impression”
Case: Smit v Workmen's Compensation
Commissioner:
o Smit had been employed as an agent for an
insurance company - court had to decide
whether employee or not
o Held that contract is one of work and not one of
service - not an employee
Criticism: offers no guidance in answering question
Productive capacity test:
Independent contractor “sells the job” whereas
employees “sells his hands”
Independent contractor and four undertakes to deliver
the completed work
Case: SABC v McKenzie 1999:
o Revisited six crucial differences between
contract of employment and contract of work
are identified in the Smit Case
Object of contract of service is he
rendering of personal services, while
object of conduct of worker is
3
, performance of a certain specified
worker or production of a certain
specified result
Contract of service - employee will
typically be a better and core of
employer to render his personal
services, while independent contractor
or not obliged to perform the work
himself or produce the result himself,
unless otherwise agreed upon
Services to be rendered in terms of
contract of service are at disposal of
employer who may decide whether or
not she wants to have them rendered,
while independent contract that is bound
to before may certain specified
work/specified results within time fixed
by the contract/reasonable time
Employee subordinate to will have
employer - obliged to obey lawful
commands, orders were instructions of
employer who has right of supervising
and controlling him by prescribing to him
what work he has to do as well as
manner in which it has to be done.
Independent contractor is notionally on
a footing of equality with employer - a
bound to produce in terms of contract,
not by orders of employer, and also not
bound to obey orders of employer in
regard to manner in which work is to be
performed
Contract of service terminated by death
of employee whereas death of parties to
contract of work does not necessarily
terminate it
Contract of service terminates on
expiration of period of service ended in
to of contract of work to let on
completion of specified work/result
o Neither of the three Tests are satisfactory
Formation of the employment contract
o Requirement for valid employment contract (or else Void)
Agreement/consensus
As to Nature of contract
4
