SRI LANKA Law and Practice Contributed by: Ayanthi Abeyawickrama, Varners
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 obligation for employers to consult or inform employees in the ordinary course of busi - ness or for routine employment matters. Howev - er, employee representation becomes relevant, and in some cases expected or required, where trade unions are recognised or where employ - ment 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 bargaining, grievance resolution and dispute set - tlement processes. 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 consulta - tive bodies, some enterprises (particularly 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 in 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 com - munication 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 favourable than those prescribed under applicable Sri Lankan labour laws.
monly 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 compensation, based on factors such as the employee’s length of service, age, salary and the circumstances of the termi - nation. The amount of compensation is calcu - lated 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 con - sent or approval risk having the termination declared unlawful, which will result in reinstate - ment of the employee or an order to pay retro - spective compensation. For collective redundancies, the procedure is similarly governed by TEWA. Termination of multiple employees requires prior approval from the Commissioner General of Labour, and the employer must continue to pay salaries and oth - er dues until such approval is obtained. Where a trade union exists, consultation is required, although there is no formal statutory requirement for a negotiated agreement. In practice, employ - ers often seek to implement mutual separation schemes, offering employees ex gratia compen - sation packages in exchange for resignation, in order to avoid the uncertainty and delay involved in obtaining formal approval for termination.
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