Sri Lankan Labour Law – Case Law Note
Sri Lankan courts have issued two significant employment law rulings recently that every HR team and business owner should understand. Both cases reinforce a consistent theme: procedure matters as much as substance when it comes to disciplinary action and termination.
1. Constructive Termination Without a Formal Dismissal Can Still Constitute Termination
China Harbour Engineering Company (Lanka) Limited v. Commissioner General of Labour & Others
C.A. (WRIT) 464/2021 — Court of Appeal, decided 19.01.2024
What happened: The company prevented several employees from reporting to work after accusing them of misconduct. However, the company did not formally dismiss the employees or conduct a disciplinary inquiry.
What the Court held: The Court of Appeal held that the company’s refusal to allow the employees to work amounted to constructive termination under the Termination of Employment of Workmen (Special Provisions) Act (TEWA). The Court confirmed that TEWA protections can apply not only when an employer expressly dismisses an employee but also when the employer takes action that effectively ends the employment relationship. The Court also rejected the company’s argument that disciplinary dismissals fall outside TEWA or that merely intending to conduct an inquiry, without actually conducting it, could protect the company from liability.
HR Impact:
- Employers should not sideline or “freeze out” an employee accused of misconduct as an informal alternative to termination. A court may treat such conduct as termination.
- Employers should formally initiate and document any suspension or disciplinary process rather than simply announcing an intention to investigate.
- Employers who bypass proper procedures may face TEWA proceedings and compensation orders, even where the employee’s alleged misconduct may have had some factual basis.
2. Employers Must Support Dismissals with Credible and Reliable Evidence
Ceylon Cold Stores PLC v. Inter Company Employees’ Union
SC Appeal 17/2022 — Supreme Court
What the Court held: The Supreme Court emphasized the importance of credible and reliable evidence when an employer seeks to establish misconduct leading to termination. Employers should properly present first-hand evidence and carefully establish the circumstances surrounding any alleged confession. Unsupported, vague, or second-hand accounts may not adequately establish misconduct.
HR Impact:
- Employers should conduct domestic inquiries thoroughly and fairly and maintain proper documentation throughout the disciplinary process.
- Employers should not rely solely on hearsay, unverified reports, or assumptions when establishing misconduct.
- Employees and trade unions may challenge dismissals where employers rely on weak or indirect evidence.
- HR professionals should ensure that the inquiry officer properly evaluates the evidence before reaching a finding on the allegations.
The Common Thread: Process Protects You
Both rulings point to the same practical lesson for employers: the law is far less forgiving of shortcuts than it used to be. Whether it’s removing someone from work informally or dismissing them based on incomplete evidence, Sri Lankan courts are increasingly scrutinizing how the decision was reached, not just whether it was justified.
Recommended HR Actions
- Never remove an employee from active duty without opening a formal, documented disciplinary inquiry — intent to investigate is not enough.
- Audit your disciplinary inquiry process — ensure evidence is first-hand, properly recorded, and not reliant on hearsay or informal confessions.
- Train inquiry officers on evidentiary standards, since inquiries conducted informally are now a growing point of legal vulnerability.
- Document every step of a termination decision — from the initial allegation to the final inquiry outcome — as courts will examine this record closely if challenged.
- Seek legal review before termination in any case involving disputed facts, to confirm the evidence and process meet current judicial standards.
This note is for general informational purposes and does not constitute legal advice. For guidance on a specific disciplinary or termination matter, consult Law Points directly