Dismissal: unfair dismissal LC applies "dominant impression" test

Hydraulic Engineering Repair Services v Ntshona and others
Case No. JR 1022 / 05
Judgment Date 17 August 2007
Jurisdiction Labour Court, Johannesburg
Judge Molahlehi AJ
Subject Grievance: Working Relationships
Issue: Employee was also shareholder in the business, but regarded as an employee at the same time. The court applied the dominant impression test and held that he was an employee.
Summary of Facts: The Employee referred an unfair dismissal to the CCMA. He had been employed by the Employer already when he entered into an agreement to purchase 50% shares in the business. No agreement was ever signed in this regard. He then received a letter advising that he is required to resign as director, failing which he will be removed as he had not complied with his duties as a director and did not expand the business as had been required of him. The Employer argued that he was not an employee as he was a director and shareholder of the business.
Summary of Judgement: The LC applied the dominant impression test and held that a director may also perform duties as an employee of the company. The office and duties of a director are separate. Directors are the holders of an office within the company. Rights and duties attach to that office and flow from statutory and common law of companies. A contractual relationship between a company and a director may not be necessary. Yet more often than not, contracts of employment are concluded between directors and companies. The fact that the parties either in writing or otherwise categorise their relationship as being anything other than that of an employment, is not in itself conclusive of the true nature of that relationship. In using the dominant impression test to evaluate whether an employment relationship exists, the relationship should be looked at in its totality and those aspects that indicate an employment and those indicating some other forms of relationship be identified. All relevant factors are to be weighed and then a determination should be made as to whether or not from those factors a dominant impression prevails that the nature of the relationship is that of employment. In this matter, the court determined on investigating the relationship between the parties that the Employee reported to the employer, and that the employer had control over him and his duties. The 2 parties did not have equal power and control. The Employee was obliged to manage the sales team and was expected to get involved in the day-to-day activities of the business in as far as marketing and sales were concerned. As a result the court held that there was an employment relationship between the parties. The case was referred back to the CCMA for arbitration.