Time to rethink the definition of an employee in Zimbabwe
THE world of work is changing and digitisation is fuelling such change. The digital era has changed employment relationships dramatically, causing a considerable degree of legal uncertainty as to which rules apply in cyberspace. Technology is transforming business organisation models and traditional employment types are becoming obsolete.
New types of companies, based on the gig economy or “on-demand economy” and dedicated to connecting customers directly with individual service providers are emerging.
Although this new phenomenon of the gig economy is a relatively new concept in Zimbabwe, it has already gained prominence in Europe and the United States. South Africa is slowly catching up, with Uber as the prime example.
The gig economy is a term that refers to the increased tendency for businesses to hire independent contractors and short-term workers for on-demand work.
The trend in the gig economy is that jobs are completed on demand on online platforms. The complexities of determining who is an employee in a gig economy will continue to confound Zimbabwe and the rest of the world.
The changing world of work has seen the obliteration of the distinction between an employee and an independent contractor.
So, does the definition of an employee still hold today in the gig economy?
In Zimbabwe, independent contractors are excluded from the various labour protection regulations.
In general, employees enjoy the protection and benefits provided by such laws, whereas independent contractors are not covered.
There are concerns of whether the traditional legal concept of an “employee” would still be considered valid in this new way of working in a gig economy.
What is an employee in Zimbabwe’s labour laws?
The Oxford Dictionary defines an employee as a person employed for wages or salary.
In terms of the 13th Schedule of the Income Tax Act, an employee means, “an individual to whom remuneration
is paid or payable at an annual rate . . . .”
Section 2 of the Labour Act goes on to define an employee as “any person employed by or working for any employer, and receiving or entitled to receive any remuneration in respect of such employment or work.”
The Zimbabwe Revenue Authority (ZIMRA) applies the definitions of employee and remuneration under the 13th Schedule of the Income Tax Act.
It is, therefore, important that companies exercise extreme caution in rewarding an independent contractor for work done.
Any extension of a benefit exposes the principal to income tax obligations, including the requirement to account for Pay As You Earn (PAYE) on the remuneration of such a person.
The difference between an agent and an independent contractor is that an agent is bound to act in the matter of the agency subject to the directions and control of the principal.
Whereas an independent contractor merely undertakes to perform certain specified work, or produce a certain specified result, the manner and means of performance of production being left to his discretion, except as far as they are specified by the contract.
This distinction cannot be ignored. The contract between master and servant is one of letting and hiring of services (locatio conductio operarum), whereas the contract between the principal and a contractor is the letting and hiring of some definite piece of work (locatio conductio operis).
In the former case, the relation between the two contracting parties is much more intimate than in the latter, the servant becoming subordinate to the master, whereas in the latter case the contractor remains on a footing of equality with the employer.
The crucial difference between these two cases lies in the fact that where a master engages a servant to work for him, the master is entitled under the contract to supervise and control the work of the servant. He is entitled at any time to order the servant to desist,
and if the matter is sufficiently serious may even dismiss him for disobedience.
An independent contractor is his own master, free of his employer’s control and representing no one else. When performing the obligations he is called on to do so under the contract which he has entered into with his employer. Such obligations not being those of contracting legal relations with third parties on behalf of his employees.
A principal is liable for the delict of his agent where such agent is a servant, but not where he is a contractor or sub-contractor or their servant. Similarly, an agent has authority to bind his principal in contract, whereas the independent contractor has no such power.
This statement is echoed in the following words by Jonathan M Silke in his book “The Law of Agency in South Africa”, Third edition: “An accurate test for distinguishing the agent from the independent contractor is that the agent has authority to bind his principal in contract, whereas the independent contractor has no such power.”
Traditionally, the existence of a contract of employment served as the foundation for an employer-employee relationship.
However, things have changed. It is no longer about the contract of employment, but the existence of an employment relationship.
Three main tests have been largely applied by the courts to identify an employment status, namely the control test, the organisation test and the dominant impression test.
These tests distinguish between an employee and an independent contractor.
If a person is an independent contractor, no employment relationship exists; and generally the rights and duties applicable to an employment relationship would not apply.
It would seem that independent contractors have some flexibility in the execution of their work, but this was rebutted in Butie vs MEC Gauteng Department of Health (2016) 37 ILJ 1445 LC. The Labour Court (LC) held that employers can still exercise a degree of control on independent contractors.
The traditional tests of determining employment relationships have come under a barrage of criticism more so with the advent of technological advancement. Some of the criticisms stem from the proliferation of skilled people; and who determines when, where and how they would wish to discharge work, thus rendering the control test obsolete.
To be clear, worker misclassification problems are by no means limited to the gig economy. They also extend to typical workers. Because of technological advancement and the hazy status of the workers operating in a gig economy, companies are often unsure, and thus, apply imprecise and outdated tests that do not fit the modern workforce.
The restriction to strictly legal parameters can be problematic for employers, and may lead to misclassification. In the case of Masango & Others v Kenneth & Another (SC 307/13) (2015) ZWSC 41, the court started from the premise that an employee, agent or independent contractor, all render services to another for a consideration.
The significance of ensuring that the appropriate category is assigned is important for the purposes of tax obligations, and which employment rights will be applicable. Independent contractors do not enjoy employment rights.
Similarly, Zimbabwean labour legislation does not extend protection to independent contractors either.
There is no doubt that the gig economy is growing and its impact will reverberate in Zimbabwe. It is time now for the Government of Zimbabwe to prepare for this phenomenon and harness the advantages brought about by this gig economy. The unemployment rate could be mitigated as more and more people embrace the gig economy.
The way in which it is possible to work in a gig economy has brought both opportunity and risk. Businesses have harnessed digital technology to create value and efficiencies. These business models have capability to stimulate economic growth, allow for flexibility and engenders entrepreneurial spirit.
◆ Milton Nyamadzawo is a former Mwana Africa Football Club team manager and a human resources chief advisor to a leading global book publishing company. He writes in his personal capacity, and can be contacted on mmnyamadzawo1@gmail.com