SERVICE AGREEMENTS AND

LABOUR ENACTMENTS
Employer -employee relationship
Employment involves two persons, the employer who
employs a person to do some work for him and an
employee or workman who undertakes to do that work.
In the kind of employment we are concerned with, there
is an agreement of the use of the service of the
employee in the way that the employer wants. This
agreement is the best indication of the true relationship
between them.
Contract of employment

This refers to an agreement between the employer and employee/workman, whereby the employee agrees to provide his services to the
employer and the employer agrees to pay for these services a consideration called a wage or salary.

In addition to the main requirement above, a Contract of Employment may contain other terms and conditions relating to this employment
relationship. Example: terms in an employment contract

An employment contract generally contains terms and conditions, on the following areas:

• Scope of work.
• Salary and other benefits.
• Salary increments and bonuses.
• Working hours and leave.
• Termination.

The contract of employment can be in writing, verbal, or implied by the conduct of the parties. The terms of a contract of employment can be
changed with the consent of both parties.
Distinction between an ‘employee’ and an ‘independent contractor’:

This is an important distinction to make because labour laws do not apply to

independent contractors. An independent contractor is hired under a contract FOR
service and is free to determine the manner in which the task is to be performed.

S.R. De Silva defines an independent contractor as follows:

“An independent contractor…is one employed to do certain work but he has a right
to exercise his own discretion as to the time and manner of doing the work”.
Contract of service - the employer can dictate terms about the manner in which work should be done. The employee employed under a contract of service is
entitled to all the benefits of
labour law.

Rex v Negus (1873)

The right of the employer to order and control the servant (employee) during employment and the servant’s obligation to obey such order and be under the
master’s control during employment was stressed.

Contract for service: the one who gets the service cannot dictate terms to the service supplier about the manner in which such service should be supplied as
long as he supplies the service as promised. The service supplier is not an employee but rather an ‘independent contractor’ and is not covered by labour laws.

Performing Right Society v. Mitchell & Booker Ltd. [1924]

A servant is a person subject to the command of his master as to the manner in which he shall do the work. An independent contractor is one who undertakes
to produce a given result, but in the actual execution of the work he is not under the order or control of the person for whom he does it and may use his own
discretion in things not specified beforehand”.

James Appuhamy vs. Shanmugam

Owner of a taxi employed another person to drive it. Court held he is an employee since the tools(car) was provided by him
Employee
Cannot delegate the work
Can obtain payments on a
monthly basis
Entitled to EPF,ETF, Gratuity
Employer provides the tools
Long duration
Employer has a higher control
Employer has higher liability
Independent Contractor
Can delegate the work
Payments on work basis
Not entitled to EPF,ETF,Gratuity
Uses his/her own tools
Short duration
Employer has less control
Less liability on the employer
Difference between a ‘contract of service’ and a ‘contract for service’ –

Tests

Contract of Service vs. Contract for Service: Tests are available to identify whether a
worker is an independent contractor or an employee.

 Control Test

 Integration Test

 Economic Reality Test

 Multiple Test
 Control Test –

The question of ‘control’ is an important yardstick to determine the relationship. In the control test you can see

- who did the selection of the worker

- who gives the orders
- who has the control of the worker
- who can dismiss the worker
- who pays the worker

if the employer has more control of all of these, we can all the worker an employee but, if the employer has less control
of these elements we can call the worker and independent contractor and that the contract is a contract for service.

Yewens v. Noakes (1880)

If a worker is subject to the command of his master on the manner in which he shall do his work (what, when, where,
how), he is in a contract of service -
• Cannot delegate his work to another.
• Cannot work in any other place as he pleases.
The drawback of this case is that it cannot test expert workers. E.g.: a Surgeon.
 Integration Test –

If a person’s work is done as an integral part of the business, it is a ‘contract

of service’. If his work is not integrated to, but only an accessory to the
business, it is a ‘contract for service’.

Stevenson, Jordan & Harrison v. MacDonald & Evans [1952]

“Under a contract OF service, a man is employed as part of the business

and his work is done as an integral part of the business; whereas under
contract FOR services his work, although done for the business, is not
integrated into it but only an accessory to it”
 Economic Reality Test –

Whether the worker is in business on his own account or works for another who takes
the ultimate loss or profit of the business. - Market Investigations Ltd v. Minister of
Social Security (1968)

 Multiple Test –

Montreal v. Montreal Locomotive Works [1946]

The question can be only settled by examining various elements of relationship

between the
parties. If consideration of all these factors result in the conclusion that the person is ‘in
business on his own account’ then he is an independent contractor. Hence, one key
determining factor is the economic independence/dependence of the individual.
 The Nine Sectors of Employment

1 .Government Servants/ State Officers/ Public Officers

Government servants or public officers probably constitute the single largest category of employees. They are persons who hold paid office
under the Republic of Sri Lanka.

A public officer means a person who holds any paid office under the Republic other than a judicial officer but does not include—

(a) the President;

(b) the Speaker;
(c) a Minister;
(d) a member of the Judicial Service Commission;
(e) a member of the Public Service Commission;
(f) a Deputy Minister;
(g) a Member of Parliament;
(h) the Secretary-General of Parliament;
(i) a member of the President’s staff;
(j) a member of the staff of the Secretary-General of Parliament
Applicable Laws: The Establishment Code

under Article 33(4) of the Constitution, the Cabinet is empowered to formulate "schema of recruitment and codes of
conduct for public officers, the principles to be followed in making promotions and transfers, and the procedure for the
exercise and the delegation of the powers of appointment, transfer, dismissal and disciplinary control of public officers,"

Remedies available to Public Officers

 The Industrial Disputes Act expressly precludes public officers from seeking any form of relief or redress under the
Act, in connection with their employment.

 Article 55(5) of the Constitution takes away the public officer's right to go to a civil court in regard to any matter
covering his appointment.

 The only recognizable right of a public officer under the Constitution is administrative appeals for redress; but the
Constitution also expressly reserves to a public officer the right to petition the Supreme Court under Article 126 for
violation of his fundamental rights.
2 .Provincial Public Service
➢ The Provincial Councils Act No. 42 of 1987 which came into operation, under the 13th Amendment to the
constitution, established a public, service for each Provincial Council, to deal with the subjects devolved to such
Councils.
3. Employees of Public Corporations
➢ A public corporation is a creature of the modern State, being created by an Act of Parliament as a semi-
government institution.

Applicable Laws :
➢ Employees of corporations are not public officers or government servants.
➢ The management has the right to frame schemes of recruitment and promotions. Other terms and conditions
of service are given in the letter of appointment which may refer to a code of regulations applicable to that
particular corporation. For convenience, a corporation may adopt the Establishments Code.
➢ All Labour laws/other than the Termination Employment of Workmen (Special Provisions) Act, apply to such
employees.
4. Domestic Sector
➢This category includes domestic servants, chauffeurs of private vehicles and gardeners.
➢Domestic employees are not covered under the Employees' 'Provident Fund (EPF) or the
Employees' Trust Fund (ETF) Acts.
5. Plantation Sector
➢Plantation workers are employed in the tea, rubber and coconut estates and live away from
the indigenous population. Most of the workers, particularly in tea plantations, are of Indian
origin, although a large number have been granted citizenship.
Applicable Labour Laws
➢In addition to being covered under the Wages Boards Ordinance, the Maternity Benefits
Ordinance, the Industrial Disputes Act and the Payment of Gratuity Act, there are some
special laws which are applicable exclusively to plantation workers. These are the Estate
Labour (Indian) Ordinance, the Indian Immigrant Labour Ordinance and the Medical Wants
Ordinance.
6 .Industrial Sector
➢The Wages Boards Ordinance covers the terms and conditions of service of a large majority of employees in
the industrial sector, known as 'blue collar' workers.
➢They also enjoy several benefits stipulated by law, such as EPF and ETF, maternity benefits
and to the payment of gratuity.
➢The provisions of the Industrial Disputes Act also apply to such workers.

7 .Mercantile Sector
➢The term 'white collar workers' is used to distinguish employees in shops and offices in the
mercantile sector.
➢These employees who are covered under the Shop and Office Employees Act and the Industrial Disputes
Act, the Payment of Gratuity Act, and the EPF and ETF Acts

8. Co-operatives Sector
Co-operate society Act No. 05 of 1972 and EPT, ETP
Types of Employment Contracts
Employment contracts may be of different types: permanent, temporary, casual,
probationary, seasonal, fixed-term, or that of an apprentice, trainee or learner.

1. Permanent
A permanent employment is where the contract is automatically renewed each
month until the employee reaches the age of retirement.
The employee is guaranteed security of employment with all benefits like EPF,
ETF, bonus, gratuity and so on, unless there is disruption of service due to
illness or for some other reason. Some of these reasons may be misconduct on
his part; or, termination of his services unilaterally by his employer; or the
establishment going into liquidation.
2. Temporary

A temporary employee is one who is recruited to fill a vacancy created by a permanent employee going
on leave; or someone recruited to do a job which is of a temporary nature, the duration of which is
limited by the job or by time.
Such employees are also entitled to EPF and ETF benefits; and where the duration of employment
exceeds 180 days in a continuous period of 12 months, the provisions of the Termination of
Employment of Workmen (Special Provisions) Act shall apply, provided the employment is in a
scheduled employment and the employer had 15 or more employees on the average in the 6-month
period preceding such termination.

3. Casual
This is a term very much abused and misinterpreted by employers. A casual employee is one who is
employed by chance or on no regular contract of employment. For example, an odd-job gardener or a
person who undertakes to wash and polish a car; An employer cannot expect a casual employee to
arrive for work continuously. He cannot as a right expects the work from employer.
4. Probation
Probation implies a 'fixed and limited period of time' during which an organization
employs a new employee in order to assess his aptitudes, abilities, characteristics,
conduct and his devotion to work, before taking him into the permanent cadre. It is a
trial period during which the employee is tested by the employer. It follows therefore,
that the employer should have the right to discontinue a probationer if he does not
come up to expectations. But the termination should base on bona fide reasons.
5. Seasonal
Certain types of employment - such as harvesting of paddy or sugar-cane, drying of
tobacco, working in tourist hotels, etc., - are by their very nature seasonal. There is no
assurance of regular employment since work i s available only during a certain season
of the year and the employee is discontinued at the end of that season. Nonetheless,
any such employee is entitled to EPF and ETF benefits for the period he is employed.
6. Fixed-term Contract
A fixed-term contract is a contract of employment which expires on a
definite date, not on the happening of a particular event or on the
completion of a particular task at some time in the future. A fixed-term
contract does not lose its legal character as fixed-term merely because it
provides for its premature termination by notice.
7. Apprenticeship (Trainees / Learners)
In the case of apprentice there is no contract of service. Therefore, he
cannot be considered a workman in the normal sense. An apprentice is a
person who is there to learn the trade, and the master or employer has
undertaken to train him and prepare him to understand the trade in which
he is engaged .