A genuine fixed-term employment contract in Sri Lanka ordinarily ends when its agreed period expires; non-renewal alone is not employer termination. In U.L. Jaufer v Foster Parents Plan International and Others, SC/Appeal/18/2012, decided on 24 September 2026, the Supreme Court affirmed this distinction while recognising that exceptional circumstances, supported by cogent evidence, may justify a different conclusion.
The judgment provides important clarity for employers in Sri Lanka by recognizing the legitimate role of a FTC. It affirms that the commercial purpose and legal validity of FTCs will be recognized by Court, provided the contractual arrangement is genuine and not a device to circumvent statutory protections of employees.
Our own Jivan Goonetilleke with Delan De Silva acted as Counsel for the Respondent Employer in the matter, in whose favour the Appeal was decided.
What Happened in U.L. Jaufer v Foster Parents Plan International?
The Appellant was employed as a permanent Employee of the Respondent under a Permanent Contract of Employment. Following his resignation, he was offered to work with the Respondent under 2 successive FTCs. When the 2nd FTC expired on 31 January 1998, it was not renewed by the Respondent which therefore ceased the Appellant’s employment with the Respondent.
The Appellant claimed that his services had been wrongfully terminated, alleging that his resignation had been forced and that the subsequent contracts disguised a continuing permanent employment relationship. He also argued that the surrounding documents showed an intention to employ him beyond the expiry of the FTC.
The Labour Tribunal dismissed his Application, finding that employment had ended through expiry of the FTC. The Provincial High Court affirmed that decision. The Supreme Court dismissed the Appeal, upholding this decision.
Is Fixed-Term Contract Expiry the Same as Termination?
In arriving at its findings, the Supreme Court distinguished permanent employment from that of a genuine FTC.
In an ordinary contract of indefinite duration, continuity is the governing principle and termination ordinarily requires a positive act by the employer. Whereas a genuine FTC is entered into for a specified period, with a mutual understanding that employment will end by effluxion of time, unless the parties mutually agree to renew or extend it.
The Supreme Court recognized that in the present day and age, with complex economic conditions and evolving labour markets, employers, particularly companies and organizations which are engaged in project-based, donor-funded, seasonal and/or other time-bound operations, may have legitimate commercial and operational reasons for engaging employees on FTCs. The Court held that due recognition to such commercial/operational reasons and arrangements must be given by exercising caution before rewriting a bargain voluntarily entered by the parties.
Exceptional Circumstances to be Established by Employee to Rebut Sanctity of FTC
The Court explained the exceptions to the general rule set out above. Consistent renewals or extensions of FTCs without a break in service over a prolonged period may, depending on circumstances of each case, create an implied promise, legitimate expectation or mutual understanding that one’s employment is regular, and will continue indefinitely. Exceptional cases may arise where successive FTCs are used to deprive an employee of their protections under labour laws, or where refusal to renew FTCs amounts to unfair labour practices which are gravely prejudicial to the rights of an employee. In such circumstances, non-renewal of FTCs may constitute termination of employment despite formal expiry of the FTC. However, such exceptional circumstances are to the established by cogent evidence. The Court proceeded to hold that the burden rests on the employee to demonstrate that the surrounding facts justify lifting the veil of the written contract and treating the employment relationship as one of continuing service. Mere dissatisfaction with the non-renewal of a FTC, or the existence of successive contracts without more, is insufficient to attract such a conclusion.
Significance of the Judgement in relation to the Law on FTCs
- Upholds the sanctity of genuine and legitimate FTCs and the principle that they automatically expire on the effluxion of time at the expiry of the FTC period.
- Grants integrity and confidence to non-profit project-based, donor-funded entities engaging FTC staff.
- Shifts burden onto employee to rebut genuineness/legitimacy of FTC by cogent evidence.
