Free Lanka Trading Co. v. Da Mel
1978 Present: Samerawickrame, J., Ismail, J. and
FREE LANKA TRADING CO. LTD., Petitionerand
W. L. P. DE MEL, COMMISSIONER OF LABOUR andOTHERS, Respondents0
S. C. Application No. 271/75Termination of Employment of Workmen • (Special Provisions) ActNo. 45 of 1971—Persons employed as “ Technical Sales Represen-tatives”—Written agreement governing conditions and terms ofemployment—Nature of actual work done and extent of controlexercised by employer—Whether workman within the-meaningof Act or independent contractor—Scheduled employment—Persons not actually working in a shop or office—Shop and OfficeEmployees Act, section 68 (2) (b)—Law No. 1 of 1976.
The petitioner in these proceedings sought to quash an ordermade by the Commissioner of Labour under the Termination ofEmployment of Workmen (Special Provisions) Act No. 45 of 1971.The said order directed the petitioner company to reinstate the2nd to 7th respondents to this application, to pay them wages duringthe period of non-employment and to grant them other relief. Itwas contended on behalf of the petitioner that these persons werenot workmen in a scheduled employment within the meaning ofthis Act.
Free Lanka Trading Co. v. De Mel
These respondents had been engaged by the petitioner as “ Tech-nical Sales Representatives” on a written agreement on whichthe petitioner strongly relied. They were referred to as Indepen-dent Agents in this agreement Clauses' 3 (e) and 5 (f) of theagreement read as follows : —
3 (e). “The Independent Agents agrees to determine for himselfthe hours and days he will work in the company’s behalfand will only submit those reports to the company that nedeems necessary in the conduct of his business as an Inde-pendent Agent
5 (/). “ The Independent Agent is aware of the definition of‘worker’ as appearing in the Annual Holidays Act, Shopand Office Act, Wages Boards Ordinance, Workmen’s Com-pensation Act and the definition of ‘ employee ’ as appearingin the Industrial Disputes Act,1 and agrees and acknowledgesthat he is not within such definitions and that he has receivedlegal advice to that effect and to the import and meaningof all the provisions of this Agreement.”
However, it appeared that in fact, the position was that thework done by these Sales Representatives and their relations withthe management were regulated not by the terms of this agreementbut carried out in a very different manner very much at varianceu with the said terms. The conduct of the business by these SalesRepresentatives and the mode of the discharge-of- their dutiesappeared to have been very much under the control of the manage-ment and so much so that they had, inter alia, to finish Daily CallSheets, a work calendar every Saturday for the following week,weekly reports on sales etc. and came under the direct supervisionand disciplinary control of the General Sales Manager.
Held : (1) That the said agreement appeared to have been enteredinto so as to erect a facade under cover of which the managementcould seek to avoid performance of obligations cast by law uponemp’oyers towards the employees. Though it is proved that therepresentatives were paid a commission or a salary and commission,the mode in which remuneration was paid was not decisive on thequestion whether a person was an employee or an independentcontractor.
That the clauses of the said agreement which purported toset out the agreement of the parties on its legal effect were notrelevant as the contract was not intended to be and/or was notacted upon.
That under the definition of scheduled employment intro-duced by Law No. 1 of 1976 read with section 68 (2) (b) of theShop and Office Employees Act; these respondents came within thecategory of workmen in a scheduled employment within the meaningof the Termination of Employment of Workmen Act.
Cases referred to :
Market Investigations Ltd. v. Minister o1 Social Security, (1968) 3All E.R. 732; (1969) 2 W.L.R. 1 ; (1969) 2 Q.B. 173.
Bank Voor Handel en Scheepvaart v. Slatford, (1952) 2 All E.R.956; (lU5i) 2 K.B.D. 779.
Global Plant Ltd. v. Secretary of State for Social Services, (1972)
1 Q.B. 139 ; (1971) 3 All E.R. 385 ; (1971) 3 W.L.R. 269.
Ready Mixed Concrete (South East) Ltd. v. Minister of Pensionsand National Insurance, (1968) 2 Q.B. 497 ; (1968) 1 All E.R. 433:(1968) 2 W.L.R. 775.
U. S. v. Silk, (1946) 331 V.S. 704.
Montreal Locomotive Works Ltd. v. Montreal and A.G. for Canada(1947) 1 Dominion Law Reports (Canadai Ittl
160SAMERAWICKRAME, J.—Free. Lanka Trading Co. v. Dn Mel
A.PPLTCATION for a Writ of Certiorari and Prohibition.
II. W. Jayewardene, Q.C., with J. C. Ratwatte and MissS. Fernando, for the petitioner.,
D. C. Amerasinghe, for the respondent.
Cur. adv. vult.
August 18, 1978. SAMERAWICKRAME, J.
The petitioner-company filed this application asking for a writof certiorari to quash t'ne order of the 1st respondent, who isthe Commissioner of Labour, made under the Termination ofEmployment of Workmep (Special Provisions) Act No. 45 of1971 directing it to reinstate the 2nd to 7t'n respondents, to paythem wages during the period of non-employment and to grantthem other reliefs. The position of the petitioner is that theserespondents were not workmen in a scheduled employmentwithui the meaning of the Act.
The petitioner company had engaged these respondents asTechnical Sales Representatives and had entered into the agree-ment marked “ A ” with each of them. In that agreement, theyare referred to as Independent Agents, paragraph 3 (e) states—
“ The Independent Agent agrees to determine for himselfthe hours and days he will work in the Company’s behalf andwill only submit those reports to the Company that he deemsnecessary in the conduct of his business as an IndependentAgent ”.
Clause 5 (f) of the Agreement reads: —
“ The Independent Agent is aware of the definition of* worker ’ as appearing in the Annual Holiday Act, Shop andOffice Act, Wages Boards Ordinance, Workmen’s Compen-sation Act and the definition of ‘ employee ’ as appearing inthe Industrial Disputes Act, and agrees and acknowledgesthat he is not within such definitions and that he has receivedindependent legal advice to that effect and to the importand meaning of all the provisions of this Agreement. ”
In contravention of and in flagrant disregard of clause 3 (e)set out above, the Technical Sales Representatives were calledupon by a Memorandum signed by an official of the petitioner-company 1R2M to furnish Daily Call Sheets setting out thecustomers whom they interviewed, a work calendar every Satur-day for the following week, weekly reports on sales, full list ofcustomers in their districts with the names of their EngineeringStaff and Supplies Managers, and they were told that they
SAMERAWICKRAME, J.—Fret Lanka Trading Co. v. De Mel101
“ should know all sales stories verbativelyand that they
will be tested by the District Manager, Office Manager andGeneral Sales Manager after tSie next sales conference, failureto satisfy them will entail suspension of Representatives fromsales till the abovementioned requisite is perfected. ”
At the inquiry held by an Assistant Commissioner of Labour,the Attorney-at-Law who appeared for the Sales Representativessaid that his clients had to start work at 8 a.m. and were requiredto work till 4 p.m. ; that they had to sign an AttendanceRegister. They had to send a daily call sheet and if they hadnot worked, the reason for not working had to be entered Theycame under the direct supervision and disciplinary control ofthe General Sales Manager. They had to get prior leave in casethey had to leave their districts. The Technical Sales Represen-tatives had been trained to propagate sales in the magna way,that is, in the way prescribed by the management and they hadto adhere strictly to the technique laid down. Even the dressthat a Technical Sales Representative should wear when he wasin the field was prescribed by the Management. Learned Counselwho appeared for the petitioner-company at the inquiry disputedonly the statement th?f the Sales Representatives had tosign an attendance register. Re relied strongly on the agreement“ A ” and its provisions.
It appears to be the position that work was done by the SalesRepresentatives and their relations* with the management wasregu’ated, in truth and in fact, not by the terms of the agreement“A ” but in a different manner very much at variance with theterms of that agreement. The conduct of business by the SalesRepresentatives and the mode of the discharge of their dutiesappear to have been very much under the control of the manage-ment. The Agreement “ A ” appears to have been entered intoso as to erect a facade under cover of which the managementcould seek to avoid performance of obligations cast by Lawupon employers towards their employees. It is true that'therepresentatives were paid a commission or a salary and commis-sion but the mode in which remuneration is computed is notdecisive on the question, whether a person is an employee oran independent contractor.
It has been laid down in recent decisions that the idea thatcontrol over the manner of performance of the work is not thesole criterion in determining whether a contract is a contractof service or a contract for furnishing services. In MarketInvestigations Ltd. v. Minister of Social Security, (19681 3 A.E.R.732. CooVo. J. referred to the observation of Lord Wright inMontreal Locomotive Works Ltd. v. Montreal and A.G. for
bAM ERA.WICXCRAMFy J.—Free Lanka Trading Co. v. Dr Mel
Canada, (1947) 1 D. L. R. 161, the dictum of Lord Denning inBank Voor Handel en Scheepvaart v. Slatford, (1952) 2 AE.R.956 at 971—
“the test of being a servant does not rest nowadays
on submission to orders. It depends on whether the personis part and parcel of the organisation”
and the view of the Judges of the U. S. Supreme Court in
U.S. v. Silk (1946) 331 U. S. 7G4, that the test to be appliedwas not “ power of control, whether exercised or not, over themanner of performing service to the undertaking ”, but whetherthe men were employees “ as a matter of economic reality. ”Cooke, J. went to say at p. 737—
“ The observations of Lord Wright, of Denning, L.J., andof the judges of the Supreme Court in the U.S.A. suggestthat the fundamental test to be applied is this : ‘ Is theperson who has engaged himself to perform these servicesperforming them as a person in business on his own account? ’If the answer to that question is ‘ yes ’ then the contractis a contract for services. If the answer is ‘no’ then thecontract is a contract of service ”.
It is my view that if one asks the questions posed by Cooke, J.in respect of the sales representatives in the instant case, theanswer is that they were not in business on their own . accountand were in fact not permitted to be on their own by themanagement of the petitioner-company. Another authority inpoint in which Cooke, J.’s judgment is cited is Global Plant Ltd.v. Secretary of State for Social Services, (1972) 1 Q.B. 139.
I should refer to clause 5 (f) of the Agreement which I haveset out above. The effect of a clause seeking to agree on thelegal effect of an agreement has been considered in Ready MixedConcrete (South East) Ltd. v. Minister of Pensions and NationalInsurance, (196'8) 2 Q. B. 497 at 512. Mackenna, J. dealing witha clause that declared a party to be an independent contractorsaid—
“ It may be stated here that whether the relation betweenthe parties to the contract is that of master and servant orotherwise is a conclusion of law dependent upon the rightsconferred and the duties imposed by the contract. If theseare such that the relation is that of master and servant, itis irrelevant that thq,parties have declared it to be somethingelse
He went on to consider when such a clause may have someeffect. As the contract before me was not intended to be and/orwas not acted upon, this clause is doubly irrelevant.
SAMERA WICKRAME, J.—Free Lanka Trading Co. v. De Mel
I hold that the sales representatives were employees of thepetitioner-company and workmen within the meaning of Act No.45 of 1971. Learned Counsel for the petitioner submitted that theywere not workmen in a scheduled employment. Under a newdefinition of scheduled employment introduced by Law No. 1 of1976, scheduled employment' means, inter alia, employment inevery shop and every office within the meaning of the Shop andOffice Employees (Regulations of Employment and Remunera-tion) Act. But learned Counsel for the petitioner submittedthat as many of the sales representatives were sent out in thefield they were not employed in a shop or in an office. LearnedCounsel for the 2nd, 4th, 5th and 6th respondents referred us tosection 68 (2) (b) of the Shop and Office Employees Act. Itreads—
“ (2) For the purposes of this Act, a person shall be deemedto be employed in or about the business of a shop oroffice if he is wholly or mainly employed—
in the service of the employer upon any work,whether in the shop or office or outside it, whichis ancillary to the business carried on in thatshop or office, and notwithstanding that- he re-ceives no reward for his labour ; but he shallnot be deemed to be so employed if his onlyemployment in the service of the employer is inthe capacity of a caretaker ”.
In view of this provision, I hold that the sales representativesheld scheduled employment within the meaning of Act No. 45of 1971.
There had been earlier inquiries held by the Department ofLabour in disputes between the same parties in which the samequestion had arisen. As both parties were heard and were repre-sented at such inquiries, I think the proceedings and the evidenceled at such inquiries may be taken into account but the petitio-ner-company should have the opportunity of adducing any freshevidence it may have and a fresh decision should be arrived at.It was submitted that these two requirements had not been fullymet. As documents signed by the officers of the petitioner-company and the unchallenged facts fully support the findingof the 1st respondent, I am not disposed, even if there is someirregularity, to exercise my discretion and issue a writ.
Ift the result, the application of the petitioner-company isdismissed with costs.
Ismail, J.—I agree.
Gunasekera, J.—I agree.
FREE LANKA TRADING CO. LTD., Petitioner and W. L. P. DE MEL, COMMISSIONER OF