Labour Law

Dr Thusitha B Abeysekara
Senior Lecturer in Law
Legal Studies Unit
Faculty of Management Studies and Commerce
University of Sri Jayewardenepura
PhD in Computer Law/University of Exeter-UK
LLM in Computer and Communications Law/Queen Mary-UK
LLB (Hons)1/2- University of Colombo
Attorney-at-Law (1st Class)
Dip in IR (BCIS/Sri Lanka)
Dip in HR (AMU/Poland)
Dip in Digital Archives (CEU/Hungary)

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 Basics
Employer Employee Relationship

Contract of
Employment

Employee agrees to provide work or a service in return for a payment or remuneration by the Employer

Contract of Contract for

Service service 2
 Contract of Service Contract for service
An employee-employer contract A contractor-client contract
• The worker is controlled by their employer • A requirement to supply services to the client according to the
• The worker is expected to work at a specific place during contract schedule’s specification
• A requirement to complete the project, and any milestones,
specific hours on specific days (even flexi-time has core according to the contract schedule
hours) • A requirement to provide services to the standard required by the
• The worker must present themselves for work and cannot client as agreed in the contract
send someone else as a substitute • An obligation to make right any errors or defective work, without
• Employees have statutory rights to holiday pay, sick pay, additional remuneration
maternity and paternity rights and redundancy payments • Liability for any errors or defects in work completed for clients
• Employees have statutory rights regarding how they can be • The right to be paid the rate agreed in the contract, assuming the
services have been provided according to the contract’s requirements
asked to leave their employment
• The right to be paid according to the terms agreed
• Employees enjoy a range of additional benefits • The right to provide a substitute to complete the work specified in
• Employees are not personally liable for any errors they the contract
make when completing work for their employer, nor are • Often the contractor is required to abide by any health and safety
they expected to make good in their own time. and security arrangements when working on the client’s site
• The client is obliged to provide a safe working environment for the
contractor.
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Employee or Independent Contractor
Several Tests

 Control Test
Test of Equipment
Integral Test
Economic Reality Test

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 Tests
Control Test
• The common law control test is the basic test, using the common law rules, for
determining whether a relationship exists between the worker and the person
or firm that they work for.
• The employer has the right to tell the employee what to do, how, when, and
where to do the job.

An airline pilot cannot be said to be ‘controlled’ by the airline in any real sense while he or
she is carrying out their work. Therefore, the control test became outmoded as the sole
criterion. Although it remains important, it is no longer seen necessarily conclusive.

• Fleming v Secretary of State for Trade and Industry

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Market Investigations Ltd v Minister for Social Security
[1969] 2 QB 173

'Is the person who has engaged himself to perform these services
performing them as a person in business on his own account?'. If the
answer is 'Yes', then the contract is a contract for services. If the answer is
'No', then the contract is a contract of service”

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Test of Equipment …Tests
• If the person employed brings all the equipment required to work
then such person is an independent contractor. If Not (Provided by
employer) then an employee.

Integral Test
• The individual is “Part and Parcel” [part meaning “a portion”
and parcel “something integral with a whole,”] of the organization. If
the person is wholly a regular unit of the entity and not casual,
temporary employee the he is an employee. If not then he is an
independent employee.
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 …Tests
 Integral Test
In 1952 Denning LJ referred to this test in
Stevenson, Jordan and Harrison Ltd v Macdonald and Evans
It was considered that the decisive question was whether the person is
employed as part of the business, whether his or her work is done as ‘an
integral part of the business’ or whether it is merely an accessory to it.
Although the test has the advantage of being a fairly straightforward
one, the great fall back of this approach lies in its failure to define
exactly what is meant by ‘integration’ and ‘organisation’.

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 Economic Reality Test …Tests
Consists of the following five factors which gauge the degree of a
worker's economic dependency on the business to which he or she is
providing services.
(1) The degree of control exercised by the alleged employer
(2) The extent of the relative investments of the worker and alleged
employer
(3) The degree to which the worker's opportunity for profit and loss is
determined by the alleged employer
(4) The skill and initiative required in performing the job
(5) The permanency of the relationship
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 …Tests
Gradually the courts have recognized that no one test or set of criteria
can be conclusive when determining employment status, and so the test
adopted by courts for deciding whether a contract is of or for service is
the ‘multiple test’.
This is a three fold test:
 a contract of service requires duty to give personal service,
 the existence of a sufficient degree of control and
 the terms of the contract being consistent with service.

The correct approach for identifying the status of a working relationship

is to consider a range of factors relevant to the relationship.
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 Its useful to determine…
Only employees are entitled to certain benefits and security such as EPF,
ETF, Gratuity and etc…

 The employer is liable to pay PAYE [Pay As You Earn] under income tax
law for employees employment income

The employer is vicariously liable for a negligent act of an employee

 If the employer is bankrupt the employees have priority claim over arrears
of salary compensation for termination of employment

 The employer is bound by several duties of his employees such as care for
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health and safety
Industrial Disputes Act No. 43 of 1950
Introduction
• Peaceful employer, employer relationships are crucial in socio-
economic development of a country.

The Beginnings…
• The Industrial Disputes (Conciliation) Ordinance No.3 of 1931.

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 The Ordinance Provided -
• Appointment by the Governor, a Commission to inquire in to any
matter;
• Appointment of a “Conciliation Board” by the Controller of Labour
which would “Induce the Parties” to settle the disputes by settlement.

Consisted of a Chairman (Controller or When the Board failed to effect a

another Public Servant). settlement, the Board made its
Other members appointed in equal numbers. recommendations for settlement of
disputes and was left for the good
Principle of Tripartism (cooperation, sense of parties to the dispute, to
consultation, negotiation) was adopted. accept them.
Before the dispute is referred to Conciliation There was no a penal procedure.
Board, the Controller could Mediate. 13
History
• Essential Services (Avoidance of Strikes & Lockouts) Order.
• Provided an aggrieved employer or a worker to seek solutions through a
District Judge or a special Tribunal.
• Must submit a petition to the Commissioner of Labour setting out the
grievances.
• Any award (decision) made by such a Judge or Tribunal would effect not
only the parties bound, but also on similar employers in the Judicial District.
• “Compulsory Arbitration” as a means of settlement of disputes was
introduced for the first time.
• With end of the war, the Essential Services Order was cancelled resulting
confusion and industrial turmoil.
• Though the Industrial Disputes (Conciliation) Ordinance was re-introduced,
it was not adequate to deal with the situation which was present.
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The Act…
• To overcome Industrial Disputes, the Govt introduced the Industrial
Disputes Act No.43 of 1950 to regulate Industrial Relations in Sri
Lanka.

The Objective
• Prevention, Investigation and settlement of Industrial Disputes which
may occur between employers & employees and employees &
employees in order to ensure industrial peace in the country.

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Definition of Disputes
• “Any dispute or difference between employer & a workman, between
employers & workmen, or between workmen & workmen, connected
with employment, or non-employment, or terms of employment or
with the conditions of labour, or the termination of services or the re-
instatement of service of any person”.
• For the purpose of this Act, “workman” includes a trade union
consisting of employees.
• A dispute over a political matter or the nationality of the employer
would not be an Industrial Dispute and any trade union actions on
such will not be covered by the Act.
• Act is based on a statutory framework of Arbitration and Adjudication
with legally enforceable orders.
• The Act becomes dominant than bi-lateral relations.
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Workman…
• “Any person who has entered into or works under a contract with
an employer in any capacity, whether the contract is expressed or
implied, oral or in writing and whether it is a contract of service
or of apprenticeship or a contract personally to execute any
work or labour and includes any person ordinarily employed under
any such contract whether such person is or is not in employment at
any particular time and includes any person whose services have
been terminated.”

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 Functions of the Commissioner and
circumstances in which Industrial Disputes
Methods adopted… will be referred for settlement by
Conciliation or by Arbitration or by
Industrial Court.

• It is a societal need that the Industrial Disputes are properly dealt with.
• The Act provides following four methods to deal with Industrial
Disputes.

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 Part II – Methods adopted by Commissioner to settle disputes…

• Where the Commissioner is “Satisfied” that an industrial dispute exists in an

industry, he may take any of the following steps to settle that dispute.
1. By referring to Agreement;
• Collective Agreement
2. By Conciliation
• When there is no such agreements between parties, the Commissioner may try
to solve the Dispute by “Conciliation”.
• Conciliation is a method to solve disputes by attempting to reduce the
differences between the parties involved in the dispute.
• Conciliator will attempt to bring about compromise between the two parties.
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 3. Authorized Officer for Conciliation

• When Commissioner fails to solve the dispute by conciliation, he may

refer to an “authorized officer” to settle the dispute by Conciliation.

 4. Arbitration

• Commissioner may refer the dispute for settlement by voluntary

arbitration.
• or recommend to the Minister of Labour that the dispute be referred to
compulsory arbitration.

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 Part III – Arbitration.

• There are two forms of Arbitration.

• The Act provides for Voluntary Arbitration or Compulsory
Arbitration as a means of settling disputes.
Voluntary Arbitration…
Compulsory Arbitration…
• The parties to the dispute must be willing to refer the
dispute to voluntary arbitration in writing. (by an
Arbitrator nominated jointly) When the Commissioner fails to settle
• Then the Commissioner may refer the dispute to an the dispute using above methods, the
Arbitrator in writing. Minister of Labour may refer the dispute
• The Arbitrator may be appointed by the parties
involved. They must appoint a Chairman as well. to an Arbitrator appointed by him or to a
• When there is no agreement between the parties to Labour Tribunal.
appoint the Chairman, the Commissioner will Alternatively Minister may refer the
appoint. dispute to an Industrial Court as well.
• The award (solution) made by the Arbitrator is
binding on the parties, unless they repudiate it.
• Strong solutions can be reached as both parties
consent to the solution reached.
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Labour Tribunal…
• Labour Tribunal is an important forum for settlement of disputes.
• Labour Tribunals are to entertain applications from workmen for relief in respect of;
The termination of employment
• Forfeiture of gratuity
• Gratuity from establishments with less than 15 employees.

Method –
The Minister may, by an order in writing, refer any industrial dispute to an
industrial court for settlement.

Minister shall ensure that …

• The dispute is an Industrial dispute,
• The dispute is NOT regarding the law,
• The dispute is NOT regarding terms and conditions of a collective agreement,
• The dispute is NOT related to an illegal strike or illegal trade union action,
• That the dispute does NOT relate to individual termination. 22
 Part – III Collective Agreements
• The Sections 5 to 10 of the Act provide for the Collective Agreements.
• The employees are able to obtain the rights and privileges more than the
labour law provides for, from the Collective Agreements.
• Have become the major method in deciding the Industrial Relations in
Developed countries.
• In Sri Lanka also, Collective Agreements exist in large developed
organizations where strong labour unions are present.
• These agreements may exist in improving the conditions relevant to high
salaries, medical leave, non-recurrent cost of living allowances, bonus,
medical expenses etc…

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 Collective Agreements…
• The employers are benefited as well

A Collective Agreements means;

Every Collective Agreement which is published in
the Gazette, shall come in to force on the date of such
An agreement reached between
publication or on the date on which is specified in the an employer or employers and a
agreement. labour union consisting
employees

Termination of Collective Agreements

By written notice using the prescribed form sent to the Commissioner and to every other party, trade
union and employer bound by the agreement.
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Settlement by Conciliation

• The Commissioner himself tries to settle an industrial dispute or a

dispute is referred to an authorized officer for settlement.
• Every investigation for the purpose of settling dispute by conciliation
shall be concluded within one month.
• If the dispute is settled by conciliation, either the Commissioner, or the
authorized officer will set out a memorandum including the terms of
settlement, which shall be signed by both parties.
• When a dispute can not be solved by conciliation, the Commissioner or
the authorized officer shall prepare a full report regarding the dispute
including the steps he has taken for its investigation and settlement, and
his recommendation for the settlement of the dispute.
• Every dispute referred to an arbitrator for settlement, will be
accompanied by a “statement” prepared by the Commissioner setting out
each of the matters to his knowledge is in dispute between the parties. 25
Settlement by Arbitration…

• When an industrial dispute has been referred to an arbitrator, he shall

make all such inquiries in to the dispute as he may consider necessary,
here such evidence and thereafter make such award as may appear to
him just and equitable.
• The award of an Arbitrator shall be transmitted to the Commissioner
who shall publish it in the Gazette.

• Every award of an Arbitrator shall come in to force on the date of the

award or on a date specified in the award.

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Industrial Courts

• Is the highest tribunal under the Act.

• The Act provides for the Minister by Order to refer any Industrial
Dispute to an Industrial Court.
In Constituting Industrial Court-
• Minister may select one or three persons from the panel appointed by
the H.E. the President.
• This panel will be consisted of 5 persons appointed by the president for
a period of three years or more.
• The Industrial Court consists of one or three persons selected from the
above panel.
• Same as the Arbitrator, Industrial Courts too are under the duty of
making inquiries into the dispute, hear all such evidence, and thereafter
to make such decisions as may appear to the Court to be “Just and 27
Equitable”.
Labour Tribunals…

• The Minister shall establish such number of Labour Tribunals as he

determines.
• Each Labour Tribunal shall consist of one person.

A worker in a dispute must…

• Inform the Labour union, if he/she is a member
• If it is regarding termination of employment, inform a labour tribunal
before six months time
• If it is regarding other disputes such as incomplete salary payments,
EPF the relevant district’s labour dept branch and the Commissioner
of Labour must be informed.
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 Part V – Unfair Labour Practices…

• No Employer Shall;
• Require or refrain a workman from joining, any trade union, or to withdraw from,
or refrain from withdrawing his membership of a trade union of which he is a
member
• Dismiss a workman by reason only of his membership of a trade union or of his
engaging in trade union activities;
• Give any document or promise to a workman for the purpose of preventing him
from becoming or continuing to be a member, office-bearer or representative of a
trade union;
• Interfere with the conduct of the activities of the trade union
• Dismiss or take disciplinary action against any workman
• For making statements on good faith before a tribunal
• Relating to any statement regarding employer
• Refuse to bargain with a trade union, which has its membership not less than 40%
• Prevent a worker from
• Forming a trade union
• Supporting a trade union by financial or other means 29
Industrial Disputes (Special Provisions) Act,
No. 19 of 2022
• Presently, according to the Industrial Disputes Act, in cases where an
employer has terminated the employment of an employee, such
termination is dealt with under a Labor Tribunal.
• In situations where the employers violate the provisions of various
Acts pertaining to the Employees and Provident Fund, wages, other
terms and conditions, litigation will be instituted in the Magistrates
Courts.

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Industrial Disputes (Special Provisions) Act,
No. 19 of 2022
• However, under the Industrial Disputes (Special Provisions) Act No. 19 of 2022, the Act delegates
such powers to the Chairman of Labor Tribunals.
• Therefore, the Labour Tribunal now has power to implement the provisions of laws such as,
• Employees’ Provident Fund Act, No. 15 of 1958
• Employees’ Provident Fund (Special Provisions) Act, No. 6 of 1975
• Employees’ Trust Fund (Special Provisions) Act, No. 19 of 1993
• Employees’ Trust Fund Act, No. 46 of 1980
• Employment of Trainees (Private Sector) Act, No. 8 of 1978
• Employment of Women, Young Persons and Children Act, No. 47 of 1956 and etc..

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What are the methods that could be adopted by the Commissioner of
Labour for the settlement of Industrial Disputes?

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The Employees Provident Fund (EPF) Act No 15 of
1958
• Currently the largest Social Security Scheme in Sri Lanka.
• The AIM of the EPF is to assure financial stability to the employee
in the winter of life and to reward the employee for his or her role
in the economic growth of the country.
• According to the EPF Act, an employee is required to contribute a
minimum of 8% and the employer a minimum of 12% of the total
salary of the employee monthly.

Central Bank of Sri Lanka- http://www.epf.lk

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Coverage - EPF
• Permanent and nonpermanent
• Casual and Temporary
• Apprentices/Trainees [Not covered under - National Apprenticeship Act (No. 49 of 1971)- Sec 2.
For the purposes of this Act, the Minister may, by Order published in the Gazette, divide apprentices
into such different categories as may be specified in the Order, and the expression " category " or "
categories " wherever it appears in any context relating to apprentices in the succeeding provisions
of this Act shall be read and construed subject to the preceding provisions of this section.]
• Daily wage earners
• Those who work on commission basis
• Contract employees
• Non-permanent employees employed in local authorities
• Partners and directors earning salaries or allowances from the company 34
Excluding – EPF
• Public Servants
• Establishment run by family members. [However, if they employ even one outsider, EPF has to be
paid to that employee and all other family members, Family – Act- For the purpose of this section,
“ Family ” means a member of the Fund, his or her spouse, and his or her children.]
• Non working directors
• Partners of a business who are not earning a salary
• Contributors to Approved Provident Funds
• Person under 14yrs of age
• Self-employed persons
• Domestic servants
• Employees of charitable or social service organisations having les than 10 workers
• Apprentices under National Apprenticeship Act (No. 49 of 1971)
• Employees working in organisations where training is given to juvenile offenders, orphans,
destitute, dumb, deaf of blind 35
 Contributions
Based on Monthly Total earning
Employee - a minimum of 8% If employers and
Employer - a minimum od 12% employees by
mutual agreement
Total earning includes can elect to pay a
 Basic wage or salary higher rate of
 Cost of living allowances contribution to the
 Other special allowances
fund. If so, it
cannot be alerted
 Payment in respect of Holidays
later.
 Cash value of cooked or uncooked food
 Meal allowances and other allowances
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 Commissions earned by employee
Entitlement – EPF
In the following circumstances…
When leaving service on reaching age of retirement
When leaving service on grounds of marriage [(For female Employees)] in the event of
• 1) If married within 3 months of leaving service
• 2) Have left service within 5 years of marriage

When leaving service on permanent disability

When migrating to another country on a permanent Visa
When leaving for employment in Government Service or Local Government Service [Pensionable
appointment]
When leaving service on a corporation being closed down, converted into a Company or on
retrenchment
1) A business undertaking or corporation belonging to the Government converted into a public company.
2) Employees retrenched from a State Corporation
3) A Government Corporation or Government Business Undertaking closed down. 37
- A letter should be obtained from the previous Employer stating the situation clearly.
ETF Act No.46 of 1980
• Employer obliges to contribute 3% of the employees total wages.

Objectives-
• To provide employees with a non- contributory benefit at the time of their
retirement or termination of employment.
• To provide benefits for the welfare of members during their employments.

The Coverage-
• Private sector enterprises
• Semi government enterprises
• Universities
• Corporations
• Statutory bodies 38
Withdrawal of fund balances
Other benefits
• On cessation of employments • Free life insurance
• Change of employment • Permanent disability
• Retirement insurance
• Financial assistance for heart
• Dismissal surgery and kidney
• Resignation transplant
• Low interest housing loans
• Vacation of post • Financial awards for year 5
• Closure of the establishment scholarship

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Gratuity
• Act No.12 of 1983
• Gratuity is a lump sum payment made in recompense for service at
the end of the employment period.
• The amount is calculated at the rate of half a month’s salary for
each completed year of service(for monthly paid employees)
• Less than 15 workmen or not completed 5 years not eligible

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Laws on welfare and well-being of Employees
• Employment of Women, Young Persons and Children Act
• Maternity Benefit Ordinance
• Employment of Females in Mines Act

Occupational safety and Health

• Factories Ordinance
• Workmen’s Compensation Ordinance

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Factories Ordinance No.45 of 1942
Objective of the Act
• To provide for the safety ,health and welfare of workers in factories
through maintaining a safe and healthy work environment

The Coverage
• The term factory is given a very wide meaning, entailing premises
under cover as well as in the open air where persons are employed in
manual labour for any of the general purposes over which the
employer has the right of access or control

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Workmen’s Compensation Ordinance
• The Ordinance specifies and regulates the employees liability to pay
compensation. the compensation has to be paid for
• An injury caused to a workmen by accident arising out of his
employment
• An occupational disease contracted by an employee whose service is
not less than 6 months in any process which is directly attributable to
the nature of his employment.

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Disciplinary actions available to an
organization.
• Verbal warning
• Written warning
• Suspension with or without pay
• Pay cuts
• Reduction/denial of bonus or other benefits
• Denial of promotion
• Demotion
• Delay in increments
• Transfer
• Dismissal