Employer-Contractor Relationship: The Risks of Not Concluding a Written Agreement

The potential risks faced by parties due to an employer-contractor relationship, because of non-compliance with the Occupational Health and Safety Act, No. 85 of 1994 (OHSA), can result in serious liabilities for a business. These risks are more prevalent in the construction industry and related industries with high health and safety risks due to the nature of the work conducted by employees.

Key Definitions in OHSA

• Employer: Any person who employs or provides work for any person and remunerates that person or expressly or tacitly undertakes to remunerate that person but excludes a labour broker.
• Employee: Any person who is employed by or works for an employer and who receives or is entitled to receive any remuneration or who works under the direction or supervision of an employer or any other person.
• Mandatary: Includes an agent, a contractor, or a subcontractor for work, but without derogating from his status in his own right as an employer or a user.

Liability Under Section 37 of OHSA

• Section 37(1): An employer can be held vicariously liable for an act or omission of its employee, which results in a contravention of OHSA.
• Section 37(2): The terms of section 37(1) also apply to a mandatary of an employer, meaning an act or omission by a mandatary can also be imputed on the employer. However, the employer may escape liability if a written agreement is concluded for the arrangements and procedures for compliance with OHSA. This is generally referred to as a section 37(2) agreement, a mandatary agreement, or a health and safety agreement in terms of OHSA.

Essential Undertakings in a Section 37(2) Agreement

• Compliance with the health and safety arrangements and procedures prescribed by the employer.
• Indemnification of the employer against any liability, loss, claims, or proceedings arising out of non-compliance by the mandatary and/or any of the mandatary’s employees with OHSA, the Regulations binding in terms thereof, and any relevant health and safety laws and standards or which may arise from an accident, incident or an occupational disease.
• Registration of all employees and/or contractor’s employees with the Compensation Fund in terms of the Compensation for Occupational Injuries and Diseases Act, No. 130 of 1993 (COIDA) and ensuring good standing with the Compensation Fund.
• Possession of a letter of good standing from the Compensation Fund and obtaining such a letter annually.
• Reporting all accidents, incidents, and occupational diseases to the employer and the Department of Employment and Labour.

Potential Risks of Not Having a Section 37(2) Agreement

• Criminal liability on the employer due to non-compliance by a mandatary with the provisions of OHSA.
• Liability on the employer to make payments in terms of COIDA, following an injury or occupational disease of an employee of a mandatary.
• Higher burden of disproving claims of negligence in the event of a civil claim by an employee of a mandatary for an injury on duty or occupational disease.

For more information and advice, contact our health and safety law team.

Author: Cindy-Lee Bekeer.