Introduction to Labour Law

This document provides an introduction to labour law, including the origins and enforcement of international labour standards, the setup of the International Labour Organization, and the constitutional protection of labour rights in Sri Lanka. It also discusses the contract of employment and the distinction between servants and independent contractors.

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LABOUR LAW
PART TIME
E-BOOK

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Lesson : Introduction to Labour Law
International Labour Standards
a. Origin of the International Labour Organization:
In the aftermath of World War I, the international community realized the need to
achieve social justice for maintenance of world peace. In order to do away with
economic disparities among and within the countries, preservation of workers’
rights was a must and the ILO was found in 1919 with a mandate to adopt minimum
international labour standards.
See http://www.ilo.org/global/about-the-ilo/history/lang--en/index.htm for more
information on origins and history of the ILO.
b. Setup of the ILO:
The ILO is a tripartite organization where views of all three stakeholders, namely
the governments, employers and workers are taken into consideration in
formulating labour standards. The delegates from each member state representing
all three stakeholder groups meet every year at the International Labour Conference
to discuss key labour issues and to formulate policies to address the same.
The Governing body of the ILO performs the executive functions such as taking
decisions on the ILO policy, deciding the agenda for the international labour
conference and the drafting the programmes and the budget of the ILO.
c. Adoption of International Labour Standards:
“Developing international labour standards at the ILO is a unique legislative process
involving representatives of governments, workers and employers from around the
world. As a first step, the Governing Body agrees to put an issue on the agenda of a
future International Labour Conference. The International Labour Office prepares a
report that analyses the laws and practices of member states with regard to the
issue

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at stake. The report is circulated to member states and to workers and employer
organizations for comments and is discussed at the International Labour
Conference. A second report is then prepared by the Office with a draft instrument
for comments and submitted for discussion at the following Conference, where the
draft is amended as necessary and proposed for adoption…A two-thirds majority
votes is required for a standard to be adopted.”
http://www.ilo.org/global/standards/introduction-to-international-labour-
standards/international-labour-standards-creation/lang--en/index.htm
d. Enforcement of International Labour Standards:
The member states that have ratified the ILO conventions are bound by the
obligations enshrined therein and are required to submit periodic reports for
review by the Committee of Experts on the Application of Conventions and
Recommendations and the International Labour Conference’s Tripartite Committee
on the Application of Conventions and Recommendations.
e. Uses of International Labour Standards in the Domestic Sphere:
International labour standards are used at the national level as,
- Models in drafting national labour laws
- An interpretation aid by the national courts
- Guidelines for developing national and local social policy
f. Compliance Status of Sri Lanka:
Sri Lanka became a member of the ILO in 1948 and has ratified all eight fundamental
conventions of,
- Freedom of Association and Protection of the Right to Organize Convention
(No.87)
- Right to Organize and Collective Bargaining Convention (No. 98)
- Forced Labour Convention (No. 29)
- Abolition of Forced Labour Convention (No. 105)

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- Minimum Age Convention (No. 138)
- Worst Forms of Child Labour Convention (No. 182)
- Equal Remuneration Convention (No. 100)
- Discrimination (Employment and Occupation) Convention (No. 111)
Introduction to Sri Lanka Labour Law
a. Constitutional Protection of Labour Rights in Sri Lanka
The 1978 Constitution does not guarantee a right to work. However, there is a
commitment to promote social justice and improve labour standards under the
Directive Principles of State Policy. Article 27 (6) and (7) of the Directive call on
government to ensure equality of opportunity to citizens, eliminate economic and
social privilege and disparity, and eliminate exploitation of man by man or by the
State.
Although there is no express right to work, several key labour rights have been
declared as fundamental rights in Sri Lanka and a number of judicial decisions have
attempted to determine the status and scope of some labour rights in Sri Lanka as
the right to strike.
Article 14 (1) guarantee to every citizen the freedom to engage by himself or in
association with others in any lawful occupation, profession, trade, business or
enterprise.
Article 14 (1) (c ) recognizes the freedom of Association and is supplemented by
Article 14 (1) (d) which specifically recognizes the freedom to form and join a trade
union.
Article 12 (1) recognizes equality before the law and Article 12 (2) prohibits
discrimination based on race, religion, language, caste, sex, political opinion, place of

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birth or any one of such grounds. The Constitutional guarantee of right to equality is
particularly important in relation to public sector employment and applies in all
stages of employment such as recruitment, promotion and termination.

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Lesson: The Contract of Employment
Aims and Objectives
On the completion of this topic, the students should be able to,
1. Comprehend the origin of the law governing employer-employee relations
2. Appreciate the contractual nature of the employer-employee relationship under the
common law
3. Identify the major developments that transformed the common law of employer-
employee relations
4. Critically examine the continuing relevance of the common law and the contract of
employment
5. Appreciate the differences between a servant and an independent contractor
6. Critically analyse the tests applied for determining the existence of an employer-
employee relationship between two parties
7. Comprehend the extent to which control is relevant in today’s context in determining
the existence of an employer-employee relationship between two parties
8. Illustrate the extensions of the scope of the terms “employer” and “employee” under
different statutes and judicial interpretations of statutory definitions
Introduction
The law of master and servant or Employment Law or Labour Law was less
significant prior to the Industrial revolution and increased in importance in the
advent of industrialization. As signified by the use of the terms “master” and
“servant” prior to the development of labour law, the employers assumed a superior
position than the employees due to the low bargaining power of individual
employees. The rise of trade unions and collective bargaining; formulation of
legislation setting out minimum employment standards; and establishment of
labour courts rectified the disparity between the bargaining powers of employers
and employees.

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The Common Law of Employer-Employee Relations
The Law governing employer-employee relations originated in an era of laissez-faire
and prior to legislative inroads it was founded in common law principles. A contract
of employment entered into between an employer and employee was seen as an
exercise of freedom to contract and a manifestation of their free will. The common
law overlooked the inequalities between the bargaining powers of employers and
employees and upheld the will of the parties as manifested in the contract of
employment, the terms of which were often in favour of the employers.
The common law recognition of employer-employee relationship as a mere
contractual relationship underwent drastic changes due to two major
developments.
1. Collective Bargaining resulting from Trade Unionism: The increased bargaining
strength of the employees improved their ability to demand their rights and to
agree on terms and conditions of employment which are fair for both employers
and employees.
2. Legislation: with the shift from laissez-faire state to welfare state, the State
assumed a positive role in protecting the weaker segments of the society.
Consequently, the State intervened in formulating laws that set out the minimum
terms and conditions of employment.
The Continuing Relevance of the Common Law and the Contract of Employment
The key effect of the above mentioned developments was to relegate the importance
attached to the common law and the contract of employment, The employer-employee
relationship which was viewed as a mere contractual relationship under the common law
came to be viewed as a status.
- Diminished the freedom of parties in terms of contents of contracts
- Employer-employee relationship became more than a mere contractual
relationship

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- Expanded employees/employers ability to demand for rights and terms which
are fair to both parties.
Why is the Distinction between servants and independent contractors important?
The distinction between servants and independent contractors first became important in
Torts since the employers were only vicariously liable for the torts of their employees. In
Labour Law, the identification of the status of a person hired to provide a service is
important due to the availability of special legislative protections for employees.
Meaning of “Servant” and “Independent Contractor”
A servant hired under a Contract OF Service is subject to the control of his/her employer
with regard to the manner in which his/her work is to be carried out. In contrast, an
Independent Contractor hired under a Contract FOR Service is free to decide on the manner
in which his/her task is to be performed.
J.W. Salmond defines a servant as,
“Any person employed by another to do work for him on the terms that he, the servant, is
to be subject to the control and discretions of his employer in respect of the manner in
which his work is to be done.”
- Salmond, J.W., Law of Torts, (Sweet and Maxwell, London, 13th ed.), at p. 112 cited
in De Silva, S.R., The Contract of Employment, Monograph No. 4, The Employers’
Federation of Ceylon, Revised Edition, 1998, at p. 42
“An Independent Contractor…is one employed to do certain work but he has a right to
exercise his own discretion as to the time and manner of doing the work…”

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- De Silva, S.R., The Contract of Employment, Monography No. 4, The Employers’
Federation of Ceylon, Revised Edition, 1998, at p. 42
Case laws
Performing Right Society v Mitchell & Booker Ltd. (1924) 1 KB 762, at p 768
“A servant is a person subject to the command of his master as to the manner in which he
shall do the work. An independent contractor is one who undertakes to produce a given
result, but in the actual execution of the work, he is not under the order or control of the
person for whom he does it and may use his own discretion in things not specified
beforehand.”
The Tests to Determine the Existence of an Employer-Employee Relationship
The determination of the nature of the contract between two parties is a question of law
and the label used by the parties to identify their relationship is not decisive of its nature.
In order to overcome this concern, the English courts developed tests to determine the
existence of an employer-employee relationship.
In Sri Lanka, the common law governs the determination as to the existence of an
employer- employee relationship between the two parties. The Sri Lankan courts refer to
various tests developed by the courts of jurisdictions, including the United Kingdom courts
with persuasive authority to ascertain the factors that need to be taken into consideration
in determining the existence of an employer-employee relationship.
a. Control Test
The test which had been celebrated for years as the decisive test in determining the
existence of an employer-employee relationship is the control test. The inquiry under

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the control test focuses on the question as to who exercise the right of control over
the manner in which the work is carried out.
Mercey Docks and Harbour Board v Coggins and Griffiths (Liverpool) Ltd. (1947) AC 1
Coggins and Griffiths hired a crane and a driver, named Newall from Mersey Docks
and Harbour Board to help load the cargo to a ship. Newall negligently drove the
crane and injured a workman. In order to determine the vicarious liability for the
injury caused, it was necessary to first decide the employer of Newall. The contract
between Mercey Docks and Harbour an the hirer Coggins and Griffiths stated that
Newall is an employer of the hirer for the duration of the hire. Although Coggins and
Griffiths exercised a certain degree if control in deciding what objects were lifted by
the crane, they did ot contoll the manner in which Newall drove the crane. The House
of Lords held that the real control was with the Mercey Docks and harbour who
selected Newall, paid him, prescribed the jobs he should undertake and possessed the
right to dismiss him.
Performing Right Society v Mitchell & Booker Ltd. (1924) 1 KB 762
The Control Test is suitable where the employer possessed a higher degree of
knowledge and skill than the employee. It is inadequate in situations where the
employee is exercising special or professional skill and the employer is unable to
instruct the employee as to the manner in which he/she should carry out his/her
work.
Perera v Marikar Bawa Ltd. (1989) 1 SLR 347, at p. 354
“…the greater the skill required for an employee’s work, the less significant is
control in determining whether the employee is under a contract of service. Control
is just one of many factors whose influence varies according to circumstances.”

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Cassidy v Minister of Health (1951) 2 KB 343
Despite the lack of employers’ control over the manner in which the professionals
exercised their professional skill in later cases the courts started recognizing
professionals as employees.
The Court of Appeal held that although the right of control the hospital authorities
have over a professional is limited the professionals who are permanent staff
members of hospital are employees of a hospital are employees of that hospital
since the hospital authorities select and appoint these professionals to treat
patients. However, the visiting surgeons and other professionals are not considered
as employees of a hospital.
Whittaker v Minister of Pensions & National Insurance (1966) 3 All ER 531, at p.
537, “…persons possessed of a high degree of professional skill and expertise, such
as surgeons and civil engineers, may nevertheless be employed as servants under
contracts of service, notwithstanding that their employers can, in the nature of thing
exercise extremely little, if any, control over the way in which such skill is used. The
test of control is, therefore, not as determinative as used to be thought to be the
case, though no doubt it is still of value in that the greater the degree of control
exercisable by the employer the more likely it is the contract is one of service.”
Lane v Shire Roofing [1995] IRLR 493, at p. 495,
The elements of control, which today remains important only as one of the
considerations, was illustrated as “who lays down what is to be done, the way in
which is to be done, the means by which it to be done and the time when it is done.”

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b. Integration test
The inquiry under the integration test focuses on the question whether the work
was done as an integra part of the business of the employer.
Stevenson, Jordan & Harrison v Macdonald and Evans (1952) 1 TLR 101
“…under a contract of service a man is employed as part of the business and his
work is done as an integral part of the business; whereas under a contract for
services, his work, although done for the business, it is not integrated into it; but
only an accessory to it.”
Bank Voor Handel en Scheepvaart N v Slatford (1953) 1 QB 248
“The test of being a servant does not rest nowadays on submission to orders. It
depends on whether the person is part and parcel of the organization.”
c. Dominant Impression Test
Unlike the earlier tests which concentrated on a single factor such as control or
integration as the decisive factor, the dominant impression test calls for the
consideration of all the factors involved in a given situation. If multiple factors
support the conclusion that the person providing the service is “in business on his
own account” then the contract is considered as a contract for service. Thus the
focus is in the economic dependence of the person providing the service.
Control+ integration+ economic independence= Dominant Impression test
Market Investigations v Minister of Social Security (1969) 2 QB 173
“The fundamental test to be applied is this; “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 to that question is “yes” then the contract is a contract for

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services, if the answer is “no” then the contract is a contract for services…The most
that can be said is that control will no doubt always have to b considered, although it
can no longer be regarded as the sole determining factor; and that factors which
maybe of importance are such matters as whether the man performing the services
provides his own equipment, whether he hires his own helpers, what degree of
financial risk he takes, what degree of responsibility for investment and
management he has, and whether and how far he has an opportunity of profiting
from sound management in the performance of his task.”
Dual Capacity of Directors
A person is capable of holding a dual capacity on one hand as an employee and on
the other hand as a member, co-owner, director, etc. The relationship between a
director and a company is not an employer-employee relationship. However, a
director may have entered into a separate contract of service with the company.
In such situations, directors becomes entitled to two separate sets of rights in his
capacity as a director and as an employee. For instance, a director in his capacity as
a director does not fall within the scope of an “employee” under the Industrial
Disputes Act and therefore a dispute between a director and a company cannot be
identified as an industrial dispute within the meaning of the Act. However, if the
director has a separate contract of service he/she is covered under the Industrial
Disputes Act for matters relating to his/her employment.
Lee v Lee’s Air Farming Ltd. (1960) 3 All ER 420
Lee formed a company in which he owned 2999 shares except one which was held
by his solicitor. He was the Governing Director of the company and was also
employed as the Chief Pilot of the company. When he was killed in a plane crash, his
wife sued the company claiming worker’s compensation.
Privy Council held that the company has a separate legal personality distinct from
Lee and that the company could enter into a contract of employment with Lee. The
fact

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that Lee was also the Governing Director of the company did not impede him from
getting employed as the chief pilot.

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Lesson: Types of Contracts of Employment
Aims & Objectives
On the completion of this topic, the students should be able to,
- Comprehend the types of contracts of employment prevailing in Sri Lanka
- Compare and contrast the legal rules governing different types of contracts of
employment
- Critically analyze the rights of employees ensuring from different types of
contracts of employment.
Introduction
Having gone through the common law concept of contract of employment, it is now time to
learn and understand the different types of contracts of employment prevailing in Sri
Lanka. Recruitment of employees is predominantly based on the employment needs and
employer, As a result employees are recruited under different types of contracts of
employment that permit the employer to vary the terms and conditions of employment
depending on the purpose and duration for which the employee is needed, qualification
and experience of the employee and legal rules applicable.
a. Monthly Contracts Employment
This type of contract of employment is widely known in Sri Lanka as “permanent
employment.” The students need to appreciate that the employees who identify
themselves as in permanent employment in Sri Lanka are not in perpetual
employment but have also been recruited under a contract of employment. The
distinguishing characteristic of monthly contracts of employment is the monthly
automatic renewal of the employment contract until it is terminated.
Legal issues arising out of monthly contracts:
- Employees are entitled to statutory protections such as minimum wages, hours
of work, superannuation benefits and recourse to labour tribunals.

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- If the services of an employee recruited under a monthly contract of
employment is terminated by his/her employer, the employee can challenge the
employer’s decision to terminate the services in a labour tribunal under the IDA.
b. Fixed Term Contracts
The unique feature of this type of contract of employment is that the employee is
recruited for a definite term and the contract comes to an end at the end of the
stipulated term.
“A fixed term contract is one under which a person is employed for a fixed term
without any guarantee that he contract will be renewed on the expiry of the period
stipulated, the contract coming to an end by mutual consent at the end of the agreed
period.”
- De Silva, S.R., The Contract of Employment, Monograph No. 4, The Employers’
Federation of Ceylon, Revised Edition, 1998, at p. 138.
Legal Issues with fixed term contracts
1. Whether a labour tribunal, an industrial court or an arbitrator can order an employer
to renew a fixed term contract?
The jurisdiction of labour tribunals is limited, and for terminations by an
employer and does not include consensual terminations resulting from the
expiration of a fixed term. Therefore, an employee cannot file an application
in a labour tribunal against an employer who refuse to renew his/her fixed
term contract.
See Nigel Hatch, N., Commentary on the Industrial Disputes Act of Sri Lanka,
1989, at p.211-13
De Silva v The Associated Newspapers of Ceylon Ltd. (1978-79) 2 SLR 173. At p.
183.

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“where a contract for a fixed term is not renewed, the employee would have
no claim to reinstatement before a Labour Tribunal; because a claim for
reinstatement can be made before a Labour Tribunal under section 31B (1)
(a) of the Act only if his services are terminated by the employer. But a fixed
term contract is terminated not by the employer, but by mutual agreement
on the effluxion of time.”
If an employer has continued to renew a fixed term contract as a practice,
then the employee may become entitled to an implied right to renewal upon
the same terms and conditions in the absence of any other grounds of
termination such as misconduct, redundancy or inefficiency.
c. Probation
Probationers are employees subject to a period of probation or trail whose
confirmation in employment is based on satisfactory performance within that
period. Simply put, it is a limited period within which a new recruit’s suitability for a
particular job is tested.
“a fixed and limited period of time for which an organization employs a new
employee in order to assess his aptitudes, abilities and characteristics and the
amount of interest he shows in his job so as to enable employer and employee alike
to make a final decision on whether he is suitable and whether there is any mutual
interest in his permanent employment.
- Ayre Globerson, “Duration and Extension of Probationary Employment- A Re-
examination” in (1969) Vol. 2 The Journ. Of. Ind. Rel. 54, at p. 56 quoted in De
Silva, S.R., The Contract of Employment, Monograph No. 4, The Employers’
Federation of Ceylon, Revised Edition, 1998, at p. 143.

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Richard Peiris & Co. Ltd. v Jayatunge C.A. No 404/80, C.A. Minutes 9th September 1982
“The period of probation necessarily entails that the probationer should satisfy the
employer before the employer decides to affirm him in his employment which would place
the employer under various legal restraints and obligations and…any employer should
have the right to discontinue a probationer if he does not come up to the expectations of
the employer.”
Mosajees v Rasaiah (1986) 1 SLR at p. 369
“The period of probation is a period of trial during which the probationers’ capacity,
conduct or character is tested before he is admitted to regular employment. For the
purpose of confirmation, the probationer must perform his services to the satisfaction of
his employer. The employer, therefore, is the sole judge to decide whether the services of a
probationer are satisfied or not.”
d. Casual Employment
According to S.R. De Silva, causal employment has been the most controversial types of
employment due to the misuse of the term in practice to identify employees that no way
resemble casual employees and the absence of a distinguishing test that clearly stipulates
the characteristics of causal employment.
“A casual employee is one employed by chance on no contract to employ…”
See S.R. De Silva., The Contract of Employment, Monograph No. 04, The Employers’
Federation of Ceylon, Revised Edition, 1998, at p. 153.
For example, X who goes from house to house offering to climb coconut trees and pluck
coconuts is employed by Y by chance to pluck coconuts. However, if X is required to come
every month on a specific day to Y’s house to pluck coconuts, then he is no longer a casual
employee.

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Hence the main distinguishing feature of causal employment is that a casual employee is
employed irregularly to perform some task.
All Ceylon Commercial & Industrial Workers’ Union v Peiris ID 44 & 56 CGC, 471 of 8th August
1958 cited in S.R. De Silva
“The fact that these workers are not employed on a monthly contract of service or that they
are only paid for the days of which they work is quire insufficient to show that they are
casual workers…as usually understood, a casual employee is on who engaged to do a
particular job of work for a short period of time and is paid for on the completion of the job
or on the expiration of the period. In the present case, the workmen are paid at the end of
each week for the number of days theyhave worked during that week and their names are
retained in the check-roll unless they keep away for a long period of time. Further, these
workers have continued coming regularly to work in the Proprietor’s business for several
years. In view of this position, we hold that the employment of these workers was of a non-
casual nature.”
Ratnasabapathy v Asilin Nona (1960) 61 NLR 548
“There is a class of cases where it is quite clear the employment is regular, permanent,
stable and not casual. There is another class of cases on the other side of the line where
manifestly the employment is of a casual nature. Between these two, it may become more
and more difficult to say on which side of the line the individual cases fails. In those cases it
is a question of fact to be determined by considering not only the nature of the work, but
also the way in which the wages are paid, or the amount of the wages, the period of time
over which the employment extends, indeed all the facts and circumof the case.”

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Bandara v State Engineering Corporation of Sri Lanka (2002) 3 SLR 138
Bandara was recruited as a Trainee Engineer by the State Engineering Corporation while
he was an undergraduate and was recruited as an Engineer upon graduation. He was
assigned to three construction sites and thereafter his services terminated since his
services were not required anymore. He filed an application in the labour tribunal seeking
reinstatement and back wages. Although the labour tribunal granted the reliefs claimed by
Bandara, the High Court upon appeal reversed the decision of the labour tribunal.
Thereafter, Bandara appealed to the Supreme Court. The main use to be determined was
whether he was a casual employee or not.
The Shirani Bandaranayake, J. at p. 142 observed that
“…a casual employee is a person who is employed ‘by chance or on no regular contract of
employment’. A basic feature in casual employment would thus be that-
- Employment by chance
- Absence of a contract of employment between the employer and the employee;
- Work would be irregular by nature.
On comparison, while an “odd-job” gardener, whose services are irregular would be
regarded as a casual employee, a person who has an arrangement that he should come
regularly once a month would not be regarded as a casual employee due to his employment
being “stable and periodical”.
Characteristics of casual employment emanating from case law:
As held in the Rathnasabapathy case, whether an employee is a casual employee depends
on the circumstances of each individual case. However, certain factors have been taken into
account by the courts in determining the existence of a casual employment.

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a. Assurance of work and obligation to report to work: A casual employee has no
assurance that he will be offered work in future and has no obligation towards the
employer to report to work.
b. Nature of work: if the work performed by an employee is of a casual nature it is an
indication that he is a casual employee provided that the other facts support the
same conclusion.
c. Duration of employment: A casual employee is usually employed for a day or for a
short period of time. There is no assurance that the casual employee will be offered
with more work after he/she performs his task.
d. Mode of payment: If the payment is made when an employee finishes his task or at
the end of each day, such an employee is usually considered to be casual employees.
Weekly and monthly payments are considered as factors that negate the casual
status of an employee.
e. Temporary Contracts of Employment
Temporary employment contracts are often confused with casual employment. There
are no fixed criteria to determine the distinction between temporary and casual
employees. According to S.R. De Silva, “…the only reliable guideline is to say that the
longer the period of employment the more likely the employee is temporary, rather
than casual.”
f. Seasonal Contracts of Employment
Certain employment opportunities are only available during a particular season of the
year such as tobacco drying and certain employment opportunities in tourism industry.
A seasonal employee employed in one season does not have an automatic right to re-
employment in the next season unless there is an express clause in his/her contract to
that effect and the customers of the business recognize a right to re-employment.

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g. Apprenticeship and Training
The essence of apprenticeship is the commitment to learn a skill. An apprentice is
different from a probationer who is called upon to prove his/her suitability for a
particular job. The purpose of the period of apprenticeship is to equip the apprentice
with skills necessary to be an employee.

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Lesson: Industrial Disputes
Aims & Objectives
On the completion of this topic, the students should be able to;
1. Ascertain the scope of application of the Act by analysing the meaning of various
terms such as “Industrial Dispute”
2. Identify the main types of alternative dispute settlement methods introduced by the
Act
3. Compare and contrast the process of settlement involved in different alternative
dispute settlement methods
4. Comprehend the legal rules applicable to different alternative dispute settlement
methods
What is an “Industrial Dispute”?
 The meaning of the term “Industrial Dispute”
The term industrial dispute is defined under section 48 of the IDA as
“any dispute of difference between an employer and a workman or between employers
and workmen or between workmen and workmen connected with the employment or
non-employment, or the terms of employment, or with the conditions of labour, or the
termination of the services, or the reinstatement in service, of any person, and for the
purpose of this definition, “workmen” includes a trade union consisting of workmen.”
 The meaning of the term “Difference”
Federated Saw Mill v James Moore & Sons Pvt. Ltd (1909) 8 CLR 465
“…a difference can exist long before the parties become locked in a combat. It is not
necessary that they should have come to blows. It is sufficient that they should be
sparring for an opening.”

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The court defined an industrial dispute as a real and substantial difference having some
element of persistency which is likely to if not adjusted endanger the industrial peace of
the community.
Shambu Natha Goyal v Bank of Baroda, Jullundur 1978 AIR 1088 1978 SCR (2) 793
“The key word in the definition of industrial dispute are dispute of difference. The term
industrial dispute connotes a real and substantial difference having some element of
persistency and continuity till resolved and likely if not adjusted to endanger the
industrial peace of the undertaking or the community.”
 The meaning of the term “Employer”
The term employer is defined under section 48 of the IDA as,
“any person who employs or on whose behalf any other person employs any workman
and includes a body of employers (whether such body is a firm, company, corporation
or trade union) and any person who on behalf of any other person employs any
workman.”
 The meaning of the term “Workman”
The term “workman” is defined under section 48 of the IDA as
“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 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.”
 Subject Matter of an Industrial Dispute
According to the definition of the term “Industrial Dispute” discussed above, the subject
matter of an industrial dispute should be connected with the employment or non-

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employment, or the terms of employment, or with the conditions of labour, or the
terminations of the services, or the reinstatement in service, of any person.
Alternative Disputes Settlement Methods
The Industrial Disputes Act introduced four main alternative dispute settlement
methods, which are discussed in detail below.
a. Conciliation
b. Arbitration
c. Industrial Courts
d. Labour Tribunals
Conciliation
“Conciliation connotes the intervention of a third party who attempts to compose differences
or to mediate between the disputing parties.”
S.R. De Silva, The Legal Framework of Industrial Relations in Ceylon, H,W. Cave &
Co. Ltd. , Colombo 1973 at p. 266.
The process of settlement by conciliation is laid down under section 11-15 of the IDA.
Conciliation is advantageous as it is capable of producing speedy settlements and given
their voluntary nature, the parties are more willing to abide by the terms of such
settlements. However, one of the drawbacks in Sri Lanka is that the labour officers are not
trained as to how to conduct investigations and settle disputes by conciliation. Although
conciliation is not popular amongst the Sri Lankan industrial community as a means of
settling an industrial dispute, it is still resorted to.

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Arbitration
“Conceptually the basic notion of arbitration is the settlement of a dispute between two
contending parties by reference to the decision of an outsider at their request…while
conciliation is a friendly interference to help the parties to arrive at a settlement of their
differences, arbitration is the submission of a dispute to the judgement of a third party.
Whilst therefore, the Conciliator does not exercise quasi-judicial functions, the Arbitrator
performs quasi-judicial functions.”
- Hatch, N. Commentary on the Industrial Disputes Act of Sri Lanka, 1989, at p. 156
Arbitration is preferred over ordinary courts proceedings given its expeditious and less
expensive nature. Skilled and experienced arbitrators may also bring in specialized
knowledge making it easy for the parties to arrive at a settlement and detachment will
allow them to give an impartial arbitral award. Non-applicability of strict procedural rules
such as the rules contained in the Civil Procedure Code and the Evidence Ordinance is
another advantage of the arbitration process.
Forms of Arbitration
1. Voluntary Arbitration
Section 3 (1) (d) provides for voluntary arbitration and sets out that if the parties to
the industrial dispute consent the Commissioner may refer that dispute, by an order
in writing, for settlement by arbitration to an arbitrator nominated jointly by such
parties, or in the absence of such nominations, to an arbitrator or a body of
arbitrators appointed by the Commissioner or to a labour tribunal.
2. Compulsory Arbitration
Section 4 of the IDA empowers the Minister in charge of the subject of labour to
refer an industrial dispute which he is of the opinion to be a minor dispute, by an
order in writing, for settlement by arbitration to an arbitrator appointed by the
Minister or to a labour tribunal, notwithstanding that the parties to such dispute do
not consent to such reference. The determination as to whether a particular
dispute is major or

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minor has been left to the discretion of the Minister and the Act does not provide any
guideline on that behalf.
Nature of Powers Exercised by an Arbitrator
It is unanimously agreed in case law that arbitrators do not exercise judicial powers and
only exercise arbitral powers. However, arbitrators have a duty to act judicially.
Walker Sons & Co. Ltd. v Fry.F.C.W 68 NLR 73
Industrial Courts
When any dispute, application, question or other matter is referred to an industrial court,
section 24 (1) of the IDA requires such court to make all such inquiries and hear all such
evidence, as it may consider necessary. Further, the court is empowered to take such
decision or make such award as may appear to the court just and equitable.
Labour Tribunals
Labour tribunals were introduced as one of the alternative dispute settlement methods by
the Industrial Disputes (Amendment) Act No. 62 of 1957.
Section 31A of the IDA empowers the Minister to establish any number of labour tribunals,
each consisting of one person.
Section 31B (1) of the IDA provides for the circumstances under which an industrial
dispute can be referred to a labour tribunal for settlement.
Accordingly, a workman who is a member of that union, may make an application in
writing to labour tribunal for relief or redress in respect of,
- The termination of his services by his employer
- The question whether any gratuity or other benefits are due to him from his
employer on termination of his services and the amount of such gratuity and the
nature of such benefits
- The question whether forfeiture of a gratuity in terms of the Payment of Gratuity
Act 1983 has been correctly made in terms of that Act

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- Such other maters relating to the terms of the employment or the conditions of
labour of a workman as may be prescribed.
-
Powers of Labour Tribunals v Powers of Ordinary Courts
Powers of a labour tribunal are wider than the powers of an ordinary court for the
following reasons;
a. Unlike the ordinary courts, the labour tribunals can grant any relief or redress
notwithstanding anything to the contrary in any contract of service in terms of
section 31B (4) of the IDA
b. When dealing with alleged terminations, the labour tribunals are empowered to
grant reinstatement as a relief whereas the ordinary courts cannot go beyond the
terms of the contract, unless in exceptional circumstances where the terms of
contract are alleged to be unconscionable.
c. Labour tribunals have much wide powers than the ordinary courts in relation to the
evidence it can hear in terms of section 31(C ) (1), which allows a lobour tribunal to
hear all such evidence as the tribunal may consider necessary.
d. Section 31(1)(c)(1) empowers the labour tribunal to make any order which in its
opinion is just and equitable.

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Lesson: Remedies under the Industrial Disputes Act
Aims & Objectives
On completion of this topic, the students should be able to,
1. Identify the types of remedies available under the Industrial Disputes Act
2. Explain the legal rules applicable to different remedies
3. Comprehend the limitations applicable to different remedies
Introduction
The Industrial Disputes Act No. 43 of 1950, as amended, specifies the types of remedies
that can be awarded to an aggrieved party under the Act. In terms of section 33(1), an
arbitrator industrial court or labour tribunal upon hearing an industrial dispute may grant
any of the following remedies:
a. Wages and all other conditions of services, including back wages and wages for any
period of absence by reason of any strike or lock-out
b. Reinstatement in service or the discontinuance from service
c. The extent to which the period of absence from duty of any workman, whim the
arbitrator, industrial court or labour tribunal has decided to reinstate, should be
taken into account or disregard for the purpose of his rights to any pension, gratuity
or retiring allowance to any benefit under any provident scheme
d. Compensation, including the amount of such compensation, the method of
computing such amount, and the time within which such compensation should be
paid.
Wages and all other conditions of service
According to section 33(1)(a) of the iDA, wages and all other conditions of service is relief
that can be granted by an arbitrator, industrial courts or labour tribunal. It includes
decisions that any such wages and conditions shall be payable or applicable with effect
from any specified date, which may, where necessary, be a date prior to the date of such

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award or such

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order, and decisions that wages shall be payable in respect of any period of absence by
reason of any strike or lock-out.
 Back wages
“Arrears of wages which a workman claims can be awarded on an application in terms
of section 31B (1)…
- Hatch, N., Commentary on the Industrial Disputes Act of Sri Lanka, 1989. At p. 337
Sirisena v Samson Silva (1972) 75NLR 549
Rajaratnam, J, at p. 551 observed that,
“…I am of the view that unpaid wages can be awarded by the Labour Trubunal in the just
and equitable order it makes in respect of the termination of the services of a workman.”
Usually, an order for reinstatement includes an order for back wages.
The Associated Newspapers of Ceylon v Jayasinghe (1982) 2 SLR 595
“Back wages can be awarded on the basis of an unbroken contract of employment.
Of course the quantum of back wages and the period for which they will be awarded will
depend on the circumstances of each particular case.”
 Reinstatement
Although ordinary civil courts cannot grant reinstatement under common law, arbitrators,
industrial courts and labour tribunals are empowered to grant reinstatement as a remedy
under section 33 (1)(b) of the IDA.
“Conceptually, reinstatement implies restoration of the status quo and the employee is
entitled to be restored to the same position with all benefits as if he had never been
discharged.”
- Hatch, N., Commentary on the Industrial Dispute Act of Sri Lanka, 1989, at p. 324

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Reinstatement can only be granted in an instance where an alleged termination is illegal,
wrongful and unjustified.
IDA specifies the following instances in which reinstatement is not an appropriate remedy
and therefore arbitrators, industrial courts and labour tribunals are barred from awarding
he relief of reinstatement in these instances.
1. Reinstatement of purely personal employees, such as a personal secretary, personal
clerk, personal attendant, chauffeur and domestic servant is discouraged under
Section 33 (3) of the IDA an dit requires compensation to be awarded as an
alternative to reinstatement.
2. In terms of section 31(B)(6) of the IDA where a person has ceased to be an
employer, a labour tribunal may order compensation in lieu of reinstatement.
3. According to section 47(C ) of the IDA where a person has ceased to be an employer,
an arbitrator or an industrial court may order compensation in lieu of reinstatement
4. In terms of section 33(5) of the IDA where an arbitrator, industrial court or labour
tribunal considers granting reinstatement as a relief, if the workman requests that
he prefers compensation over reinstatement, then the arbitrator, industrial court or
labour tribunal is required to make a decision for the payment of compensation in
lieu of reinstatement.
These exceptions suggest that reinstatement is the appropriate remedy in situations where
a termination was found to be wrongful, making compensation a mere alternative to
reinstatement. However, it is important to note that compensation us a substantial remedy
which can be granted in its own right.
The courts have also found reinstatement to be inappropriate in certain circumstances.
1. Where reinstatement would not promote industrial peace
- Hotel, Backer and Beverages Workers’ Union v New Grand Hotels ID 97 CGC 11,
633 of January 1959

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The courts upheld reinstatement as the normal remedy in situations where the
dismissal is proved to be wrongful. However, the court added that reinstatement
should not awarded indiscriminately where it would lead to breach of industrial
peace.
2. Loss of Confidence
Mere loss of confidence alleged without a basis not a ground to refuse reinstatement. In an
instance where misconduct on the part of a workman was alleged and evidence of
negligence was present although misconduct could not be proved, loss of confidence can be
raised as a ground to deny reinstatement. However, a proper inquiry needs to be conducted
in relation to the misconduct.
- Bank in West Bengal v Their Workmen (1950) LLJ 1045
“loss of confidence, reasonably so found, is sufficient to justify the removal if an
employee of the Cash Department…loss of confidence in an employee of the Cash
Department may not be confined to his work, but may extend to other factors of
his being or to his financial circumstances, which may be reasonably said to
militate against his retention in the Cash Department.”
3. According to S,R. De Silva, reasonable suspicion is a circumstance to be taken into
account in awarding reinstatement.
4. Where an employer has ceased to be an employer
- All Ceylon and Commercial & Industrial Workers’ Union v Boteju CGC 14, 898 of 20
March 1970
In this case, although termination was found to be unjustified, reinstatement was
not awarded since the original employer has ceased to exist in law and a new
legal entity has taken its place.
5. Undue delay in seeking relief
- Bombay Steel Rolling Mills Ltd. v Labour Union (1964) 2 LLJ 120

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There were criminal proceedings instituted against several employees and the
employer agreed to reinstate employees if they were acquitted. Upon acquittal,
the employers failed to report to work for several months and when they
returned later, the employer refused to reinstate them. The court held the
refusal to be justified.
 Compensation
In terms of section 33(1)(D) of the IDA as amended, an arbitrator, industrial court of labour
tribunal is empowered to grant compensation as a relief. An award or order may also
contain terms as to the amount of compensation, the method of computing such amount,
and the time within which such compensation should be paid.
Nigel Hatch argues that subsequent to the Amendment, compensation can be awarded as a
substantial remedy in its own right, in addition to being awarded as an alternative to
reinstatement.
Circumstances in which compensation may be awarded
1. The first line of authority views compensation as a remedy available to an employee
who has suffered a loss as a result of a wrong done by an employer.
- Wataraka Mutli-purpose Co-Operative Society Limited v Wickremachandra (1968)
70 NLR 239.
2. The second line of authority treats compensation as a remedy available even in
instances where a termination is justified.
- Abeyrathne v Palugama Multi-Purpose Co-Operative Society Ltd. S.C. Application
No. 56/67, S.C. Minutes 15 February 1973.

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 Gratuity
Gratuity is a payment made to a workman by an employer for long and meritorious
services provided to the employer.
The law governing gratuity underwent considerable change due to the enactment of the
Payment of Gratuity Act No. 12 of 1983. Although this Act provides for the payment of
gratuity by employers to their workmen, the scope of its application is limited to employers
or have employed 15 or more workmen on any day during the period of 12 months
immediately preceding the termination of the services of a workman.

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Lesson: Termination of Employment
Aims & Objectives
On the completion of topic, the students should be able to,
1. Comprehend the types of terminations and laws applicable to each type of
termination
2. Explain the common law principles governing disciplinary terminations
3. Illustrate the provisions of the Termination of Employment of Workmen (Special
Provisions) Act, which governs non-disciplinary terminations
Types of Terminations and Applicable Law
Termination of a contract of employment may occur in any of the following ways.
a. Termination by the employer on disciplinary grounds and constructive
dismissal
b. Termination by the employer on non-disciplinary grounds. This has assumed
particular importance in view of the Termination of Employment of
Workmen (Special Provisions) Act 1971
c. Termination by operation of law, which includes termination of a contract
due to such factors as frustration of contract and impossibility of
performance.
d. Termination by effluxion of ttime
e. Termination by the employer, which may arise due to a variety of
circumstances such as resignation, vacation or abandonment of employment
or repudiation of the contract by the employee.

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Disciplinary Terminations
Disciplinary terminations are governed by the principles of common law.
“The grounds on which an employee may be dismissed in the sense that the termination
may be summary and therefore, without notice or payment in lieu of notice, fall within the
category of misconduct. An act should be regarded as an act of misconduct if it is
inconsistent with the fulfilment of express or implied conditions of service or if it has a
material bearing on the smooth and efficient working of the concern. Since, however, there
are no fixed rules of law defining the degree of misconduct which would justify dismissal
and the test whether a dismissal is justified must vary with the nature of the business and
the position held by the employee, each case must depend on its own facts and
circumstances.”
- De Silva, S.R., Law of Dismissal, Monograph No. 08, The Employers’ Federation of
Ceylon, 2004, at p. 31.
There are no hard and fast rules as to the procedure to be followed. In general, a
disciplinary procedure involves the following steps;
a. Pre-show cause stage: When an employer gets to know about a misconduct
committed by an employee the first step would be to obtain written statements
from witness and if necessary hold a preliminary investigation.
b. Show cause stage: The next is to send a show cause letter to the accused employee,
A show cause letter should specify all the charges against the employee and call
upon the employee to show reasons for his alleged conduct.
c. Letter of Explanation: In response to the show cause letter, the employee will send a
letter of explanations, stating reasons for his alleged conduct. On receipt of this
letter, the employer is required to decide whether to accept the explanation or not.
If it is accepted, the disciplinary proceedings will not be continued. If the
explanation is not accepted (for instance, where the workman denies charges)

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the employees

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should be informed of the fact that his explanation is unsatisfactory. Further, the
employer should notify the employee that an inquiry will be held on specified date
and time and request him to be present with his witness.
If the charges are admitted by the employee disciplinary action against the
employee can be taken without holding a domestic inquiry. However, if the charges
are partly admitted subject to qualifications it is better to hold a domestic inquiry
before taking any disciplinary action agiants the employee.
d. Domestic Inquiry: A domestic inquiry should be held by an official of the company
not below the rank of Executive and above the rank of the accused employee. The
inquiring officer cannot be one of the witnesses.
An accused employee is not allowed to be represented by an outsider such as an
attorney-at-law at a domestic inquiry.
The inquiry commences with a question posed by an inquiring officer to the accused
as to whether he is guilty or not guilty to the charges. If he pleads guilty, then the
accused should be allowed to give a statement, if any.
If the accused pleads non-guilty, then the inquiry should proceed to record the
evidence tendered on behalf of the employer first and then the evidence presented
on behalf of the employee. Both parties are allowed to cross-examine each other’s
witnesses. If documents are produced by the employer at the inquiry, the accused
employee should be allowed to study them.
When the inquiry is concluded, the accused employee should be informed of the fact
of conclusion. However, unless there is a legal obligation, a copy of the record need
to be given to the employee.
The findings of the inquiry should be whether the accused is found guilty or not
guilty for each charge. The inquiring officer is free to find the accused guilty of a
lesser

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charge. The inquiring officer is required to present the report of the inquiry, including
his findings to the management.
e. Punishment: Punishment of an employee who was found to be guilty of the charges
is not in the hands of the inquiring officer. The management may impose any of the
following punishments taking into account the gravity of the offence, the employee’s
past records of service, the length of his service, and the possible attitude that a
labour court might take in regard to the matter.
- Dismissal
- Suspension without pay
- Deferment of an increment
- Stoppage of an increment
- Fine
- Demotion
- Transfer
- Warning
- Reduction of bonus
Non-disciplinary Terminations
Non-disciplinary terminations are governed by the Termination of Employment of
Workmen (Special Provisions) Act No. 45 of 1971 as amended.
Power of Administration of TEWA
In terms of section 11, the power of administration of TEWA is vested in the Commissioner
and the Commissioner is permitted to delegate his powers to any officer of the Labour
Department.

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Scope of Application of TEWA
TEWA does not apply in the following cases;
a. To an employer who has employed less than fifteen workmen on an average during
the period of six months preceding the moth in which the employer seeks to
terminate the employment to the workman.
b. To the termination of employment of any workman who has been employed by an
employera period of less than 180 days.
c. To the termination of employment of any workman who has been employed by an
employer where such termination was effected by way of retirement in accordance
with the provisions of any collective agreement or any contract of employment
wherein the age of retirement of such workman is expressly stipulated.
d. To the Government in its capacity as an employer
e. To the Government in its capacity as an employer of the Local Government Service
f. To any local authority in its capacity as an employer
g. To any co-operative in its capacity as an employer
h. To any public co-operation in its capacity as an employer
i. To the termination of employment of any workman who has been employed by an
employer in contravention of the provisions of any law.

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Prohibition on terminations by Employers without Fulfilling the Requirements of
TEWA
Section 2(1) prohibits an employer from terminating the scheduled employment of any
workman without;
a. The prior consent of the workman; or
b. The prior written approval of the commissioner.
Exercise of the Power of the Commissioner to Grant or Refuse Approval for a
Termination
An employer is required to submit an application seeking approval from the Commissioner
for a non-disciplinary termination of a workman and a copy of the application should be
served on the workman. Upon receipt of such an application, the Commissioner has
absolute discretion to grant or refuse approval. However, exercise of his discretion is
subject to a time bar of three months within which he is required to grant or refuse
approval.
Upon reaching a decision to grant or refuse approval of the Commissioner is mandated to
give notice in writing of his decision to both the employer and the workman. The
Commissioner may subject his approval to any terms and conditions, including any terms
and conditions relating to the payment of a gratuity or compensation. Finality is attached to
any decision made by the Commissioner to grant or refuse approval and his decision
cannot be called in question by way of writ or otherwise in any court, or in any court,
tribunal or other institution established under the IDA.

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