Swart v TubeOFlex Namibia (Pty) Ltd and Another (70 of 2013) 2016 NASC 15 (25 July 2016)

Facts

The appellant alleged that he was employed by the first respondent as ‘sales director’ since 2007, based on a resolution by the respondent setting out a commission formula payable to him. He further alleged that the majority shareholders of the respondent unilaterally changed the formula, contrary to s 50(1) of the Act and referred a dispute to the office of the Labour Commissioner, claiming certain relief. The first respondent raised a point in limine that the Labour Commissioner lacked jurisdiction on the ground that the appellant was not an ‘employee’.  

The plea asserted that the appellant was a shareholder only in the first respondent and a member of its board of directors.  In the latter capacity, he had agreed with the board of directors to render services as sales director for a commission.  The first respondent also pleaded that the appellant’s employment with it terminated in 2007; that he was not bound to any specific ‘times of employment’, unlike other employees; that he was not subordinate to its managing director, unlike other employees; that he was not registered for social security, unlike its other employees; that he is not subject to a leave regime, unlike the other employees; that he leaves its offices ‘if and when he so desires’, and that he has no salary advice unlike its other employees.’’

After hearing evidence on oath and entertaining oral submissions, the arbitrator upheld the point in limine. The arbitrator declined jurisdiction, holding that the appellant was not an employee of the first respondent.

On appeal, the Labour Court did not decide if the arbitrator was right or wrong.  It concluded that it lacked jurisdiction to determine the correctness of the arbitrator’s conclusion. The appellant appealed against that conclusion of the Labour Court. 

Issues for determination

Whether a finding by the arbitrator (as trier of fact)  that the appellant is not an employee as defined in section 1, read with section 128A of the 2007 Labour Act, is an appealable ‘question of law alone’; and if it is whether the Supreme Court should interfere with the arbitrator’s finding. In other words, the court was faced with the question of what an employee is in terms of the Act. 

Discussion

DAMASEB DCJ (SHIVUTE CJ and CHOMBA AJA concurring)considered the matter as follows:

When does an employer/employee relationship exist?  

[34] Under the common law, the rendering of a personal service is essential to the existence of an employer/employee relationship. A contract of employment (locatio conductio operarum) involves one person making over to another (the employer) his or her capacity to produce (Smit v Workmen’s Compensation Commissioner 1979 (1) SA 51 (A) at 61A-B ). Although not decisive as a determinant of an employment relationship, a measure of control by the employer of the employee is important. In fact, if no control whatsoever exists over the worker, either expressly or by implication, that is a strong indication that the relationship is not one of employment. (See Smit at p 62D-F).

[35] An independent contractor or a contract for letting and hiring services (locatio conductio operis), on the other hand, involves one person being engaged by another to produce a result rather than to render a personal service. An independent contractor’s commitment to the one who pays for his or her labour is the production of a given result (Smith at p 57C-E, and Colonial Mutual Life Assurance Society Ltd v McDonald 1931 AD 412 at 425). It is recognised under the common law that the term ‘independent contractor’ is wide enough to include all agents who are not servants in the widest sense of that term and includes an independent agent, a mandatory or a locator operis: the common denominator being that they are engaged in a ‘contract of work’ as opposed to a ‘contract of service’: Borcherds v C W Pearce & J Sheward t/a Lubrite Distributors (1993) 14 ILJ 1262 (LAC) at 1277 and the authorities there collected.

‘[36] …in Paxton v Namib Desert Trails (Pty) Ltd 1996 NR 109, the court was called upon to consider whether a lady who had been assisting her husband in his employment and being paid for certain services was an employee. Her services were rendered on an ad hoc basis, and more to assist her husband than his employer. She was found not to be an employee.

[37] Paxton was decided under the 1992 Labour Act, which contained the same definition of employee as in s 1 of the 2007 Labour Act,  save that the former did not include the words ‘other than one who is an independent contractor’. Nothing should in my view turn on that fact because the common law always excluded an independent contractor from the definition of employee. The inclusion of those words in the 2007 Labour Act therefore does not add anything to the meaning of employee as defined in that Act...  

[38] …Rendering of a personal service lies at the heart of the employment relationship. As was recognised in Paxton (at 112D), it is true that in seeking to define who is an employer and who is an employee, the legislature attempts to extend protections to working people, but it also seeks to balance the interests of those who make use of the labour of others… In fact, the recognition in s 128A that parties may regardless of the presumption contract opt out of an employment relationship strengthens the view that not every relationship in which a person through his or her labour assists in the business of another will result in an employer/employee relationship. The definitions’ section must not be read in a way that renders s 128A nugatory. Each case must be considered on its facts, and the trier of fact must look at the substance of the relationship.

[43] The definitions section of the 2007 Labour Act is intended to assist the trier of fact in resolving disputes concerning who is an employee, and who is not. In that process, the s 128A presumption also comes into play and must be considered together with the definitions section, bearing in mind that an employer may place facts and circumstances before the arbitrator which show that the parties did not intend to create an employment relationship…

[46] In my view, the dominant purpose discernible from the scheme adopted in ss 1 and 128A is the protection of workers from contrivances aimed at circumventing the protection afforded by labour legislation. An arbitrator (and the Labour Court on appeal) considering whether or not an employment relationship exists should bear that in mind.

[47] There is a rebuttable presumption of employment if any of the factors set out in s 128A are present.  It is rebuttable because the parties may choose that there be no employment relationship even when one or more of the factors giving rise to a particular presumption are present.  The consequence of a rebuttable presumption is to cast the onus on the person who wants to avoid an employer/employee relationship to show that, irrespective of the presence of the factors giving rise to the presumption of employment, the parties did not intend same, and none in fact arose.’

Applying the Van Rensburg test, the Supreme Court proceeded to consider if the arbitrator made the correct decision on the record, and stated that:

‘Proper application of the definitions section and s 128A

[51] In deciding whether a particular worker is an employee as defined in labour legislation, Grogan  observes that:

‘The ultimate question, it is submitted, is whether the person concerned is deserving of the protection or right which he or she is claiming under the statute.

This suggests that the courts should strictly scrutinise any purported independent contractual relationship to ensure that it is not a ruse aimed at evading the provisions of the Act.’

[52] …The Act widens the common law meaning of employee so as to cast the net of protection of labour legislation to categories of persons who would otherwise not be covered under the common law. The definitions section and the s 128A presumption are intended to assist the courts guard against ruses aimed at evading the protection afforded by a worker being an employee. 

[53] As was said by Joubert JA in Smit at p 62D-63B in a dictum approved by this Court in the APS  matter:

‘In many cases, it is comparatively easy to determine whether a contract is a contract of service, and in others whether it is a contract of work. But where these two extremes converge together, it is more difficult to draw a borderline between them. It is in the marginal cases where the so-called dominant impression test merits consideration . . . (The) presence of a right of supervision and control . . . is not the sole determinative factor since regard must also be had to other important indicia in the light of the provisions of a particular contract as a whole.’   

[56] The facts of the present case resonate with those in Borcherds v C W Pearce & J Sheward t/a Lubrite Distributors (1993) 14 ILJ 1262 (LAC) at 1281A-C - where the absence of day-to-day control over a worker, the fact that he was employed to produce a result and not personal services, and the fact that he was not registered as an employee with the Department of Manpower resulted in him not qualifying as an employee. The tools of trade offered to him by the employer were regarded as neutral factors, as they could be required for the employer’s purposes from either an employee or an independent contractor.

[57] In the present case, the appellant was paid on commission basis, and only if he produced a result. He did not render a personal service in that what was required of him was the production of a result. He was not registered with the Social Security Commission. The first respondent exercised no control over him, and he chose when to work, and did not work fulltime at the first respondent’s place of business. He was not subject to the direction of the manager of the first respondent, who in fact saw him as his superior on account of his being director and shareholder. There was no day-to-day control over his activities by the first respondent. He did not apply for leave to be absent from work. His being availed a cellphone and a company car are neutral factors.  

[60] Overall, the record shows that the appellant enjoyed a considerable degree of freedom of action and autonomy, which made it possible for him to rebuff the request that he report for work according to set hours and routine – a privilege not available to an employee on the test for determining an employment relationship. This fact also lends credence to the inference that what he was engaged in was a contract of work and not for service: he had not surrendered his labour or service to the first respondent, and the latter neither controlled nor directed the manner in which he performed his service.

[61] On the facts found by the arbitrator, the appellant does not fit the profile of a person who deserves the protection of the 2007 Labour Act [i.e., an employee], and I do not find any pressing public policy reason or concern which necessitates extending the protection afforded by that Act to a person in the circumstances of the appellant.

Conclusion

[63] The conclusion I come to is that although the appellant’s ground of appeal raised an appealable question of law within the meaning of s 89(1)(a), the first respondent had rebutted the presumption that the appellant was its employee.  Both the arbitrator and the Labour Court were therefore correct in declining jurisdiction to entertain the appellant’s complaint.’

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