South Africa's gig economy – a solution to addressing un“employment” December 2018

By SHERISA RAJAH AND KASENDRAN MOODLEY, Published in Employment Law

At the time of writing, there are about six million unemployed citizens in South Africa. When the definition of unemployment is expanded to people who have stopped looking for work, this amounts to 36,7% of the population. Against the backdrop of an economy in a technical recession, the South African employment landscape is crying out for contemporary methods to create alternative economic opportunities. This is particularly important as there are no significant projections as to when the GDP will improve.

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The solution may well be found in the gig economy.

While it is very easy to throw around contemporary terms on the assumption that we all work from the same terms of reference, an understanding of the "gig economy" is necessary.

This "gig economy" is defined as "a labour market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs".

Investopedia describes a gig economy as one in which "temporary, flexible jobs are commonplace and companies tend towards hiring independent contractors and freelancers instead of full-time employees". It goes on to identify that a gig economy is different to the traditional economy of full-time workers who rarely change positions and focus instead on a lifetime career.

The gig economy is best described as ever-changing. For this reason, it requires flexible, completely independent contract-based work, and a lot of it. It cannot be disputed that the result of the gig economy is an abundance of economic opportunity for those desperately in need of it. In South Africa and other developing nations, technology also has the potential to create spontaneous work opportunities for the millions who seek it.

A noteworthy example of a gig economy is Malaysia where government officials see their country's economy as an opportunity to increase productivity by putting unemployed citizens to work at flexible contractor model jobs. A government entity called the Malaysia Digital Economy Corporation (MDEC) has set up several programmes to get under-employed Malaysians onto gig economy platforms. One of these programmes is called "eRezeki", a website designed for Malaysians to make money completing online tasks, such as reviewing images, writing content, filtering out spam, and editing databases.

The gig economy creates an explosion of non-traditional work opportunities which directly result in more efficient services to consumers. This explosion is based on the dependency of the average consumer on the internet. Social media platforms allow service providers in the gig economy to connect with the consumer in real time. This is via "work on demand" apps. Examples do not just include Uber and Uber Eats, but also Taxify and Mr Delivery. Very recently in South Africa, this has included domestic work and home repairs which are coming to be classified as "gig services".

The digitisation and even automation of services in South Africa forces us to reconsider how we categorise and regulate employment and atypical employment models. This type of work would not create permanent employment and thus cannot fit into traditional employment models covered by employment legislation. It means that the gig economy is not limited to the entry of gig service providers into South Africa. Long established business and brands looking for particular skills to be fulfilled on a needs basis may also come to rely on it. This could drive innovation with the advent of the fourth industrial revolution which creates an ever-changing market.

As a consequence this type of economy is a grey area – contract work is unregulated under existing employment laws. Over the years, traditional contract work has been seen to be exploitative and has, in some instances, been pierced by tribunals and courts alike to protect vulnerable parties who were deemed to be employees.

However, in the gig economy, contractors cannot be deemed to be employees. Contractors have a wealth of economic opportunity, independence and flexibility to determine their own conditions under which they render services.

The Labour Court, in considering whether the Uber drivers were employees of Uber Technologies South Africa (Pty) Ltd (Uber SA), found:

"Part-time employment, outsourcing and casualisation have been features of our labour market even at the time that the Labour Relations Act 66 of 1995 was passed, while the gig economy has provided new opportunities for otherwise unemployed people to earn an income. The line between who is employed and who is not, is increasingly blurred as relationships have become largely anonymized, internationally and internationally."

In this judgment, the court commented that the test to determine whether people engaged in these sorts of services are employees for the purposes of the Labour Relations Act, 1995 (LRA) would be to consider the dominant impression and the reality tests. Importantly, these tests expound on the rebuttable presumptions of employment in the LRA, which provide that a person is presumed to be employed by another if one of the following factors are met:

  • The manner in which the person works is subject to the control or direction of another person;
  • The person's hours of work are subject to the control or direction of another person;
  • In the case of a person who works for an organisation, they form part of that organisation;
  • The person has worked for the other person for an average of at least 40 hours a month over the past three months;
  • The person is economically dependent on the other person for whom he or she works or renders services;
  • The person is provided with tools of trade or work equipment by the other person; or
  • The person only works for or renders services to one person.

Also relevant is the principle that persons cannot structure their affairs as an independent contractor, reap the benefits thereof, and later claim the protection of the LRA as an employee when it no longer suits them to be viewed as an independent contractor. In this regard, the remarks of Bulbulia DP in Callanan v Tee-Kee Borehole Casings (Pty) Limited (1992) 13 ILJ 1544 (IC) at 1550D-E have been repeatedly cited with approval (CMS Support Services (Pty) Ltd v Briggs [1997] 5 BLLR 533 (LAC) 540C-D; SABC v McKenzie (supra) 16E; Apsey v Babcock Engineering Contracts (Pty) Ltd (1995) ILJ 914 (IC) 924D-F):

"… I must point out that the applicant cannot have his proverbial cake and eat it. He cannot say that he was not the respondent's employee as a machinist for purposes of taxation (or for wishing to avoid the pension scheme of the industrial council), but simultaneously claim that he should be regarded as an employee for the purpose of the Labour Relations Act."

Considering this, is it not the case that the contractor in the rising South African gig economy is free to manage his/her own output, deliverables, and earnings? Such a person has no obligation to work but if they choose to do so, they can work from wherever, whenever and for whomever they choose, without exclusivity. This is then a stark juxtaposition to the presumptions of employment in the LRA. And what we now have, are a number of economic opportunities for contractors to earn a living, clearly without restraint, being frowned upon because there is no conformity to traditional employment models. The vexing question is why these commercially negotiated relationships have to be boxed as employment relationships at all.

The gig economy model also serves rising entrepreneurs well. In the gig economy, an average entrepreneur will require the services (and not the labour) of a multitude professionals – should all of them be employed? Arguably, of course not. The fairly onerous obligations on an employer in an employment relationship are likely to be prohibitive to an entrepreneur. Entrepreneurial take off is key to the viability and relevance of our economy.

As South African companies too look to optimise operations and streamline costs, a glaring consideration would be to shift from a manufacturing base to a service base, where this is practical. However, South African companies, entrepreneurs and unemployed citizens alike may have to embrace the gig economy in its infant stages, however muddy the regulatory waters may be.

The future of work within the gig economy is growing in areas such as the United States and in Europe alike. For South Africa to compete in the Fourth Industrial Revolution as an equal with these economies, particularly considering our precarious national economic position, it is our view that the focus should be on encouraging gainful economic opportunities through better protections for contract workers rather than quashing models that have the power to stimulate the economy.

Rajah is a Partner with Fasken and Moodley Employment Counsel with Uber.

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