SL Airlines Limited vs SL Airlines Aircraft Technicians Association
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SL Airlines Limited vs SL Airlines Aircraft Technicians Association

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Sri Lanka Airlines Limited vs. Sri Lanka Airlines Aircrafts Technicians Association et al, SC Appeal 79/2013

In the matter of an Appeal from the Judgment of the Court of Appeal



This is an Industrial Dispute which arose between the Sri Lankan Airlines Aircraft Technicians Association (“SLAATA Technicians”) and the Sri Lankan Airlines Ltd. (the “Employer”). From its inception, the Employer paid their employees (which includes SLAATA Technicians) for an extra month for each financial year which was referred to as the ‘13th-month incentive bonus’ (the “Bonus”). In January 1999, SLA entered into a Collective Agreement (the “Agreement”) setting out the terms and conditions of employment of aircraft technicians. Clause 13 of the Agreement stated that “A 13th-month incentive bonus may be payable each year in the end-December payroll as per the rules and regulations that are announced each year at the sole discretion of the management of the company to all employees” [Emphasis added]. In 2001, the SLAATA Technicians complained to the Commissioner of Labour that the Employer failed to pay the Bonus to the SLAATA Technicians. Failing to come to a settlement, the Commissioner referred the dispute to an Arbitrator.

The Employer took the position that due to the terrorist attacks that took place at the Katunayake Airport which destroyed a fleet of aircrafts and caused damage to the company as well as the impact that the US 9/11 attacks had on the number of people who traveled via airplanes, the Employer company faced financial difficulties. The Employer contended that it was left to the discretion of the Employer to decide whether to grant the Bonus or not and the reason for the non-payment was due to the aforesaid difficulties SLA was facing in 2001. However, the SLAATA Technicians argued that the staff worked an additional 168 hours per year which amounts to the 13th month of work, and therefore, they are entitled to receive the Bonus as payment for the worked month. The SLAATA Technicians also took the position that the Bonus now forms a customary payment from the Employer to SLAATA as this payment has been made continuously for a period of 20 years. It is also the position of the SLAATA Technicians that the Employer had not used their discretion reasonably and had acted ‘unjustly’.

The Arbitrator made an award in favour of the SLAATA Technicians directing the Employer to pay the Bonus. The Employer then applied to the Court of Appeal to issue an order in the nature of a affirmed the award of the Arbitrator. Thereafter, the Employer applied to the Supreme Court to set aside the judgment of the Court of Appeal.



S. Eva Wanasundera PCJ took the position that an Arbitrator is required to consider all the evidence before him and the facts of the case as a whole and thereafter make a decision based on his findings. The Court further stated that,

which appears to him to be just and equitable”. Parties are at liberty to point at the terms of the contract which are obvious on the first reading of the clauses of the Collective Agreement but the Arbitrator is not tied down and fettered by the terms contained therein.”

Justice Wanasundera noted that the SLAATA Technicians worked throughout the calendar year including weekends and public holidays amounting to 13 ‘lunar’ months within the year. Therefore, they have worked for an additional period of one month every year thus, justifying the payment of the Bonus on account of the extra work done by them. On page 11 of the judgment, Justice Wanasundera stated that,

Even though Clause 13.1 of the Collective Agreement reads as ‘at the sole discretion of the Management of the Company’, the just and reasonable interpretation of the use of discretion of the employer should be in favour of the employee.

The Judge further stated that although the Employer was not in a position to pay the SLAATA Technicians in December 2001, this payment was due to the SLAATA Technicians on account of work done in April 2001 and the said payment was ‘put off’ as a matter of practice.

The Court cited the case of Sharp Vs Wakefield 1891, AC 173 by Halsbury L.C., where the Court held that,

Discretion means… something is to be done according to the rules of reason and justice not according to private opinion… And it must be exercised within the limit to which an honest man competent to discharge of his office ought to confine himself

Based on the aforesaid, Justice Wanasundera found that the Employer had not used the alleged discretion contained in Clause 13.1 of the Agreement properly as they had failed to consider that “the payment did not arise after the economic downfall during the period it was due” and further stated that the SLAATA Technicians “cannot afford to lose a right to the payment” which was earned prior to that event.

Therefore, the Court was of the opinion that the Court of Appeal had correctly affirmed the award of the Arbitrator and dismissed this Appeal.