The Employment and Industrial Relations Act and Regulations enacted under the auspices of the Act, seek to protect employees from unfair and unlawful treatment. The term ‘employee’ is ordinarily associated with individuals having a contract of employment with his or her employer hence enjoying all benefits deriving from the employer and employee relationship. Throughout the years however, employers have indeed attempted to avoid obligations in favour of subordinates by couching the relationship between their subordinates as a ‘contract of works’ relationship, hence enjoying the benefits of a dependent whilst exonerating themselves from additional responsibilities and protection towards their subordinates. The legislator has intervened to cater for such situations and thereby avoid situations where self-employed individuals are hired by third parties as independent contractors when, simultaneously, imposing terms and conditions akin to employment.
The importance of understanding the true nature of the relationship and rules imposed in legislation is also of imperative important for employers who genuinely seek independent contractors and wish to avoid unjustified claims by contractors during the duration of the contractual relationship or post termination of remit.
Article 3 of the Employment Status National Standard Regulation lists criteria to determine the true nature of the relationship and provides that in the event that five of the specifically listed criteria are satisfied, the status of the person who is nominally self-employed shall be presumed to be in an employment relationship and the person/entity for whom the service is provided, is to be considered the employer.
The criteria stipulated by the Regulation are the following:
(a) the individual depends on one single person for whom the service is provided for at least 75% of his income over a period of one year;
(b) the individual depends on the person for whom the service is provided to determine what work is to be done and where and how the assigned work is to be carried out;
(c) the individual performs the work using equipment, tools or materials provided by the person for whom the service is provided;
(d) the individual is subject to a working time schedule or minimum work periods established by the person for whom the service is provided;
(e) the individual is prohibited from sub-contracting his/her work to other individuals to substitute himself/herself when carrying out work;
(f) the individual is integrated in the structure of the production process, the work organisation or the company’s or other organization’s hierarchy;
(g) the individual’s activity is a core element in the organization and pursuit of the objectives of the person for whom the service is provided; and
(h) the individual carries out similar tasks to existing employees, or, in the case when work is outsourced, performs tasks similar to those formerly undertaken by employees.
Although any relationship where the person providing the services satisfies at least five of the above criteria is to be presumed and considered as an employee, the law does allow for an exemption. The exemption may be obtained by submitting a written request to this effect to the Director of Employment and Industrial Relations and the Director may, in the Director’s discretion on a case by case basis, if it is considered that there are particular grounds relating to that activity to exempt it from this requirement, including that the activity being carried out is an uncommon occurrence or of very short duration. Such exemption is granted by the Director in writing and shall remain valid unless rescinded by the Director.
Article 4 of the Employment Status National Standard Regulation further provides that individuals satisfying five or more criteria and found to be an employee in terms of law shall be considered to have been engaged as an employee on an indefinite contract of the person for whom he/she was providing services and the date of engagement and the date of engagement on an indefinite contract shall be considered to be the date of the initial continuous provision of services and the seniority and any notice due in case of an eventual redundancy shall be computed accordingly:
A rigorous and careful exercise must therefore be undertaken by employers and employees alike so as to avoid misclassification of the relationship and consequences thereof.
The information provided in this Insight does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only. This Insight may not constitute the most up-to-date legal information and you are advised to seek updated advice.
