The Common Law does not recognize the grant of remedies, which has the effect of specific performance. However, In Extraordinary situations the Common Law has recognized the possibility of an employee securing an order of court restoring him to that status.
The Industrial Dispute Act (IDA) 1950 provides employee to make applications relating to unjust dismissals to Labour Tribunals set up under the IDA, which are empowered to order reinstatement with back wages or compensation in lieu of reinstatement and back wages , in any quantum it deems “just and equitable” in the circumstances. Compensation means a sum of money to compensate for a wrong done.
The Tribunal must make an order in equity and good conscience, acting judicially, based on legal evidence rather than on beliefs that are fanciful or irrational imaginations or whims. Due account must be taken of the evidence in relation to the issues in the matter before the tribunal in order to prevent the order being set aside as perverse.
Industrial Dispute Act was not enacted only to consider the rights of the employee and that if the tribunal only considers the rights of the employee and fails to consider the rights of the employer, the court would be committing a grave injustice.
Labour Courts specifically empowered to award the relief of Reinstatement and it may be awarded only where a termination is illegal and unjustified.
Availability of Compensation as a relief
Circumstances where the termination of service is found to be unjustified, the employee is, as a rule entitled to reinstatement under S33(1)(b) of the IDA. Under S33(3) of the IDA an order for payment of compensation could be given as an alternative to reinstatement if employment is in the capacity of Personal Secretary, Personal Clerk, Personal attendant or chauffer or domestic servant to the employer.
According to S33(6) of the Industrial Dispute Act the Court is empowered in appropriate cases to order compensation as an alternative to reinstatement, apart from cases where a court is bound to make an order for compensation in lieu of reinstatement.
Many Judicial Precedents have stated that the normal rule should be reinstatement. In Ennore Foundries LTd v Manager of Ennore- Foundries Ltd[1] held that the normal relief in unjustified dismissal is reinstatement and compensation in lieu of reinstatement is awarded only in exceptional circumstances, which would make it just and equitable to order such relief. In the case of Strathedon Tea Company Ltd V Selvadurai[2]held that an order for compensation could not be made except as an alternative to reinstatement. In Sri Lanka the remedy of reinstatement is a well-recognized principle of industrial law and compensation is contemplated by the Legislature as an alternative to reinstatement[3]. Therefore, there is no rule of law which binds a court to award reinstatement in circumstances where the termination is wrongful. Although Under S33(6) of the IDA, a Labour Tribunal can order an employee to be reinstated in service and as an alternative to his reinstatement payment of compensation to the employee in Stanley Perera v Yoosufsali[4] held it has no power to order the payment of compensation without a decision as to reinstatement. The same principle was affirmed in Taos Ltd v Fernando[5]
Compensation is awarded either under S33(5), where an employee requests compensation instead of reinstatement or under S33(1)(d) of the Industrial Disputes Act, for loss suffered by the employee for wrong done by the employer. However, Compensation in certain circumstances be awarded even where termination is justified. Sharvananda J held that a labour Tribunal is entitled to grant compensation for loss of career if it thinks such relief is just and equitable in the circumstances[6].
Relief of Compensation is not an alternative to reinstatement but is available even where reinstatement is not possible.[7]
Order for payment of compensation in lieu of reinstatement can be substituted if reinstatement has become unfeasible due to the closure of the business or by reason employee has reached the age of retirement.
Compensation could be awarded if an employee was working in an industry where fresh employment would be difficult to obtain.[9] In Delmage Forsyth & Company Ltd v Mrs Panawala[10] held that rarely compensation is granted where the termination of services on disciplinary ground is justified.
The facts did not warrant the award of compensation to the Employee
Prior making an order that is just and equitable as provided for S31C of the IDA, it was held in United Industrial Local Government and General Workers Union v Independent Newspapers Ltd[12] where reinstatement may be one of the reliefs, the question whether it is fit case for an order for compensation to be made as an alternative to reinstatement.
Quantum
The Labour Tribunal does not lay down any rules for the computation of compensation, even though the Industrial Dispute Act confers Labour Tribunal to award compensation. Wide discretion is given to the Labour Tribunal in regard to compensation. In Ceylon Transport Board V Wijerathne held that it is undesirable to enclose the wide discretion within narrow and rigid limits and the exercise of the discretion depends on the circumstances of each individual case. The failure of the Tribunal to consider the basis of computation in awarding the sum amounts to a question of law.
Even Though the Industrial Act confers the Labour Tribunals to award compensations in appropriate circumstances, the Act does not lay down the basis for the computation of compensation. The Quantum of compensation should be determined in order to ensure that the order is just and equitable. It has to be decided judicially with reference to relevant norms and should not be made arbitrally or by the application of a subjective test. Parliament did not indicate any guidelines as to the quantum of compensation except under section 31(c), the order of the Labour Tribunal shall be “just and equitable”
Various factors have been taken in to scrutiny in the assessment of compensation. Labour Tribunal to award compensation to the employee on the basis of his past service, in lieu of reinstatement. The Labour Tribunal should consider the nature of employer’s business, the employee’s age, the nature of his employment, length of service, seniority, present salary, future prospects, opportunities for obtaining similar alternative employment, manner of the dismissal, including the nature of the charge level against the workman, the extent to which the employee’s actions were blameworthy and the effect of the dismissal on future pension rights. Consideration should also give to any sums paid or actually earned or which should have been earned since dismissal took place. However, In the case of Ceylon Transport Board V Wijerathne it was held that compensation should not be mechanically calculated on the basis of the salary the employee would have earned till he reached the age of retirement and should never exceed a maximum of three years’ salary. Manner of dismissal is relevant in considering the employee’s loss as it may be tied to pecuniary loss.
An employee may normally expect to continue to work until his retirement. However, it cannot be claimed as a matter of right. In Shetty v Bharat Nidhi Ltd decided that employee may die, or he may lose his employment on account of misconduct, redundancy or closure of the business. Therefore, it is only an expectation and it would not be just or equitable to compensate the employee on the basis that he would have continued until he retired. Vythialingam J pointed out that the monetary value of an employee’s balance work span” has to be taken in to account as Sirimanne J. did in Raymond’s case and not that the compensation must be the amount so determined.” Sirimanne J in Raymond v Ponnusamy pointed out that compensation should be calculated on the basis of the balance work span left of the workman concerned and ability to secure alternative employment. However, In the Grandpass Maternity and Nursing Home Ltd V Jayasuriya held that where an employee, wrongfully dismissed is entitled to compensation for the full span of his working life.
The Labour Tribunal should compensate the employee for the damages he has suffered due to the loss of his employment and legitimate expectations for the future in the employment, the injury caused to his reputation in the prejudicing of further employment opportunities.The amount earned by an employee after a dismissal is removable from the compensation due to the employee.[24]In Ceylon Ceramic Corporation V Weerasinghe Supreme Court accepted one month’s salary for each year of service as compensation was accepted. On the contrary in Governing Body for educational Instititution v Thuragasingham 5 years’ salary as compensation was held to be just and equitable as the employee was in a retirement stage.
In All Ceylon Commercial & Industrial Workers’ Union V Weerakon Bros in assessing compensation The Arbitrator considered the following factors;
- In the case of two employees they could not, in the ordinary course , expect more than two years of work, in the type of employment they were engaged in,
- Certain other employees could expect about 10 to 15 years of work in the type of employment they were engaged in
- Considering their nature of work and the measures taken by the Government to reduce the level of unemployment , the problem of finding alternative employment would not be attended with much difficulty
- They bore a good record of service.
Jayasuriya v Sri Lanka State Plantations Corporations enumerated factors to be considered in assessing compensation under three headings. Namely: (a) An approximate computation of immediate loss ie: loss of wages and benefits from the day of dismissal to final order, (b) Prospective future loss not to be viewed as continuing damages,(c) Loss of retirement benefits. However, the burden is on the employee to adduce evidence to the Labour Tribunal to calculate the loss. There must be a stated basis for the computation to take the award beyond the realm of mere assurance of fairness. Compensation should be calculated on the basis of financial loss and not on sentimental harm.
Past earnings and benefits must be multiplied by the period from the date of the final order or Judgment. The multiplier could be fixed with reference to the question for how many days, weeks, months or years from the date of the order or Judgment. In determining compensation, Labour Tribunal must weigh together all the evidence and probabilities in the case and must form an opinion of the nature and extent of the loss and should arrive in the end an amount that a sensible person would not regard as means extravagant but would rather consider to be just and equitable in the circumstances of the case.
Limitation
In some instances, where the Termination of an employee’s service is not unlawful and justified, a Labour Tribunal has no power to order the Employer to pay, Ex Gratia, a sum of money as compensation for the employee’s loss of career. [31]Where the dismissal of an employee who has caused continuing loss to the employer is justified, no compensation can be awarded.[32] Casual employees are not entitled to reinstatement and hence not entitled to compensation in lieu of reinstatement.[33] If the employees conduct had induced the termination, he cannot in justice and equity have a just claim for compensation.[34] Industrial law does not compensate for pain of mind and humiliation. If compensation is to be awarded on compassionate grounds, employee has to go before another forum.[35]
In certain circumstances employee is not entitled to compensation even though his termination is justified.[36].However, in Rumblan V The Ceylon Press Workers Union [37]stated that no compensation can be awarded where the dismissal is justified. Furthermore in the Caledonian (Ceylon) Tea and Rubber Estates Ltd v Hillman[38] held that compensation can only be paid in situations where a justified termination is on grounds other than misconduct. The Tribunal must not try to place the employee in clover by awarding compensation at the expense of the employer as that was never the intention of the legislature when the Industrial Disputes Act was enacted.[39]
Alexander V Gnanam[40] laid down three situations that does not warrant compensation. Namely; (a) The Termination of employment is justified, (b) The termination is so justified, not with reference to a single incident but with regard to a series of lapses over a span of a period of nearly seven years, (c)The Employee’s conduct was contemptuous of the management and fell far short of the expected standard. In circumstances where the termination has caused no loss to the employee no compensation is awarded.[41]An employer who is willing to reinstate an employee who has been wrongfully dismissed cannot be ordered to pay compensation in lieu of reinstatement in circumstances where an employee is not willing to accept the offer.[42] An employee who accepted a month’s salary in lieu of notice was precluded from claiming compensation. [43]
Reforms with regard to Remedies
S33(5) of the Industrial Dispute Act entitles a tribunal to award compensation in lieu of reinstatement where the employee so requests it. However, it does not indicate other circumstances such as when employee does not request, a tribunal to award compensation rather than awarding reinstatement. Act should demonstrate clear circumstances where compensation could be awarded instead of reinstatement.
An award of re-engagement in lieu of reinstatement should be considered if reinstatement has become demonstrably impractical, before awarding compensation considering the nature of the Employer’s business. An order for re-engagement is an order requiring the employer to re-engage the employee in an employment on terms comparable to his original terms of employment or in other suitable employment. An order for re-engagement can be varied by the Labour Tribunal on an application by the employee and with the agreement of the parties concerned to the effect that engagement of the employee by a successor or an associated company of the original employer to be treated as re-engagement by the original employer in compliance with re-engagement order. Where an employee is ordered to be re-engaged his rights and privileges, including seniority and pension rights must be restored to him.
The Industrial Dispute Act does not lay down any basis for computation thus granting a wide discretion to the Labour Tribunal Presidents. In assessing compensation for a person who has been unfairly dismissed, The Industrial Disputes Act should incorporate a basic award, which is a fixed sum calculated according to a formula and a compensatory award, which is to compensate the employee for the actual money the employee has lost as a result of losing his job. In awarding compensation, Employment Tribunals in the United Kingdom utilize basic award and compensatory award. Moreover, it has been held in India that compensation for wrongful termination should exceed the amount an employee would receive in a proper case of retrenchment.
