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Sri Lanka

January 15, 2021

By John Wilson, Shannon and Jayantha Gunasekara

Back to International Employment Law

Sri Lanka

KEY DEVELOPMENTS FOR 2021


 

Tripartite decision regarding payment of wages where full employment impossible

In May 2020, the Cabinet of Ministers approved a decision taken by a Tripartite Task Force—consisting of representatives of Employers Federation of Ceylon, some Labour Unions and the Government, (the Ministry of Skills Development, Employment and Labour Relations)—set up by the Minister of Labour to look into the effects of the Covid-19 pandemic on employment in Sri Lanka.

The decision was made with a view to ensuring continuity of business while also ensuring job security. It was decided to implement the following scheme of payment where employers were unable to employ the whole workforce each day due to constraints consequent on the pandemic—in particular, compliance with directives of the Ministry of Health (regarding social distancing etc.)

The features of this agreement are as follows:

  1. The scheme applies to pro-rate wages in respect of employees who cannot be deployed at work simultaneously with others due to health restrictions, e.g., where Government guidelines dictate that only a given percentage (or number) of employees could be employed on a particular day.

  2. While being applicable to all sectors without exception, any employer who cannot afford to pay employees based on this scheme could make representations to the Commissioner General of Labour.

  3. Only employees who reported for duty or those who could not do so due to restrictions imposed by employers due to health reasons are eligible to be considered under this scheme. Nonetheless, employees unable to report for work due to restrictions imposed by the authorities, could also be considered under this scheme and payments made on the basis that they have been 'benched'. Employees who absent themselves from work despite being rostered and fail to provide acceptable reasons for their absence should be placed on no pay (in lieu of days of such absence). Others who may provide satisfactory explanations, should be placed on leave, as appropriate.

  4. According to the agreement reached, employers will apportion and pay wages for days worked based on the basic salary, and for the days not worked, (days "on the bench" without any work), wages will be apportioned and paid either at the rate of 50% of the basic wage or 50% of Rs 14,500/-, whichever is higher. It may be noted in this connection that the daily rate would be determined by dividing the monthly rate by either 30 or 26—depending on whether the employee is covered by the "Shop and Office Act" or a decision of a Wages Board. The following is a clarification of the application of the scheme:

    Step 1. To ascertain the daily rate at which employees who performed work are paid, the following method of calculation applies.

    1. divide the monthly basic salary by 30 or 26 days, as the case may be.

    2. thereafter, to arrive at the salary to be paid for the days worked, multiply the daily rate by the number of days worked.

    Step 2. To ascertain the daily rate at which employees who were "benched" have to be remunerated:

    1. divide half the basic salary OR of Rs 14,500/-, (Rs. 7250) whichever is higher, by 30/26 days.

    2. thereafter, to arrive at the salary to be paid for the days not worked, multiply the daily rate by the number of days not worked.

    Step 3. To ascertain the monthly salary to be paid to an employee, add the figures finally arrived at.

Employers in other sectors that wish to implement the scheme are obliged to inform the Commissioner General of Labour of the fact and of their concerns and provide, at the end of each month, all relevant details including names of workers employed/not employed and the details of payments made to each. These will be circulated among the members of the Task Force and if employees/worker unions have any grievances/objections to raise, they should be communicated to the Commissioner General of Labour and then raised at a meeting of the Task Force.


 

Significant judgment ‒ Interpretation of Section 31B(5) of the Industrial Disputes Act

On 2 October, the Supreme Court delivered a judgment in case no. SC Appeal 228/2017 (Rodrigo v. Central Engineering Consultancy Bureau) interpreting Section 31B(5) of the Industrial Disputes Act. The employee concerned (the applicant) had made an application to the Supreme Court alleging that, by terminating his services, the employer—a business undertaking owned by the Government and thus an 'organ of the State'—had violated his fundamental rights. He subsequently filed an application for relief to the Labour Tribunal.

In response to the application to the Labour Tribunal filed by the employee, the employer raised a preliminary objection based on section 31B(5) on the ground that the applicant having "first resorted to another legal remedy" was not entitled to seek any relief from the Labour Tribunal. The objection was upheld by both the Labour Tribunal and the High Court, following which the applicant appealed to the Supreme Court. As part of the judgment, the Supreme Court explained that the criteria upon which the second limb of Section 31B(5) can be applied were the following:

  1. the action/application by the workman in the court or other forum must cover the same or similar ground as the application to the Labour Tribunal and have the same or similar scope;

  2. the action/application by the workman in the court or other forum should seek the same or similar substantive reliefs as the application to the Labour Tribunal;

  3. both the action/application by the workman in the other forum and the workman’s application to the Labour Tribunal should be decided upon the core issue of whether the termination of the workman’s’ services by the employer was done for good cause, according to the principles which are to be applied by the court or other forum; and

  4. there should not be a significant disparity between the procedure followed by the court or other forum and the procedure followed by a Labour Tribunal.

The Court expressed the view that the second limb of section 31B (5) can be applied only if all these four criteria or, at least, a “sufficient number of them”, (unspecified), are met, so as to satisfy the Labour Tribunal that there is no material disparity or divergence between the previous action/application made by the workman to a court or other forum and the subsequent application made by the same workman to the Labour Tribunal.

As regards the particular case at hand, it was held that section 31B(5) did not apply and it was observed that while the employee's 'fundamental rights application' and his application to the Labour Tribunal sought similar substantive reliefs, the application to the Supreme Court and the application to the Labour Tribunal did not cover the same ground and did not have the same or similar scope, in that one was a matter of public law where the focus was on whether the fundamental rights guaranteed by the Constitution had been violated by the State and the other of private law, in that the application was founded and confined within the employer-employee relationship.

The Supreme Court stated that in the case under consideration, the proper course for the Labour Tribunal to have taken was to suspend its proceedings pending the conclusion of the proceedings in the Supreme Court, resume hearing thereafter and, when making a final determination, have regard to the outcome of the fundamental rights application—as provided in section 31(3) of the Industrial Disputes Act.


 

Minimum age for employment to be 16 years and amending Bills

Several Bills pertaining to amendment of (inter alia) certain employment law statutes are pending in Parliament. The statutes in question are the Shop and Office Employees (Regulation of Employment and Remuneration) Act, the Employment of Women, Young Persons and Children Act (EWYPCA), the Factories Ordinance and the Minimum Wages (Indian Labour) Ordinance.

All amendments to be made flow from the proposed amendment of the minimum age of employment to 16 years from the presently prevailing age of 14 years. Accordingly, appropriate amendments, (or repeals of sections rendered irrelevant or redundant), are to be made to relevant provisions in these statutes.

It may also be mentioned that an exception to the rule that the minimum age of employment should be 16 years is found in section 14 of the EWYPCA which provides that a child (to be defined as a person under the age of 16 years, instead of the current 14 years) may be employed:

  1. by his parent or guardian in light agricultural or horticultural work or similar work carried on by member of the same family before the commencement of regular school hours or after the close of school hours; or

  2. in a school or other institution supervised by a public authority and imparting technical education or other training for the purpose of any trade or occupation.


 

Proposed increase of qualifying age for withdrawal of monies in individual account/s of the Employees' Provident Fund

The general rule under the Employees' Provident Fund Act as it stands is that the monies lying to the credit of a member, (an employee on whose behalf contributions have had to be made as provided by the Act), shall be paid to him/her "as soon as may be practicable" after he/she has attained the age of 55 years in the case of males and 50 years in the case of females.

This is subject to the proviso that the said member is not entitled to such payment if, after attaining the stipulated age he/she continues to work in any "covered employment"—which term includes practically all employments—and will not be entitled to payment until he/she ceases to be in such employment.

In the course of his speech in Parliament, when presenting the national budget for the year 2021, the Prime Minister, who is also the Minister of Finance, mentioned that it was proposed to increase the said ages—which he referred to as the mandatory retirement age in the private sector—for both men and women to 60 years.

With thanks to John Wilson, Shannon and Jayantha Gunasekara of Sri Lanka Law for their invaluable collaboration on this update.

 

KEY DEVELOPMENTS FOR 2020


 

Tripartite Agreement reached to pro-rate wages

As a consequence of the spread of the COVID-19 outbreak in Sri Lanka and its inevitable effect on local enterprises, an agreement was reached on 4 May 2020 between the Employers' Federation of Ceylon, certain Labour Unions and the Government Task Force in relation to the pro-ration of employees' wages. The key features of the tripartite agreement are as follows:

  • The scheme will be applied to pro-rate wages of employees who are unable to attend work at the same time as others due to health restrictions (e.g., where Government guidelines dictate that only a given percentage or number of employees could be employed on a particular day).
  • It will apply to monthly paid employees in all sectors, and was initially to be limited in its application for the months of May and June 2020, but the period was later extended up until 31 December 2020.
  • Although the scheme is applicable to all sectors without exception, employers that cannot afford to pay employees based on this scheme can make representations to the Commissioner General of Labour.
  • It is only employees who have attended work, or those who were unable to do so because of the restrictions imposed by employers that are eligible to be considered under the scheme. Nonetheless, employees that are unable to report to work due to the restrictions imposed by other authorities may also be considered under this scheme and payments will be made on the basis that they have been 'benched'.
  • Employees who are absent from work despite being rostered and who fail to provide acceptable reasons for their absence should be placed on unpaid leave (in lieu of days of such absence). Employees who provide satisfactory explanations for their absence should be placed on paid leave, as appropriate.
  • Employers will apportion and pay employees' wages for the days they have worked, based on their basic salary. For any days not worked, wages will be apportioned and paid either at the rate of 50% of the basic wage, or Rs 14,500, whichever is greater.

Although the tripartite agreement is not legally binding, it is likely that officers of the Labour Department and/or arbitrators/industrial courts will be mindful of the terms of the agreement and may use it as a guideline in determining what is just and equitable.


 

Amendments to the Wages Boards Ordinance

Certain provisions of the Wages Boards Ordinance have recently been amended by Act no. 14 of 2019.

Section 59A of the Wages Boards Ordinance - which related to a situation where, by way of trade or for a commercial purpose, one person arranges to have work performed by another and the other person employs workers for the performance of such work has been replaced by a new section and provides statutory recognition to a principle that had already been established by judicial decision. The current statutory position is that where work is performed by other workers (as mentioned above) on a regular basis and where this work is integral to the business activities of the entity/individual who obtains the services, the contract/arrangement is deemed to be considered an employment relationship. If the Commissioner of Labour is satisfied that an employment relationship exists, the Commissioner has the power to put an end to the arrangement. A right of appeal to a Special Employment Relations Tribunal is provided for under section 59B.

In addition, further new sections providing for the hearing and determination of appeals (section 59C), and making failure to comply with the Commissioner's directive an offence (section 59D), have also been introduced.

Other amendments have also been introduced which relate to matters such as enhancement of penalties for non-compliance/contraventions (which has now been enhanced to a fine of not less than Rs. 20,000 or imprisonment of up to 12 months, or both), the increase of time limits for retention of records and instituting civil suit for recovery of payments due.

The enactment of the draft new Employment Act, which was released for public comment in 2019, appears to have been stalled and it is currently unclear whether the Government will pursue the enactment of this draft legislation into law.

 

KEY DEVELOPMENTS FOR 2019


 

The Shop and Office Employees (Regulation of Employment and Remuneration) Act and the Maternity Benefits Ordinance

The Shop and Office Employees (Regulation of Employment and Remuneration) Act and the Maternity Benefits Ordinance have been amended by Acts nos. 14 and 15, of 2018, respectively, both of which were certified on 18 June 2018 to include:

  • the removal of the limit of eighty-four working days paid maternity leave in respect of the first two children which will now be available regardless of the number of children the employee has at the relevant time;
  • under the Shop and Office Act the entitlement to two nursing intervals during the course of a normal working day for female employees who are nursing a child under one year of age; and
  • under the Maternity Benefits Ordinance the entitlement to twelve weeks’ paid leave regardless of the number of children the employee has at the time of the confinement, where the confinement results in a live birth and the additional provision that the maternity benefits/leave provided for is to be in addition to any holiday or leave to which the employee is entitled under any other law or regulation.

 

Amendments to minimum wages

There have also been several Wages Boards decisions amending minimum wages. In addition to amendments of minimum wages in nine trades notified during the course of July 2018, the Wages Boards have amended the minimum wages for a further nine trades (including but not limited to coconut growing, rubber export, nursing home etc.) who will see an increase in their wages as published in Gazette no. 2090/14 of 25 September 2018.

With thanks to John Wilson of John Wilson Partners for his invaluable collaboration on this update.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department

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