SRI LANKA Law and Practice Contributed by: Ayanthi Abeyawickrama, Varners
law may attract penalties and enforcement action by the Labour Department. 4.4 Termination of Employment Contracts Sri Lanka is not an “employment-at-will” jurisdiction. The termination of individual employment contracts is governed by TEWA, which imposes strict limita - tions on the unilateral termination of employment by employers. Under TEWA, an employer cannot lawfully terminate the services of a “workman” other than for miscon - duct, except with the prior written consent of the employee or the prior written approval of the Commis - sioner General of Labour. This applies even where the employment contract permits termination on notice. Accordingly, termination without cause or justifica - tion, commonly known as “at-will termination”, is not legally permissible under Sri Lankan law. Where approval is sought, the employer must justify the termination on valid grounds, such as redundancy or closure of business operations. The Commissioner General has the discretion to reject the application or to impose conditions, including payment of com - pensation, based on factors such as the employee’s length of service, age, salary and the circumstances of the termination. The amount of compensation is calculated according to the formula prescribed by the Commissioner General. In addition, employees with five or more years of continuous service are entitled to gratuity under the Payment of Gratuity Act, No 12 of 1983, irrespective of the reason for termination, other than for proven misconduct. Employers who fail to obtain the required consent or approval risk having the termination declared unlaw - ful, which will result in reinstatement of the employee or an order to pay retrospective compensation. For collective redundancies, the procedure is similarly governed by TEWA. Termination of multiple employ - ees requires prior approval from the Commissioner General of Labour, and the employer must continue to pay salaries and other dues until such approval is obtained. Where a trade union exists, consulta - tion is required, although there is no formal statutory requirement for a negotiated agreement. In practice,
employers often seek to implement mutual separation schemes, offering employees ex gratia compensa - tion packages in exchange for resignation, in order to avoid the uncertainty and delay involved in obtaining formal approval for termination. 4.5 Employee Representations Employee representation is primarily facilitated through trade unions and is regulated by the Trade Unions Ordinance. There is no general statutory obli - gation for employers to consult or inform employees in the ordinary course of business or for routine employ - ment matters. However, employee representation becomes relevant, and in some cases expected or required, where trade unions are recognised or where employment matters escalate into collective disputes, redundancies or collective terminations. When a trade union represents employees, it is empowered to act on their behalf in collective bargain - ing, grievance resolution, and dispute settlement pro - cesses. In such situations, employers are expected to engage with the union in good faith. While Sri Lankan law does not mandate the formation of works councils or joint consultative bodies, some enterprises – par - ticularly larger or unionised workplaces – voluntarily establish employee relations mechanisms to promote communication and industrial harmony. In the case of BOI-approved enterprises, the BOI actively promotes co-operation between management and labour and industrial peace through its Industrial Relations Officers. The Manual on Employment Policy and Labour Standards issued by the BOI outlines the labour standards and employment practices that must be observed by BOI-approved companies, both within and outside Export Processing Zones (EPZs). This Manual encourages proactive communication and dispute prevention practices, and reiterates that the national labour laws apply fully to all BOI enterprises. Importantly, the terms and conditions of employment in BOI-approved companies must not be less favour - able than those prescribed under applicable Sri Lan - kan labour laws. The Ministry of Labour and the Department of Labour are responsible for enforcing labour laws and over - seeing industrial relations. These institutions play a
1008 CHAMBERS.COM
Powered by FlippingBook