Case Notes: Contracting out of the Labour Relations Act: Vermooten v Department of Public Enterprises & others (2017) 38 ILJ 607 (LAC)

• Jurisdiction: South Africa
• Pages: 543-559
• Date: 20 August 2019
• Published date: 20 August 2019
• Citation: (2017) 29 SA Merc LJ 543
• Author: Karin Calitz

Case notes

CONTRACTING OUT OF THE LABOUR

RELATIONS ACT: VERMOOTEN V

DEPARTMENT OF PUBLIC ENTERPRISES &

OTHERS (2017) 38 ILJ 607 (LAC)

KARIN CALITZ

Stellenbosch University

I INTRODUCTION

In Vermooten v Department of Public Enterprises ((2017) 38 ILJ 607

(LAC)) (Vermooten) the Labour Appeal Court ruled that a person

rendering services in terms of a consultancy contract was not an

employee, although there was ample evidence of the existence of an

employment relationship. Even though this may ordinarily not appear

controversial, it may, however, be so in the employment context. The

reason for this is that in judgments predating Vermooten, the Labour

Appeal Court found that if the reality of the relationship points to the

existence of an employment relationship, a contract taking parties out of

the reach of the protection of labour legislation should be disregarded.

This case note endeavours to answer the question of when a contract

that is not an employment contract should be disregarded if there is

evidence of an employment relationship, and in which circumstances

parties to the contract should be held to it.

The discussion also evaluates the reasons for the difference in the way

in which contracts of employment and other types of contract are

enforced. This is followed by a discussion of cases where persons have

been held to the contracts they concluded with juristic persons. The

jurisprudence in which such contracts have been disregarded, as well as

the development of the reality test, are also discussed. A way to balance

fairness and the sanctity of contract in the light of the Constitution of the

Republic of South Africa, 1996 (the Constitution) is considered before,

lastly, conclusions are drawn and recommendations offered.

It should be indicated at this stage that the argument presented in this

case note requires consideration of jurisprudence on the broader

question of who qualif‌ies as an employee — a topic which has received

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(2017) 29 SA Merc LJ 543

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considerable attention, including by this author (see Calitz, ‘The pre-

carious labour law position of ministers of religion’ (2017) 2 Stell LR

287–307).

II A DIFFERENCE IN THE APPROACH TO ENFORCING

EMPLOYMENT CONTRACTS AND NON-EMPLOYMENT

CONTRACTS

The basis of labour law as a separate discipline is premised on the

assumption that employees are not in an equal bargaining position

vis-à-vis their employers. Kahn-Freund famously referred to the con-

tract of employment as ‘a f‌igment of the legal mind’ (Davies &

Freedland, Kahn-Freund’s Labour and the Law 3 ed (Stevens & Sons 1983

at 18), because in terms of the common law, parties to a contract of

employment are regarded as being in an equal bargaining position,

which is not necessarily the case. The main aim of labour law is ‘to

address what can be an unequal bargaining position between parties to

an employment relationship’ (Preamble to ILO Employment Relation-

ships Recommendation 198 of 2006) (Employment Recommendation)

and to level the playing f‌ield. As an employee is considered to be in an

unequal bargaining position, he or she is the benef‌iciary of a whole range

of protective measures. Consequently, contracts other than employment

contracts are scrutinised and set aside if there is evidence of an

employment relationship between parties.

The Preamble to the Employment Recommendation enjoins member

states to adopt legislation to guard against disguised employment,

especially to protect vulnerable workers. However, it should be noted

that the Preamble also provides that

‘[n]ational policy for protection of workers in an employment relationship

should not interfere with true civil and commercial relationships, while at

the same time ensuring that individuals in an employment relationship

have the protection they are due.’

Factors listed in section 200A of the South African Labour Relations

Act 66 of 1995 (the LRA) creating a presumption of employment for

employees earning under a certain threshold, are aligned to factors listed

in paragraph 13 of the Employment Recommendation for the purpose

of identifying employees. This is justif‌ied in that it makes provision for

the protection of vulnerable workers.

In South Africa, both employees and employers are protected by

section 23 of the Constitution, which provides that everyone has the

right to fair labour practices. Furthermore, the def‌inition of an employee

(2017) 29 SA MERC LJ

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