In a recent case, I had the opportunity of representing the Employer Respondent, a prominent company in the Hospitality and Tourism sector, in an unfair termination claim. This case, in which I was retained by D.L & F De Saram, presented a compelling exploration of the distinctions between employment and consultancy relationships under Sri Lankan labor law. By drawing on significant legal precedents, this decision reinforces critical legal principles and provides essential insights for both employers and consultants.
Case Background: Challenging the Employment Relationship Claim
The Applicant asserted an employer-employee relationship, despite the Employer’s stance that he was engaged solely as a consultant, tasked with delivering specialized Human Resources and administrative services. Following a voluntary resignation citing personal reasons, the Applicant claimed undue pressure in his resignation—an allegation our legal team robustly refuted.
A significant complexity arose regarding EPF (Employees’ Provident Fund) contributions paid by the company, traditionally reserved for employees. Although the Labour Department and Magistrate’s Court had directed the company to make these payments, our legal position remained firm that the Applicant’s role did not meet the legal thresholds of employment.
Legal Issues and Tribunal Findings
The Labour Tribunal’s inquiry was guided by Section 31(B)(1)(a) of the Industrial Disputes Act No. 43 of 1950, focusing on whether dismissal was unjust or malicious. The Applicant’s assertion that his resignation was coerced led to a pivotal examination of the ‘test of promptness’ in raising grievances, with the tribunal concluding that any genuine claim of coercion should have been pursued immediately—a delay which the tribunal deemed indicative of an afterthought.
Key Precedents Supporting the Employer’s Case
The tribunal’s ruling was firmly supported by established case law. The factual similarities between this case and Perera v. Marikkar Bawa Ltd (1989) 1 SLR 347 provided a clear reference point. In Perera, the central issue was determining whether Mr. Perera, who served as the head cutter for Marikkar Bawa Ltd, was an employee or an independent contractor. Mr. Perera was provided with a workspace by the company but employed his own workers and used his own tools. He received tailoring orders from the company and was compensated through a commission based on monthly collections. Notably, Mr. Perera did not sign the company’s attendance register and was not entitled to bonuses like other employees. The company managed customer payments and maintained the accounts. The court held that Mr. Perera’s work was integral to the company’s business, making him a part and parcel of the organization. It was determined that he did not operate his own business but was conducting business for the company, thereby establishing an employer-employee relationship.
Other supporting cases included:
- M.G.T. Karunawathie v. University of Kelaniya (2013) 1 SLR 69: Established the Applicant’s burden of proof in demonstrating an employment relationship.
- Lewis Brown & Co. v. Percy Nelson Christopher Periyapperuma (81 CLW 30): Emphasized the importance of reviewing the totality of evidence.
- A.R. Mudalige v. Yuman Gunasinghe (SC Appeal 23/94): Addressed the binding nature of a resignation given voluntarily, barring proof of undue influence.
- Haramanis v. Somalatha (1998) 3 SLR 365: Stressed the necessity of prompt statements in allegations of coercion.
- Elmo Rex Lord, Partners, Mercantile Printers and Stationers v. Eksath Kamkaru Samithiya (2001) 1 SLR 161: Justice A.R.B. Amerasinghe’s words underscored that “The law relating to employment is not a one-way street. Justice, fairness, and equity must be meted out even-handedly to employees and employers alike.”
Award of Costs and Tribunal’s Discretion
In a significant outcome, the tribunal dismissed the unfair termination claim and awarded costs of Rupees 25,000/- to the Respondent. The tribunal referenced Section 37 of the Industrial Disputes Act, permitting discretion in awarding costs. Section 37 states: “The Tribunal may, in any order, direct that the whole or part of the costs of proceedings shall be paid by either party as it may deem fit.” Additionally, Section 39 allows the tribunal to determine an appropriate scale for costs, emphasizing judicial discretion in compensating parties for incurred legal expenses.
The instant case exemplifies the critical distinctions between employees and consultants, as well as the need for clear contractual definitions. It also underscores the importance of prompt action in contesting alleged coercion. By applying longstanding precedents, the tribunal upheld a balanced view, reinforcing that Sri Lankan employment law serves to protect the interests of both parties justly and equitably.
Representing this case, retained by D.L & F De Saram, was an opportunity to advocate for fair treatment in employer-employee classifications, reinforcing our commitment to excellence in employment law.
