Sri Lanka

In Sri Lanka, employment law recognizes a variety of employment agreements, each with unique characteristics and legal implications. These distinctions are crucial for both employers and employees to understand.

Indefinite Employment Contracts

Indefinite Employment Contracts are the most common type of employment agreement in Sri Lanka. These contracts do not have a pre-defined end date for employment. Employees under such contracts are entitled to benefits and protections under Sri Lankan labor laws, including the Termination of Employment Act No. 19 of 2006.

Fixed-Term Contracts

Fixed-Term Contracts are employment agreements that specify a predetermined duration for employment. The maximum duration for a fixed-term contract is five years, after which it is considered an indefinite contract.

Casual and Seasonal Employees

In addition to formal contracts, Sri Lanka recognizes other employment arrangements. Casual Employees are engaged for short-term, specific tasks without any guarantee of continued work. Seasonal Employees, on the other hand, are employed for a particular season and may be re-hired for subsequent seasons.

Apprenticeship Agreements

Apprenticeship Agreements are specialized agreements for vocational training. Apprentices may not be considered regular employees under the law. These agreements are designed to provide practical experience in a specific field or trade.

Employment agreements in Sri Lanka are designed to provide a fair and supportive workplace. They are crucial for ensuring clarity and protection for both employers and employees.

Basic Employment Details

The agreement should outline the job title, location, and start date of employment. It should also clearly define the employee's duties and responsibilities.

Remuneration and Benefits

The agreement should specify the base salary amount, payment frequency, and any allowances. It should detail any performance-based bonuses or commission structures. It should also outline any benefits offered, such as health insurance, paid leave, and any social security contributions the employer makes.

Working Hours and Leave

The agreement should define the standard workweek, including daily hours and any overtime policies. It should specify the minimum legal requirements for paid annual leave, sick leave, and any additional leave offered by the company.

Termination

The agreement should outline the grounds for termination by both employer and employee, with specific reference to notice periods required by law or the contract. While not mandated by law, consider including details on severance pay calculations if applicable.

Confidentiality and Intellectual Property

The agreement should protect sensitive business information by outlining what constitutes confidential information and employee obligations regarding its use and disclosure. It should also specify ownership of any intellectual property created by the employee during the course of employment.

Dispute Resolution

The agreement should establish the legal framework applicable to the contract and the designated forum for resolving disputes.

Probationary periods are a common feature in employment agreements in Sri Lanka, serving as a trial period for both the employer and the employee to assess suitability for the role. However, Sri Lanka's legal framework regarding probationary periods is not explicitly defined.

Absence of Statutory Limits

Sri Lankan labor law lacks specific regulations on the maximum duration of a probationary period. This means the length is determined by agreement between the employer and employee within the contract.

Common Practices

In practice, a probation period of six months is generally considered the norm. However, some variations exist, with some employers opting for shorter periods or extending them up to a year for managerial or technical roles, with a maximum extension of three months.

Shop and Office Employees Act

This act mandates employers to clearly outline the probation period, its conditions, and the circumstances under which termination can occur during this time frame.

Employment of Trainees (Private sector) Act

This act allows employers and trainees to establish training contracts lasting up to a year, which can be seen as an extended probationary period with a focus on skill development.

Termination During Probation

While probation serves as an assessment period, termination during this time should not be arbitrary. Employers are expected to act in good faith and provide reasonable notice.

Additional Considerations

The probationary period should be clearly defined within the employment contract to avoid any ambiguity. Both employers and employees should utilize the probation period for effective evaluation and communication to ensure a smooth transition into permanent employment.

In Sri Lankan employment agreements, confidentiality and non-compete clauses are often incorporated to safeguard an employer's legitimate business interests.

Confidentiality Clauses

Confidentiality clauses are designed to protect an employer's confidential information, which can include trade secrets, customer lists, and proprietary data. Employees are expected to uphold the confidentiality of this information both during their employment and, in some instances, after their employment has ended.

The legal system in Sri Lanka supports the enforceability of confidentiality clauses, even in the absence of specific legislation. This is because these clauses are seen as an implicit part of the duty of good faith that exists between an employer and an employee.

Non-Compete Clauses

Non-compete clauses limit an employee's ability to work for a competitor or engage in similar business activities after their employment has been terminated. The aim of these clauses is to protect the employer's customer base and confidential information.

Reasonableness is Key

Non-compete clauses that are considered reasonable are generally enforced by Sri Lankan courts. This means that the restrictions placed on the employee should not be overly broad in terms of:

• Duration: The period during which the employee is restricted from competing should be limited and proportionate to the employer's legitimate interests.
• Geographic Scope: The geographic area covered by the non-compete clause should be reasonable and relevant to the employer's business operations.
• Nature of Restriction: The clause should not prevent the employee from using their general skills and experience in a new role, even if it's within a similar industry.

Balancing Interests

When assessing the reasonableness of a non-compete clause, Sri Lankan courts take into account the following factors:

• The employee's level of expertise and access to confidential information
• The employer's legitimate business interests
• The employee's right to earn a livelihood

Compensation for Post-Termination Restrictions

Non-compete clauses that restrict an employee's activities after their employment has been terminated typically necessitate compensation from the employer. This compensation recognises the limitation placed on the employee's ability to find new employment.