When a matter is brought before a Labour Tribunal, the most posed question is whether a workman is an employee under a contract of service or an independent contractor under a contract for service in terms of the Industrial Disputes Act No.43 of 1950 as amended (hereinafter referred to as “the IDA”). While the “workman” would argue that he is an “employee” of his master, the master argues that the “workman” is not an employee but an independent contractor working for him.
The reason for this being that employees are a costly option with statutory responsibilities to an organization unlike independent contractors. An employee would receive the employment benefits such as, terminal benefits (EPF,ETF,Gratuity), annual leaves, maternity leaves, etc. An independent contractor on the other hand do not qualify for such benefits. Accordingly, having employees in one’s business is a substantial cost to that business and also a risk.
The main statutory law in relation to settlement of “industrial disputes” of private and semi government workers is the IDA. However, despite the settlement methods such as settlement ofdisputes by way of agreement, conciliation and arbitrationthrough the Commissioner of Labour/Minister, the Amending Act No.62 of 1957 introduced the Labour Tribunals whichenabled an avenue for direct access to dispute settlement mechanism by workmen. The IDA as so amended secured the right to appeal to High Court and to the Supreme Court with the leave from the High Court. Moreover, The IDA secured applications by way of writs to the Court of Appeal against an Order in a Labour Tribunal.
This Article would discuss 1) in what kind of circumstances the IDA permits a person to seek remedial actions from LabourTribunals and 2) who is empowered to seek remedial actions from the Labour Tribunals.1) Circumstances that permit a person to seek remedial action from Labour Tribunal
Section 31 B of the IDA states four instances in which a workman or a trade union on behalf of a workman (who is a member of that union) can make an application to the LabourTribunal.1. Where there is termination of services of workman by the employer2. On the question brought by a workman, whether any gratuity is due to him on termination of his services and the amount of such gratuity and the nature and extent of any such benefits where such workman has been employed in any industry employing less than 15 workmen within the preceding 12 months of his termination.3. On the question whether forfeiture of Gratuity is correctly made in terms of Payment of Gratuity Act No.12 of 19834. On such other matters relating to the terms of employment, or the conditions of labour, of a workman as may be prescribed. (In terms of Section 39 of IDA Minister should make regulations for the matters to be prescribed)
However, as the Regulations are not prescribed by the Minister, fourth limb of the provision is inundated.
In terms of Section 31 B (7) of the IDA, every application under the circumstances of sub category 1. and 2. Above should be brought within a period of 6 months from the termination of services of the workman.2) Who is empowered to seek remedial actions from the Labour Tribunals
As mentioned in sub topic number 1) in terms of Section 31 B of the IDA a workman or a trade union on behalf of a workman who is a member of that union can make an application to the Labour Tribunal.
Therefore, it is important to see the definition of “Workman” asprovided in the interpretation Section, i.e Section 48 of the IDA. Accordingly “workman” is defined to mean,
“ any person who has entered into or works under a contractwith an employer in any capacity, whether the contract is expressed or implied, oral or in writing, whether it is a contract of service or of apprenticeship, or a contract personally to execute any work or labour, and includes any person ordinarily employed under any such contract whether such person is or is not in employment at any particular time, and includes any person whose services have been terminated.
Thus it has become necessary to decide if a workman is coming within this definition of “workman” in order to allow him to continue his application in the Labour Tribunal. Accordingly, in order to decide if a person is an employee working for anemployer or an independent contractor who, is providing his services to an employer; number of tests which were initially developed in Common Law has been utilized by courts. The testes are briefed out below;I. Control test – The oldest test developed in order todistinguish a contract of service from a contract for service. The test seeks for the “the degree of control”exercised by the master on his servant. However, in the famous case of Ready Mixed concrete Ltd vs Minister of Pensions (1968) 1 All E.R 433 it was stated that in deciding this question it is not only the degree of control that should be looked into and stated three tests that would be helpful to decide the question, i.e. whether there will be remuneration for the work done on his ownby the servant, the degree of control exercised by the master, and being a contract with other particulars similar to a contract of service where it can be distinguished from a contract of carriage, sale, etc. II. Integration test – According to Mr. Egalahewa in his book named “A General Guide to Sri Lanka Labour Law”, 2018, with “the specialization and knowledge on technical know-how” the application of control test became of limited recognition i.e in the instances of applying the test to doctors, nurses and pilots who have specialized skills where it was difficult for an employer to control the manner in which the work is carried out. Further, in the case of Perera v Marikkar Bawa Ltd (1989) 1 SLR 347 it was decided that the headcutter of the company who was employed on a contract and on commission basis to carryout tailoring business of the company although, brought his own tools, did not sign the attendance register and was not entitled to bonus, he was an integral part of the business of the company and that the work he carried out was not on behalf of him but on behalf of the company and therefore, he was a workman and an employee within the definition of the IDA.III. Economic Reality Test – this test looks at the reality of the employment relationship between a worker and an employer. Accordingly despite having a contract which identified workers as independent contractors in the caseof Free Lanka Trading Co v De Mel, Commissioner of Labour (1978) 79 (II)NLR 158 the court held that the contract is a façade to protect the company from employer liabilities and held the workers are employees and not independent contractors. Court highlighted the fact that the employment relationship has not been in accordance with the terms of the contract but completely different when it comes to its execution and the level of control through internal procedures disciplinary procedures were considered in arriving at the decision.IIII. Multiple test (Dominant impression test, pragmatic approach) – According to Mr. Egalahewa, this test indicates that, there is no one conclusive test to decide the above question. Therefore judges will use multiple tests depending on the facts of each case and the feature that predominates will be considered accordingly.
Accordingly, Courts have made use of different concepts to decide if a person is an employee or an independent contractor. As mentioned in the last test, there is no one specific test that can resolve the question.
The judgement delivered by the Supreme Court of UK in Uber BV and others v Aslam and others [2021]UKSC 5 would be worth of mentioning. The judges decided that the Uber drivers are workmen based on the factors such as the fare for a trip is decided by Uber, the contract terms are imposed by Uber, choice of selecting trips have been constrained by Uber, control on how a driver deliver their work is exercised by Uber and the communications between driver and the passenger is restricted by Uber. Consequently, Uber drivers became entitled to national minimum wage, paid annual leave and other worker’s rights as per the law existing in the UK which has three main categories as “employees”, “workmen” and “self-employed”.
Despite there is a definition provided for the word “workman” in the IDA, yet it has in itself created a question which has to be addressed in each Labour tribunal case applying the above-mentioned tests whether a person is an employee or an independent contractor.
In conclusion, it is “the substance over form” that decides if a contract is one of service or for service.
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Lahiruni Samarasundara is a L.L.B (University of Colombo), Attorney-at-Law and a CIMA passed finalist
