The court held that the respondents did not act as an employment
agency because the worker had a written agreement with the
respondents to work for them and to be paid for it. The Court said :
. . it is plain that when the workman agreed to work on aparticular site at a particular rate, of pay, he was agreeing so to dowith the respondents as principals. That in my judgment is sufficientto dispose of the view that the respondents were merely acting forthe workman as an employment agency. They were contracting
with the workmen as principals. ’
• «
The court also held that the workman .was paid by the respondents atthe rate agreed between him and them, and the profits of therespondents were derived from the difference between the sums theypaid to the workman and the sums which they received from thecontractor.
In the case before us the position is materially different. The
workman had the most tenuous contact with the 2nd respondent and
in truth and in fact it was the 1st respondent who calculated and
determined the wages and advances to the workmen and not the 2nd
respondent which acted as a mere conduit for the transmission of the
payment. The 2nd respondent, as the President says, had merely
undertaken to supply labour and not jo perform aijy specific services.
It is in this context that the President compared the work of the Labour
Co-operative Society to the old Kangany system and held that the 2rib
respondent functioned only as an agent for the supply of laboifr.
Further, in the Labour Force CaseM was specifically agreed between
the parties that the workman was engaged by the Labour Force. TherS
was a certificate signed by the workman to the effect that he was
engaged by the Labour Force on a Sub-Contract Basis. That was a
most significant item of evidence and we have nothing like that in thS
present case. In the light of these facts, the limited supervision that
was enjoyed by the contractor in that case was found insufficient to
spell a contract of service between the workmen and the contractor.
But in the case before us the governing factors are'quite different.
416Sri Lanka Law Reports[1985] 1 SriL.R.
In that case the Court faced the situation of being confronted with
the express .terms of contract. That did not preclude the Court from
inquiring into the true nature of the contract. This is how the Court
approached the matter:
'The tribunal was asked to consider the nature of the contractsentered into by a large and indeterminate group of workmen in theindustry. It was entitled, as it seems to me. to use its ownknowledge of the undoubted fact that many of the workmen in theindustry are self-employed. The tribunal referred to the declarationsigned by the workman in which he purports to certify that he isemployed on a sub-contract basis. Quite rightly, in my judgment,the tribunal held that this did not preclude it from enquiring into thetrue nature of the contractual relationship."
Later the Court said :
"In my view, the fact that the parties have in express terms soughtto make a contract of a particular kind, while it does not_ bind thecourts to hold that they have succeeded, is a factor which can beconsidered in determining the true nature of the contract."
Both for the above reasons and in view of the existence ofcontractual relations of the workmen with both the 1st respondentand the 2nd respondent. I think the President was right in examining allpossible factors, including ttie control test as bearing on therelationship between the parti^
The Court of Appeal has examined the material and has sought tocome to its own independent conclusion which is at variance with thefindings of the President. The Court of Appeal give the followingjustification for this exercise :
'The generally accepted criteria for determining the relationship ofemployer and workman as mentioned in the passage referred toearlier in the order of the President has not been balanced againstoral evidence indicating the contrary or against the documentaryevidence referred to or considered in their totality notwithstanding abare statement in the order that the totality of evidence was beingconsidered."
■The balancing operation contemplated by the Court of Appeal is thebalancing of all the possible factors that may have a bearing inresolving the issue of employment. The Court of Appeal in the abovepassage was no doubt having in mind the following excerpt fromFisher, J's judgment in the Labour Force Case which it quoted withapproval:
“In my judgment, it is really not possible, in Mr. Atiyah's words tolay down :
'a.number of conditions which are both necessary to,
and sufficient for the existence of(a contract of
service). The most th*at can profitably be done is to examine all thepossible factors which have been referred to in these cases asbearing on the nature of the relationship between the partiesconcerned. Clearly not all of these factors will be relevant in allcases, or have the same weight in all cases. Equally clearly no magicformula can be propounded for determining which factors should, inany given case, be treated as the determining ones. The plain fact isthat in a large number of cases the Court can only perform abalancing operation, weighing up the factors which point in onedirection and balancing them against those pointing in the oppositedirection. In the nature of things it is not to-be expected that thisoperation can be performed with scientific accuracy'.'
There is nothing in the order of the President to show that he hasnot considered all the relevant factors pro and c<3n. nor in any wayfailed to evaluate the documentary evidence. On the other hand, wh^rthe Court of Appeal has done is to give undue stress to the provisionof the bilateral agreement R6 to which these workmen were notparties while ignoring the actual conduct of the 1 st respondent in itsrelations with the workmen.
I am unable to say that the President has been unreasonable eitherin the approach he had adopted or in regard to his findings on what ar£essentially questions of fact. The two other matters – the question oftermination and the computation of compensation – mentioned byMr. Fernando had not been in issue between the parties at any stageuntil it was mentioned before us. We do not think that they couW beraised at this stage.
In. the. result, I would allow this appeal with costs both here and inthe Court of Appeal and restore the order of the President, LabourTribunal. The workmen could be entitled to back wages until the dateof reinstatement or in the alternative until the date of payment ofcompensation..
I have had the benefit of reading the judgments prepared by the ChiefJustice and by Wanasundera, J., where the facts are set out.
Wanasundera, J. after discussing the manner in which the workmenhave been dealt with by the Fertilizer Corporation concludes that thefunction of the Hunupitiya Labour Society was to act as mere agentsto supply labour to.the Corporation, whilst the Corporation becamethe employer of the labour so supplied.
The Chief Justice is unable to agree that the.Society was merely an• agent, for the reason that the Society was actively enagaged inworking and'putting into practice the terms of its contract R6 with theCorporation. Implicit in the judgment of the Chief Justice is theconclusion that the Society and not the Corporation is the employer ofthese workmen.
The instant case is similar to a situation where a contractor regularlybrings labour to the employer's workplace to perform work in theregular course of the business of the employer, and the employerqjrects how the work is to be performed, and even calls upon thecontractor not to employ particular persons from among theworkforce. In that situation, my view is that there is no contract of-employment between the contractor and the workmen. This situationis different to one where a person enters into a contract with anotherto construct a building, and that other (the contractor) employs -labour.for the purpose. In that case it may not be difficult to establishthe employer-employee relationship between the contractor and theworkmen, since the employment of the workmen is on behalf of thecontractor, and not on behalf of the person with whom the contractorhas contracted to build.
On the question as to whether a contract of service exists betweenthe Corporation and the workmen, the Chief Justice takes the viewthat the evidence shows that there is no such contract, mainlybecause (a) of the absence of any agreement regarding the paymentof wages between the Corporation and the workmen, whilst there ison the other hand, an agreement between the Corporation and theSociety as embodied in document R6 ; and (t>) the overall control,especially disciplinary control, was not in the hands of the Corporation,but in the hands of the Society.
Wanasundera, J. takes the view that on the facts of this case therelationship of employer Snd employee between Vie Corporation andthe workmen has been established not only by an application of thetest of 'control', but also by the test of "integration’, that is that theworkmen were intrinsic to the working of the Corporation.
I am in agreement with the views of Wanasundera, J. The paymentof wages by the Society was only a physical act of handing over thewages in the capacity of agent of the Corporation. One has toremember that it was the Corporation, and not the Society thatdetermined the wages of each category of workers – check roll aswell as piece-rate workers. As regards control of work, even the ChiefJustice has no doubt that it was the Corporation that assigned thework, stipulated the proportions of mixing and indicated the rnode ofdistribution. What appears to have influenced the Chief Justice is thatdisciplinary control was in the hands of the Society. There is, howevera strong finding of fact by the President that 'it is absolutely clear thatthe supervision and control of the workmen were exercised not by the2nd respondent (the Society) but the 1 st respondent (theCorporation).' J cannot see sufficient reason to disturb that finding offact.
The Court of Appeal has erred, in my view, on two other matters.They are
(a) that too much reliance has been placed on the agreement R6,which was an agreement between the Corporation and theSociety, to which the workmen were hot parties. It is doubtfulwhether they were even aware of the existence of R6. Theexistence of such an agreement cannot act to their detriment ifthe facts establish a relationship of employer and employeebetween the Corporation and themselves.
b) the fact that "none of the workmen had been interviewed priorto appointment, nor was a letter of appointment given to themor the name of any person ehtered in the Corporation booksmaintained for the permanent staff'. A common law contract ofservice can yet be implied even without any or all of thesecircumstances.
For these reasons l agree to the order proposed by Wanasundera. J.Appeal allowed.