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How Do You Define an Employee in the Gig Economy?

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How Do You Define an Employee in the Gig Economy?

6th November 2017

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There has been substantial growth in a category of the services sector which is often referred to as the “gig” or “collaborative” economy. The description is based on the ad hoc nature of the work performed, and is a technologically driven environment in which temporary placements and short-term appointments are common.

Uber is just one example of how the digitisation of services, globalisation, and the rise of independent contractors are changing the way we differentiate between ‘employees', ‘service providers' and ‘independent contractors'.

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The rise of app-based platforms has created spontaneous work opportunities, but, at the same time, has left the persons completing the work in a largely undefined employment position.

The gig economy doesn’t fit in a one-size-fits-all business model that would apply to all employees and, therefore, the focus should shift to ensure these workers receive fair compensation are legally protected in the ever-changing and progressively flexible economy.

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Legislation

The Department of Labour recently welcomed a Commission for Conciliation, Mediation and Arbitration (“CCMA”) ruling which stated unequivocally that Uber drivers are fully protected by the South African labour laws. The ruling, delivered on 7 July 2017, was part of a case of unfair dismissal brought by seven South African Uber drivers.
The decision is in line with the Labour Relations Act 66 of 1995, as amended (‘LRA”), which defines an employee in Section 213 as follows:

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, and

b) any other person who in any manner assists in carrying on or conducting the business of an employer; and “employed” and “employment” have meanings corresponding to that of “employee”.

The CCMA was faced with the question of whether Uber drivers qualified as employees of Uber Technologies South Africa (Pty) Ltd (“Uber SA”) for the purposes of the LRA. As we are all aware, Uber drivers use their own, unmarked vehicles to transport passengers or deliver food, whereas passengers use a mobile application to request a ride from one point to another.

In this case, Uber argued that it does not employ drivers, that it does not own any vehicles, and that its only role is to offer users the app. However, the CCMA found that an Uber driver cannot do business without the app.

Uber’s further argument was that it does not control when the drivers work or require drivers to work at specific times or for specific hours. The CCMA ruled that there are clear consequences for the drivers when not accepting enough trips – they can be deactivated from the app, i.e. termination of their “employment”.

In analysing the evidence and argument before her, the Commissioner mentioned the following:

“Part-time employment, outsourcing and casualization have been features of our labour market even at the time that the Labour Relations Act 66 of 1995 was passed, while the gig economy has provided new opportunities for otherwise unemployed people to earn an income. The line between who is employed and who is not, is increasingly blurred as relationships have become largely anonymized, internationally and intra-nationally”.

More clarity needed

The Income Tax Act No. 58 of 1962 sets out guidelines to establish whether a person is in standard or non-standard employment, along with guidelines as to how these employees should be compensated and taxed. One of the key elements is ensuring that the employment contract is correctly formulated. 

In essence, if a person is giving his or her capacity to serve at the disposal of the company, that person is an employee. If the person is producing a product or providing a service for a company, then the person is a private contractor. It is essential that this detail be clearly defined in the employment contract between the two parties.

This remains a complex issue and there will certainly be many more conversations, case law, opinions and interpretations around the compensation and benefits that apply to gig economy employees. What however needs to be determined first is whether the gig economy worker is free to manage their own output, deliverables, and earnings and whether he or she falls within the ambit of an ‘employee’ as held for the Uber drivers.

Written by Arinda Truter, Associate, Attorney, Notary & Conveyancer, SchoemanLaw Inc.

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