Are Estate Agents Employees?
YES, ESTATE AGENTS ARE EMPLOYEES. It has been a long-awaited change to the industry and years of disguising the true relationship between estate agents and the principal or owner of estate agencies have come to an end.
In the industry it is common practice for estate agents to have an Independent Contractor relationship with the agency they are associated with. However, this is not the correct relationship and the parties are considered employees and employers.
Our argument is in favour of Estate Agents being Employees and that they will not be considered an Independent Contractor at the CCMA or in a Court of Law if the status is challenged. Therefore, the issuing of Independent Contractor agreements does not offer enough cover for the Employer in the event of a possible dispute as the Independent Contractor agreement will be void and there will be no employment contract regulating the relationship between Employee and Employer.
The CCMA and Labour Court have adopted an approach according to which they look beyond the legal structuring of the relationship (the Independent Contractor agreement) and ascertain the true nature of the relationship. This has enabled them to reject fabricated independent contractual arrangements and focus on the ‘underlying economic realities’. This includes where it was specifically provided for in the agreement between them that it was not an employment relationship.
The Labour Court leans towards the application of the Dominant Impression test and in these cases the balance of probabilities favoured the agents. This test is favoured by the courts and considers the employment relationship as a whole, rather than concentrating on only the one factor.
As per Section 200A of the Labour Relations Act (LRA), a person who works for, or renders service to any other person is presumed to be an employee if any 1 or more of the following factors are present:
An employee is bound by the contract of service while an independent worker is bound by a contract for service. The employer has the responsibility and power to control over his employees, whereas for the independent contractor there is no power of control but the party requiring the services can determine the date for the work to be done.
Even if an Employee earns over the threshold (R205 433.30 per year) and is not subject to the presumption of S200A of the LRA and is subsequently not presumed to be an employee but challenges this the CCMA/ Labour Court would be required to rule on the matter and the onus would fall on the employer to prove the Independent Contractor relationship. In nearly every case it is found that an Independent Contractor is in fact an employee.
Employment contract:
An Employment Contract is a Contract of Service where an employee renders his service to the employer usually for undetermined period of time in return for payment. The employee is subject to control and direction of the Employer as well as their work-hours, the employer dictates how and when task must be performed, and the employer provides the resources to enable those tasks to be performed etc.
Independent Contractor:
An Independent Contractor agreement is a Contract for Service, where a contractor undertakes to perform a specific service or task and when completed the contractor gets paid. The employer dictates a specific date for completion of the task/service but does not give instructions as to what tools to use and how to go about achieving the result contracted. The Independent Contractor will decide on his own working hours, the number of hours worked, whether he/she can work for more than one agency in the same industry performing the same function and can appoint someone else to do the work to be done to achieve the result contracted. He/she does not personally have to perform the functions. An Independent Contractor agreement cannot contain any restrictions in trade, and any such restrictions are unenforceable.
Pam Goldings Properties (Pty) Ltd v Erasmus and Others (C455/07) [2009] ZALC 135; (2010) 31 ILJ 1460 (LC) (4 December 2009)
The court found that the existence of the below facts in a relationship does not prove the agreement of an Independent Contractor valid, meaning the Independent Contractor is in fact and employee:
Peter Cooper Estates v Van Eeden and Others (PR40/2013) [2015] ZALCPE 25 (24 April 2015)
The count found that the contract between the parties, even though an Independent Contractor agreement was one of employment. The court looks at the true nature of the relationship between the parties and not the agreement entered into in determining whether there is an employee and employer relationship.
The court further found that the wording of any contract between parties is not irrelevant, but is also not determinative of the nature of the relationship.
It was further stated that Section 200A of the LRA creates the rebuttable presumption of employment provided that any ONE or more of the factors listed are present in the relationship between the parties and consequently means that if at least ONE of these factors are present an employee and employer relationship will exist.
It was also found that being allowed to “do other work” but not allowed to engage in the selling of property for another agent does not cancel the requirement for economical dependency and thus an employee and employer relationship exist.
Linda Erasmus Properties Enterprise (Pty) Limited v Mhlongo and Others (J1604/04) [2007] ZALC 6; [2007] 6 BLLR 530 (LC) (13 February 2007)
The court found in favour of an employee and employer relationship despite the fact that the agent was appointed as an Independent Contractor in accordance with the Estate Agent Act No 112.
It further found that the mode of payment and the non-deduction of UIF and PAYE does not tilt the balance of probabilities towards a finding of an Independent Contractor relationship, neither does the fact that the agent was not required to furnish medical certificates when off sick have this result.
It was also found that the Independent Contractor agreement was not conclusive of the true nature of the relationship and that the true nature of the relationship was one of employee and employer.
To determine the true nature of the relationship, here are some of the questions that must be asked:
These are only a few questions you can ask yourself in determining if you are indeed an employee, it is not a requirement that all of these questions are answered in the positive but as little as one yes can show the existence of an employee and employer relationship.
Many estate agents are still misguided and work under the illusion of being an Independent Contractor. The industry has not come to grips with the not so new labour laws and application in the workplace.
Many estate agents are therefore employed without a valid employment contract under South African laws. To the detriment of both employee and employer the protection offered to both parties are not regulated and therefor has dire consequences.
Ask yourself is your commission as an estate agent truly secure if your relationship with the agency is not recorded and agreed to in terms of a valid contract?
The complications of the above changes to the industry are enormous in that agencies may be required to contribute towards UIF and PAYE, COID and SLD levies. Employees (Estate Agents) are entitled to the basic conditions of employment, including but not limited to paid sick leave and annual leave.
The most recent development in South Africa is the National Minimum Wage Act. Interns and agents are entitled to minimum wage. Intern wages are determined on the amount of points they have earned and their NQF level. Qualified agents are entitled to a minimum wage of R3 500.00 per month or R20 per hour. The determination of the minimum wage and the top-up of commission is a complicated matter for which a labour expert will need to be consulted.
The position does appear to be rather complicated, but with the correct advice and a positive attitude, it could be quite simple.
For any further information, or a free consultation on being compliant please contact our office on 041-3732182 alternatively email cezanne@vanzylcronje.co.za.