Page 266 - SAIT Compendium 2016 Volume2

IN 17 (3) Income Tax acT: InTeRPReTaTIon noTes IN 17 (3)
The doctrine of ‘vicarious liability’ (from the common law of delict or negligence), based on the premise that the employer is liable for his or her worker’s negligence because he or she should have exercised his or her contractual right of control so as to prevent the negligent act, led to con ation of the control requirement with an employee status requirement, and consequently to the over-emphasis of control in other branches of the law in which the employee/ independent contractor distinction was relevant.
The notion of control remains important, although it has undergone substantial re nement over the years. 2. The ‘intuitive’ tests
Improvements in production technology together with mass secondary education and tertiary education, made control in certain job categories more indirect and diffuse. The courts were obliged to develop more sophisticated tests. This was accompanied by the gradual realisation that the essence of the distinction was not control but whether the employer had acquired the worker’s productive capacity or the result of the worker’s productive capacity. The following intuitive tests have been alternatively invented and discarded by the courts:
• The ‘it’s what you think it is’ test, based on the question ‘what would the man in the street, or a co-worker,
characterise this worker as?’
• The ‘economic reality’ test, based on the question ‘is the person performing the services in business on his or her
own account?’ Another form of this test is based on the question ‘is the person performing the services economically dependent on or independent of the business for which the services are being performed?’ A substantial body of jurisprudence holds that the ‘economic reality’ test is particularly appropriate for tax and social security legislation, where it is applied to promote a characterisation which advances the purposes of the law.
• The ‘organisation’ test, a multi-factor test with no conclusive indicator, based on the question ‘is the person part of the commercial or industrial organisation?’ Similar to this is the ‘integration’ test, or a multi-factor test with no conclusive indicator, based on the question ‘is the person integral to or accessory to the organisation?’
• The ‘dominant impression’ test, a multi-factor test with no conclusive indicator amounts to saying, ‘take cognisance of all the facts before you decide, and arrive at a dominant impression to which effect must be given. Further improvements in production technology together with wide-spread tertiary education, and the decline of smokestack industries together with the rise of service industries, led, in certain job categories, to control becoming even more indirect and diffuse, and less distinct. At the same time, employer aversion to vicarious liability suits, unionisation, employment related social legislation and tax legislation, together with worker’s wishes for increased income, led employers and workers to collaborate to avoid the employer-employee relationship, and sometimes, to collaboration in simply obfuscating the features of the employer-employee relationship. The dominant impression test, which includes features of all previous tests, is presently the test sanctioned by the Supreme Court of Appeal.
The dominant impression test rst emerged in South Africa, in a judgement by Joubert JA in the case of Smit v. Workmen’s Compensation Commissioner.* The Appellate Division rejected the crude ‘control’ test, stating that the employer’s right of supervision and control is merely one out of several indicators (albeit an important one) in favour of a contract of service (an employee contract).†
In Liberty Life Association of Africa Ltd v. Niselow,‡ Nugent J (sitting as a judge of the Labour Appeal Court) stated that an employee performs by making his or her productive capacity available to the employer, irrespective of whether there is work to be done, while the independent contractor commits him or herself only to deliver a product or end-result of his or her productive capacity. He stressed that central to the inquiry was whether or not the relationship was one in which the worker placed his or her productive capacity at the disposal of the employer. The inquiry should be directed towards the worker’s obligations rather than his or her rights, and the extent to which the other party (employer) acquired rights relating to the use to be made of his or her productive capacity. A decision must be made taking into account all the relevant facts (indicators), so as to form a dominant impression in favour of one or other contract. No single indicator is necessarily decisive, although facts which indicate the acquisition of the worker’s productive capacity might carry more weight. Nugent J’s views were subsequently approved by the Supreme Court of Appeal, and have been followed by the ‘new’ Labour Court as well.§
More recently, in SABC v McKenzie¶ the court extracted from earlier case law more important characteristics of an employment contract that distinguish it from a contract for work. They are:
Employee
Independent Contractor
The object of the contract of service is the rendering of personal services by the employee to the employer. The services are the object of the contract.
The object of the contract of work is the performance of a certain speci ed work or the production of a certain speci ed result.
According to a contract of service the employee will typically be at the beck and call of the employer to render his or her personal services at the behest of the employer.
The independent contractor is not obliged to perform the work him or herself or to produce the result him or herself, unless otherwise agreed upon. He or she may avail him or herself of the labour of others as assistants or employees to perform the work or to assist him or her in the performance of the work.
* 1979 (1) SA 51 (A)
† See Brassey, M: The Nature of Employment, 1990 (11) ILJ 889
‡ [1996] 17 ILJ 673 (LAC)
§ Compare Niselow v Liberty Life Association of SA Ltd v Niselow, 1998 (4) SA 163 (SCA) ¶ [1999] 1 BLLR 1 (LAC)
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