Employment Law Module: Contract of Employment - SLIIT BBA

This assignment provides a detailed analysis of employment law, particularly focusing on the contract of employment within the context of Sri Lanka. It begins by outlining the legal system and environment of business, the evolution of employment law from the 'law of master and servant' to modern legislation, and the significance of the contract of employment. The assignment explores the impact of trade unions, employee protection laws, and labor courts on the nature of employment contracts. It covers various sources of employment law, the basic obligations of employers and employees, and the distinction between a contract of service and a contract for services. The report presents multiple tests to determine the employer-employee relationship, including the control test and integration test, while also examining relevant statutory definitions. The assignment references key legislation like the Shop & Office Employees Act, the Payment of Gratuity Act, and the Industrial Disputes Act, as well as landmark cases. This comprehensive overview is designed for students studying business law, providing a thorough understanding of employment law principles in Sri Lanka.

Business Law Module
Employment Law (Lecture 7)
Part A
BBA (Special) Honours Degree
Sri Lanka Institute of Information & Technology (SLIIT)
22-Aug-20 1

Course Outline
 The Legal System and the Legal Environment of Business
 Business Ethics and Corporate Governance
 Laws associated with different Organizational Structures
 Sole Proprietorship & Partnership Business
 Law relating to Companies
 Contract Law – Part A-Definition and Contract Types
 Contract Law-Part B
 Contract for Sale of Goods Agency and Employment Law-Part A Intellectual Property Law Commercial Disputes Introduction to Negligence in Business
22-Aug-20 2

Introduction
• Almost all businesses use some sort of
employment law. Employment law is the area
of law that governs the employer-employee
relationship. Therefore, if the business has
more than one employee, then the business
likely uses employment law.
• Without employees no business can thrive
and industrial peace is a must for the success
of business and growth of the economy.

Origins of the law relating to contract of
employment
In earlier times the employment law was termed more
as ‘law of master and servant’, which reflected the
superior position of the employer and duties and
obligations placed on servants/employees with no
corresponding duties on the employers.
The law regarded employer having a proprietary right
over the employee. The law had come a long way since
such time.

Is the Contract of Employment a voluntary agreement
between parties of equal bargaining power & conclusive
in determining the rights of the parties?
• The Common law looks upon employment as
a mere contractual relationship between two
parties terminable at will of either party,
subject to the condition of notice in certain
cases.

• With industrialization numerous problems
connected with safety and health in factories,
hours of work, holidays and remuneration arose
and in the context of the modern welfare state, it
was no longer possible to leave such matters
solely to the free will of the employer and
employee.
• Hence the necessity for legislative activity in the
sphere of employment came into place.

• Through legislative enactments, minimum
requirements of employment were laid in
regard to wages, hours of work, working
conditions in factories, maternity benefits,
EPF, ETF, Gratuity and the like.
• Industrial Disputes Act of Sri Lanka is a major
enactment that provides that a labour tribunal
may grant relief to an employee.

Significance and Relevance of the
Contract of Employment
• The Contract of employment is given effect to
unless illegal or contrary to public policy.

Dharmadasa V. Perera
(1975) 77 NLR 285
• A clerk who was employed by the employer
for eleven (11) years and whose services were
terminated was refused relief by the Labour
Tribunal on the ground that the employer was
carrying on an illegal business of accepting
bets on horse racing.

Three major developments that contributed
towards the change in the nature of contract of
employment
1.Rise of trade unions and consequently collective
bargaining. Today where trade unionism is a decisive
factor, the employer no longer has the same power to
determine the fundamental terms of employment law.
The growth of trade unions have replaced individual
bargaining power with collective bargaining that imposes
restrictions on both the employer & employee.

Trade Unions Trade Unions are associations of workers who by
means of collective bargaining endeavour to improve
the working conditions and their economic and social
positions. Collective bargaining of the trade unions also
became a method of negotiating the terms and
conditions of employment and becomes implied
terms in the contracts of employment between the
employer and employee.

2. Laws that came into being to protect the employees
• Social legislation imposed minimum standards of extra-
contractual obligations enforceable by criminal and civil
sanctions, thereby narrowed the area of contractual freedom.
• The legislative provisions came to govern the contract of
employment by writing into terms and conditions which the
parties cannot contract out of.
• Wages Board Ordinance and Shop and Office Act render
invalid contracts which are contrary to its provisions for
minimum wage, working hours etc.