LAD Brokers (Pty) Ltd v Mandla (CA14/00) [2001] ZALAC 9; 2002 (6) SA 43 (LAC) (29 June 2001)

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[2001] ZALAC 9
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LAD Brokers (Pty) Ltd v Mandla (CA14/00) [2001] ZALAC 9; 2002 (6) SA 43 (LAC); [2001] 9 BLLR 993 (LAC); (2001) 22 ILJ 1813 (LAC) (29 June 2001)

IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA
HELD
AT CAPE TOWN
CASE NO: CA14/00
In
the matter between
LAD
Brokers (Pty) Ltd
Appellant
and
Robert
J Mandla
Respondent
__________________________________________________________________
Judgment
_____________________________________________________________________
VAN
DIJKHORST AJA
This
is an appeal with leave of this court against a finding by the
Labour Court that the respondent had been unfairly dismissed
by the
appellant and an order that the appellant pay to the respondent
compensation in the amount of R103 500.00 with costs.
The
issue was whether the respondent had been employed by the appellant
or whether he was an independent contractor as envisaged
in
subsection (3) of section 198 of the Labour Relations Act 66 of 1995
(the Act).
At
the outset an ancillary matter has to be disposed of. The
appellant applies for condonation for the late filing of its notice
of appeal and heads of argument.The latter were filed 9 days late
and the explanation is acceptable. The notice of appeal was
filed
late by some 4 months and 24 days. The explanation is that the
appellant had successfully petitioned this court for leave
to
appeal and when this was granted his attorney had been unaware of
the requirement that in such a case a notice of appeal
had to be
filed until this point was raised on behalf of the respondent. It
boils down to this: The appellant’s attorney did
not bother to
study rule 5(1) of the rules of this court. This lack of
application is to be deprecated. In mitigation it can
be stated
that there was no prejudice to the respondent nor inconvenience to
this court. The record was prepared and filed timeously.
The
grounds of appeal were fully set out in the application for leave
to appeal and the petition (and on that occasion replied
to by the
respondent) and the real issues properly delineated in the heads of
argument filed by the appellant. The appeal was
eminently
arguable. In these circumstances it would be unfair to visit the
appellant with the sins of his attorney. For these
reasons we
allowed the appeal to proceed. Condonation is hereby formally
granted in the two applications that are before us.
The
facts are unusual. The appellant conducts business and renders
services to its customers as a labour broker, operating in
the
engineering and draughtsman industry.
A
United Kingdom-based company, Weatherford U.K. Limited
(Weatherford) which had no prior business interests in South Africa
nor any business premises or bank account, sought the services of
two service technicians for an offshore oil drill platform
off
Mossel bay. It recruited the respondent and another technician, Mc
Donald, in November 1998 through a reference by a friend
of the
respondent. The respondent and Mc Donald were called to interviews
by one Graham Laws of Weatherford where their positions,
employment
conditions and remuneration were discussed. The salary and
allowances were agreed upon. It was also agreed that the
respondent
and Mc Donald would be employed by Weatherford and when their
employment would start. The remuneration payable to
the respondent
would be in the form of a monthly retainer, irrespective of the
number of days actually worked.
The
respondent and Mc Donald were then informed by Laws of Weatherford
that they would be employed through a labour broker and
that the
latter would contact them in the immediate future for this purpose.
Weatherford then approached the appellant with the
request that the
appellant facilitate the employment and payment of the respondent
and Mc Donald, for a fee. The appellant was
to render monthly
invoices to Weatherford setting out its fee, the remuneration
payable to the respondent and any extra allowances
which might be
payable to the respondent, of which particulars would be provided
by Weatherford.
The
appellant’s Mr Fleming then contacted the respondent
telephonically, introduced himself as the labour broker and
informed
the respondent that he would be giving the respondent a
contract to sign and that the respondent and Mc Donald would be
working
as independent contractors. The respondent had had no prior
knowledge of the appellant, had not worked for the appellant before
and only came into contact with the appellant because of its
employment at Weatherford. The respondent had not been and was not
on the appellant’s database, was never recruited or interviewed
by the appellant and no conditions of employment were negotiated
or
determined between the appellant and respondent. In fact the
respondent started working for Weatherford even before concluding
a
written agreement with the appellant.
The
respondent was given a contract called “Independent Contractor -
Contracting Agreement” which contained the appellant’s
standard
terms and conditions. This contract was concluded on 1 December
1998 having been signed by the respondent and on
behalf of the
appellant.
The
appellant and Weatherford in turn concluded a written contract in
terms of which the appellant undertook to hire to Weatherford
and
Weatherford undertook to let from the appellant “...the services
of our independent contractor Robert Mandla in the capacity
of a
service technician with effect from 1 December 1998" (The
Brokerage Agreement).
The
respondent and Mc Donald rendered services to Weatherford on
instructions and under the supervision of Weatherford and on
the
terms and conditions of employment as determined and dictated by
Weatherford. The appellant on a monthly basis rendered invoices
to
Weatherford for the “services” of the respondent and Mc Donald
on the basis agreed upon. Weatherford would pay the amount
due
into the appellant’s off-shore bank account. The appellant in
turn would effect payment to the respondent and Mc Donald.
Weatherford would also in its own discretion determine the amount
of any allowances or bonuses to be paid to the respondent.
The
respondent and Mc Donald rendered services to Weatherford from 1
December 1998 until the end of April 1999 under the sole
supervision and control of the latter as and when required by
Weatherford.
On
26 March 1999 Weatherford gave notice to the appellant that it
would be terminating the “Independent Contracting Agreements”
of the respondent and Mc Donald with effect from 30 April 1999. The
appellant then terminated the contracts with the respondent
and Mc
Donald on 6 April 1999 with effect from 30 April 1999. The
respondent took up the matter with Weatherford and got nowhere.
He
then instituted proceedings in the Labour Court against the
appellant.
The
following sections of the Act are relevant:
“Employee” is defined in section 213 as “ (a)...any person,
excluding an independent contractor, who works for another
person
or for the state and who receives, or is entitled to receive, any
remuneration; (b) any other person who in any manner
assists in
carrying on or conducting the business of an employer...”
Section 198 of the Act provides as follows: ” (1) In this section,
‘temporary employment service’ means any person who, for
reward,
procures for or provides to a client other persons-
(a) who render services to, or perform work for, the client; and
(b) who are remunerated by the temporary employment service.
(2) For the purposes of this act, a person whose services have been
procured for or provided to a client by a temporary employment
service is the employee of that temporary employment service, and
the temporary employment service is that person’s employer.
(3) Despite subsections (1) and (2) a person who is an independent
contractor is not an employee of a temporary employment service,
nor
is the temporary employment service the employer of that person.”
The
appellant concedes that it is a temporary employment service as
defined in section 198 but contends that on the facts of
this case
an employment relationship existed between the respondent and
Weatherford and that the relationship between the respondent
and
itself was that of an independent contractor. The Labour Court
rejected the latter argument and agreed with the former.
To
determine this issue the terms and conditions of the relevant
contracts should be studied. The legal relationship between
the
parties is to be determined primarily from a construction of the
contract between them. cf SA Broadcasting Corporation v
McKenzie
(1999) 20 ILJ 585 (LAC); Niselow v Liberty Life Insurance
Association of South Africa Ltd (1998) 19 ILJ 752 (LAC) 754C.

The contract between
the appellant and respondent bears the title:”Independent
Contractor/Contracting Agreement.” Clause 1.3 records
specifically “ that the contractor is an independent contractor

and not an employee of LAD Brokers, and is, as such, not entitled
to, inter alia, benefits referred to in clause 6".

Clause 1.2 records that “nothing in this agreement,
whether express or implied, shall be construed as creating
the
relationship of employer and employee between the parties.”
Clause 6 refers to the benefits applicable to the appellant’s
permanent employees, and specifically excludes the respondent

therefrom.
In terms of clause 3.2 the respondent would be remunerated for all
work outside the normal hours of attendance “at a tariff agreed
“
by Weatherford, not the appellant.
It is also recorded that for purposes of the agreement the appellant
would only have supervision and control over “certain areas”
of
the respondent’s activities.
The appellant never registered the respondent for unemployment
insurance benefits or tax nor did it afford the respondent any
of
the benefits applicable to the appellant’s permanent employees.
The
Labour Court referred to the various tests formulated by the
courts to identify an employment contract. The learned judge
stated
on the basis of Smit vs Workmen’s Compensation Commissioner
1979
(1) SA 51(A)
at 62D-G that it had been held that the right to
supervision and control was one of the most important
indicia
that a particular contract is in all probability a contract of
service (employment contract). The greater the degree of
supervision
and control to be exercised by the employer over the
employee, the stronger the probability will be that it is a
contract of
service .
The
learned judge further referred to the so-called dominant impression
test with reference to Ongevallekommisaris vs Onderlinge
Versekeringsgenootskap AVBOB
1976 (4) SA 446
(A) 457A and Medical
Association of South Africa and others vs Minister of Health and
others (1997) 18 ILJ 528 (LAC) 536C-E,
and quoted extensively from
the judgment of this court in South African Broadcasting
Corporation vs McKenzie supra at 590F -
591D.
On
the basis of these authorities the learned judge concluded that
this is clearly a unique and sui generis tripartite relationship
where the person who is provided by the temporary employment
service to a client renders service, not to the temporary
employment
service, but to the client ( although he is remunerated
by the temporary employment service.) It is accordingly a fiction
that
the person concerned renders services to the temporary
employment service even when it is the employer of the person whose
services
are provided to the client through the temporary
employment service, according to the learned judge. On the facts he
thus found
that the relationship between Weatherford and the
respondent was that of employer and employee in terms of the
definition of
employee contained in section 213 of the Act. The
respondent provided his services to Weatherford not on the basis of
the performance
of a certain specified work (selling the fruits of
his labour) or on the basis of producing a certain specified result
(as it
would have been in the case of an independent contractor)
but placed his personal services at the disposal of Weatherford and

was throughout under the supervision and control of Weatherford’s
senior personnel. On this basis he was an employee of Weatherford.
One cannot fault this part of the reasoning of the learned judge.
I have due regard to the fact that the brokerage agreement
refers
to the respondent as an “independent contractor”. It is our
duty to have regard to the realities of the relationships
and not
regard ourselves as bound by the label chosen by the parties.
The
learned judge, however , found that the appellant also had control
over the respondent in certain respects, which control
was anathema
to the concept of an independent contractor. In this respect the
court referred to clauses 10.5, 10.6, 13.1, 13.2.1
and 13.2.4 of
the standard contract between the parties in terms of which
“independent contractors” like the respondent were
required to
obey instructions given by the appellant and also to adhere to the
standards set by it (in conjunction with the
client).
Clause
10 deals with the appellant’s right to terminate the agreement
should the respondent fail to meet or comply with the
appellant’s
service standards (10.5) or should the respondent commit any act
which in the reasonable opinion of the appellant
adversely affects
or is likely to affect the goodwill and/or reputation of the
appellant or any one of the employees or contractors
of the
appellant (10.6).
Clause
13 sets out the obligations of the contractor. Inter alia they are
that the respondent shall observe the standards set
by the
appellant from time to time in the conduct of its business (13.1),
that he shall observe and comply with the instructions
of the
appellant in respect of the performance of his obligations in terms
of this agreement and at all times promote the interest
of the
appellant (13.2.1) and that he shall observe all applicable laws,
ordinances, decrees, rules and regulations and service
standards
relating in any manner to the performance by him of his obligations
in terms of this agreement (13.2.4).
On
the basis of the clauses referred to above the learned judge
concluded that the “independent contractors” including the
respondent were clearly under the control and supervision of the
appellant to a degree that one could expect to find in an

employer/employee relationship. They were subordinate to the will
of the appellant and obliged to obey the lawful commands, orders
or
instructions of the appellant which clearly had the right of
supervising and controlling the “independent contractor”.

Therefore the court found that there is thus no indication in the
least that such “independent contractor” was notionally
on an
equal footing with the appellant as could be expected in terms of
a contract of work.
In
view of the contents of the clauses set out above the learned judge
expressly slotted the facts into the important characteristics
of
a contract of employment set out in point 4 in South African
Broadcasting Corporation vs McKenzie supra which reads: “(4)
The
employee is subordinate to the will of the employer. He is obliged
to obey the lawful commands, orders or instructions of
the
employer who has the legal right of supervising and controlling him
by prescribing to him what work he has to do as well
as the manner
in which it has to be done. The independent contractor, however, is
notionally on a footing of equality with the
employer. He is bound
to produce in terms of his contract of work, not by the orders of
the employer. He is not under the supervision
or control of the
employer. Nor is he under any obligation to obey any orders of the
employer in regard to the manner in which
the work is to be
performed. The independent contractor is his own master.”
I
have a difficulty with the approach of the learned judge in this
respect. In my view he takes the words quoted out of their
context
and beyond that which was intended by this Court. It is not unusual
for independent contractors to be subject to some
measure of
contractual control in respect of standards, employees, working
hours and the like. That is not the type of control
referred to by
this Court in the quoted portion of the judgment. The control
envisaged in point 4 is immediate and recurring.
It is incorrect to
describe contractual terms which are of a limiting nature or
introduce some sort of supervision in respect
of set standards as
derogating from the notional footing of equality between the
contracting parties in an independent contractual
relationship.
Such limitations upon conduct or standard do not bring about the
supervision or control envisaged by this Court.
This much is clear
from the judgment referred to itself. McKenzie was held to be an
independent contractor although his contract
provided for
supervision and instructions.(paras 33, 35)
I
would hold that the respondent was not subject to such supervision
and control of the appellant as would create an employment
relationship and thereby disregard the clear wording of the
contract between them.
This
is, however, not the end of the matter. The question to be answered
is what does section 198 intend to achieve in its exclusionary
subsection (3) read with subsection (1). Does the person who is an
“independent contractor” and who “renders the service
or
performs the work” stand in an independent contractor
relationship with the “client” or with the “temporary
employment
service” or both?
Two
factors point to the first of the three options: Subsections (1)
and (2) clearly refer to a person who renders services to
the
client. The deeming provision would not be necessary were the
services rendered to the temporary employment service. The
latter
pays the remuneration and there would therefore not be any doubt
about the existence of an employment contract. It is
only where
the services are rendered to one person but another pays the
remuneration that there is scope for uncertainty and
need for a
deeming provision. As the deeming provision of subsection (2) is
in itself wide enough to include independent contractors
with whom
the Act is not primarily concerned, subsection (3) provides for
their necessary exclusion. The reference to independent
contractors is therefore to independent contractors who render
services or perform work for the client. Thus interpreted the
awkward position of an employee working for one person but being
remunerated by another and faced with a denial of both that
they
are his employers, will be addressed. So will be the situation
where a fly-by-night employer utilizes a (reputable) labour
broker
and absconds.
For
the sake of certainty the legislature clearly intended labour
brokers and the like who pay the remuneration to be held liable
as
employers under the Act. Subsections (4), (5) and (7) of section
198 seek to draw the net tighter around the temporary employment
services.
To
interpret section 198(1) - (3) to include independent contractors
who are such in relation to temporary employment services
would
ignore the attribute that the contractors must render services or
perform work for the client (not the temporary employment
service
who pays).
To
determine whether the service provider is an independent contractor
of the temporary employment service is therefore as an
end in
itself a futile exercise. Even if he is, should he not also act
as independent contractor viz a viz the client, the
exclusionary
subsection (3) does not apply. Of course the relationship between
the temporary employment service and the service
provider may give
some indication of the relationship between the latter and the
client.
Section
82
of the
Basic Conditions of Employment Act 75 of 1997
contains
provisions similar to those of section 198 of the Act discussed
above. The interpretation of section 198 set out herein
does not
in my view conflict with the intention reflected in section 82.
The
finding by the Labour Court that Weatherford employed the
respondent and that their relationship was not that of an
independent
contractor was not disputed. I agree with that
conclusion. The appellant paid his remuneration. The finding of
the court that
although the appellant did not “procure” the
services of the respondent it “provided” his services to
Weatherford was
not attacked on appeal. In the circumstances the
provisions of section 198(2) are applicable and for the purposes of
the Act
the respondent was the employee of the appellant.
Appellant’s
termination of the respondent’s contract of employment with
effect from 30 April 1999 constituted dismissal in
terms of section
186(a) of the Act. The appellant completely failed to comply with
the provisions of section 189 which prescribes
the procedures for
dismissals for operational reasons. There was no consultation at
all. The finding that the dismissal was
both procedurally and
substantively unfair was not attacked.. Section 194(2) read with
section 192(1) of the Act was applied
by the Labour Court which
awarded 12 months remuneration. No argument was addressed to us on
this aspect of the case.
There
is no reason to interfere with the order of the Labour Court. The
appeal is dismissed with costs.
VAN DIJKHORST AJA
I agree I
agree
ZONDO JP COMRIE
AJA
For Appellant: Mr Sean Snyman
of Snyman van der Heever Heyns
Johannesburg
For Respondent: Adv RGL Steltzner
instructed by Craig Schneider Associates
Cape Town
Date of argument: 23 May 2001
Date of judgment: 29 June 2001
13