Employee or contractor? Courts will give effect to contractual terms

With reference to the matter of Vermooten V Department of Public Enterprises & Others (JA91/2015) (2016) ZALAC 63, I will attempt to declutter a litany of conjecture that marred the legal waters, eventually leading the appellant to adopt a brave posture based on a wrong legal premise. In this regard, there is many a slip betwixt the cup and the lip. For the appellant, as will be revealed herein, pyrrhic victories are nothing but a sham. Labour law may be a tricky affair, but asking and answering the simple questions may lead to desired outcomes thereby diverting legal quagmires.

The facts revealed that the Department of Public Enterprises (hereafter DPE) was required to fill a post of Director: Aviation and as such advertised same. DPE had envisaged a five year contract for the position. As one can imagine, qualifying individuals applied and amongst them was one Mr. Vermooten (hereafter Vermooten). At the interview, Vermooten seemed to have wowed and impressed the panelists and as such it appears he was the DPE’s favorite. They offered him a five year contract as advertised, the position of Director: Aviation, but; there was a glitch. Vermooten was not content with the salary on offer, he regarded same to be low and so negotiations ensued. In the same breath, the DPE could not offer him a higher remuneration on a higher salary scale against their PERSAL system.

The DPE, however, was prepared to be creative in circumventing the internal PERSAL system glitch in order to procure the services of Vermooten. However, it appears Vermooten was au fait with the workings of government and he presented a “better” solution to the DPE. He suggested that in solving the remuneration issue, that his position be regarded as that of a specialist. The DPE subsequently considered his suggestion and later provided him with an offer, a twelve month contract as a Specialist Aviation Consultant instead of the erstwhile five years contract. The latter was a welcomed deviation. As a result, Vermooten had to submit Invoices to the DPE as is the norm with Consultants. Vermooten accepted the terms of the “new” contract.

Upon expiration of the first twelve months, the DPE amended the contract in order to expire some three years and five months later; that date being the 31st March 2011. During March 2011, the DPE informed Vermooten it was not about to renew the contract. This is where the bandwagon’s 22 inch mag-rims came off. Disgruntled with this state of affairs, Vermooten approached the Bargaining Council claiming he had been unfairly dismissed. The question that would ordinarily arise is “was Vermooten an employee in terms of section 200A of the Labour Relations Act 66 of 1995, as amended?” The latter was raised by the DPE at the Arbitration but sadly never pursued in terms of adducing exculpatory averments or evidence in support thereof. But, Vermooten relied thereon. Eventually, the Arbitrator ruled in favour of Vermooten. The latter decision was thereafter reviewed and set aside by the Labour Court. Unsatisfied with this ruling, Vermooten appealed to the Labour Appeal Court, the decision of which is the subject of this article.

The Court held that the DPE considered two options, one being to offer Vermooten a contract as an employee or as a consultant on a different contractual basis. As we came to know, Vermooten declined the former option because of the remuneration scale which was too low. Seeing that they were keen to acquire his services, they accepted his suggestion to onboard him as a consultant and at a higher rate than was applicable. This is where the case turned in my view. The DPE concluded the contract for purposes of acquiring Vermooten’s skill and this contract was not premised on an illegal act but it seems to have relegated Vermooten out of protection of section 200A of the Labour Relations Act. As a result he could not rely on it but on his executed contract which he himself brought about.

The court further considered the argument on behalf of the appellant that there was no need to link the appellant to a post within the DPE, he could simply be declared an employee. The appellant further made submissions based on his relations within the DPE and relying heavily on section 200A. The court held that it is not legally permissible for the DPE to have an employee in the Department without a rank and prescribed remuneration level. Having considered all surrounding circumstances, it was evident that the parties decided to structure their contractual relationship with a purpose to exclude an employment relationship. In line with the principle of freedom of contract, the latter was legally permissible. The court argued that Vermooten sought to be classified an employee, a position that could not be achieved at the beginning of the negotiations with the DPE. Both parties were found to be relatively equal in their bargaining positions and if they chose to elect one relationship over another; that choice ought to be respected by the courts.

The court held that the contractual agreement was valid and therefore in the absence of any overriding policy considerations, neither a tribunal nor a court may ignore its terms.   It was on that basis that the court held the appeal be dismissed with costs.

By Phalen Selibi
phalen@dyason.co.za