Out-Law / Your Daily Need-To-Know

The new DIFC employment law: everything you need to know

Out-Law Analysis | 10 Jul 2019 | 3:19 pm | 7 min. read

The new Dubai International Financial Centre (DIFC) Employment Law (DIFC Law No. 2 of 2019) (New Law) is a welcome overhaul of the previous employment provisions in the free zone and brings the DIFC employment regime further into line with international best practice.

Of particular significance are the re-drafted anti-discrimination provisions, which will ensure that remedies are now available for discriminatory acts. The new parental leave provisions will ensure a more equal footing between parents similar to other international jurisdictions, reflecting the UAE government's wider aims of boosting gender equality by 2021.

The New Law (37-page / 767KB PDF) has now been published, and will come into force on 28 August 2019. DIFC employers should familiarise themselves with the new provisions of the law and ensure that their employment contracts, policies and business practices are in line with the new regime.

Scope of the New Law

The New Law extends the application of the DIFC's employment law to short-term employees and part-time employees, with regards to certain provisions.

The draft law published for consultation last year contained provisions extending the scope of the law to cover individuals with a 'close connection' to the DIFC. However, this was ultimately not included in the New Law.

Waiving statutory rights

Employers may now enter into settlement agreements with employees on the termination of their employment or regarding a dispute, in which the employee agrees to waive their entitlement to raise claims under the New Law. For the settlement agreement to be valid, the employee must confirm in writing that they have been provided with the opportunity to seek legal advice on the terms and effects of the settlement agreement from a registered DIFC lawyer.

Andrea Hewitt-Sims

Associate

The new parental leave provisions will ensure a more equal footing between parents similar to other international jurisdictions, reflecting the UAE government's wider aims of boosting gender equality by 2021.

The consultation draft expressly provided for the DIFC court to be able to set aside settlement agreement which it found to be "unreasonable". This provision has not been included in the New Law, which is positive news for DIFC employers.

'Article 18' penalty

The 'article 18' penalty provision for unpaid wages on termination of employment under the old law has been updated. Article 19 of the New Law introduces the following changes:

  • trigger - the penalty will only be triggered when the amount due and not paid to the employee is in excess of the weekly wage (basic salary and allowances excluding bonuses, grants and/or commission payments);
  • reductions – the penalty may be reduced if the court considers it reasonable to do so; and
  • cap – there is no express cap of six months' wages, as proposed in the consultation draft. However, the penalty will stop accruing once a complaint is issued to the court. As the limitation period is now reduced to six months, the effect is that the majority of penalty claims will be limited to under six months.

These provisions are a welcome reform of the position under the old law, which created an unlimited financial sanction if all employment liabilities were not paid within 14 days of termination of employment. In practice, this was a rather onerous provision and DIFC employers will benefit from the changes in the New Law and the certainty they bring.

Annual leave and sick leave

The New Law has reduced the amount of accrued but untaken annual leave an employee is able to carry forward from 20 to five working days.

Minimum sick pay has been reduced under the New Law to:

  • full pay for the first 10 working days' absence;
  • half pay for the next 20 working days' absence; and
  • no pay for any remaining sickness absence in a 12 month period.

Parental leave

The New Law has added a number of new provisions relating to parental leave:

  • ·nursing breaks – mothers returning to work after maternity leave are now entitled to nursing breaks of at least one hour in aggregate during the work day for a period of six months, which is similar to benefits offered to employees elsewhere in Dubai;
  • paid time off for fathers – rights for fathers have been enhanced under the New Law with the right to take paid time off to attend ante-natal appointments now included for fathers;
  • paternity leave – additionally, fathers with at least 12 months service with their employer are entitled to paternity leave of up to five working days. This is applicable for adoptions as well as biological children.

The consultation draft provided that a breach of the right to work provisions following parental leave carried with it an inference of discrimination, and the burden of proof would be on the employer to disprove. That clause has not been included in the New Law.

Anti-discrimination

The New Law has widened the remit of the previous anti-discrimination provisions to include the following:

  • new protected characteristics – age, pregnancy and maternity;
  • new definition of discrimination to include application of a 'provision, criterion or practice' in a discriminatory manner to one of the protected characteristics;
  • new ground of harassment – occurs if an employer 'engages in unwanted treatment or conduct related to one of the protected characteristics, and which has the purpose or effect of creating an intimidating, hostile, degrading, humiliating or offensive workplace for an employee or violating an employee's dignity;
  • new ground of victimisation – an employer may not subject an employee to a detriment for committing a 'protected act', such as claiming or alleging that the employer has committed an act of discrimination;
  • penalty of up to one year of the employee's annual gross salary added; and
  • time limit – claims for discrimination must be brought within six months of the discriminatory act occurring.

The additions to the New Law significantly improve the anti-discrimination provisions in the previous law, in particular by setting out a specific compensation remedy for employees. However, it is interesting to note that some of the changes proposed in the consultation draft were omitted; including enabling the court to address any discriminatory act by making a declaration as to the rights of the employee or a recommendation, or by requesting information from the employer about potential discrimination against the employee.

End of service gratuity

The New Law provides for payment of the end of service gratuity to all employees, even in circumstances where termination of employment was for cause (i.e. gross misconduct). This was proposed in the consultation draft and is based on the rationale that the end of service gratuity stands in place of employer contributions to a pension. It would therefore be unfair to deprive employees of this, regardless of the reason for termination.

Further provisions have been included in the New Law to ensure that the breakdown of the employee's salary meets particular thresholds. Basic pay must comprise at least 50% of the employee's gross salary. This will prevent employers from reducing the end of service gratuity by fixing the basic pay at an artificially low level.

DIFC employees may now also opt to receive pension contributions as an alternative to the end of service gratuity, provided the pension contributions are not less than the value of the gratuity the employee would otherwise have received.

Whistleblowing

The consultation draft contained provisions relating to whistleblowing which would have protected employees from civil or contractual liability or suffering any detriment or dismissal for disclosing information in good faith and in accordance with the DIFC Companies Law. These provisions were not included in the New Law, so there are currently no whistleblowing protections for employees in the DIFC employment laws. However, employers should still be aware of the whistleblowing provisions that apply to them under the DIFC Operating Law.

Constructive dismissal

Although proposed in the consultation draft, the New Law does not contain any provisions on constructive dismissal. The position remains as under the previous law: there is no option for the court to award compensation as a standalone claim in circumstances where an employee terminates their own employment, regardless of the reason for this.

Tapp Luke

Luke Tapp

Partner

The penalty provisions are a welcome reform of the position under the old law, which created an unlimited financial sanction if all employment liabilities were not paid within 14 days of termination of employment. In practice, this was a rather onerous provision and DIFC employers will benefit from the changes in the New Law and the certainty they bring.

However, depending on the circumstances leading to the resignation, employees could issue a claim for a discriminatory act under the New Law.

Other differences between the New Law and the previous law

The minimum working age has increased from 15 to 16 years old.

Payroll records must be retained by employers for a minimum of six years, rather than two years as under the previous law.

The concept of 'secondments' is now expressly recognised under the New Law. A specific secondment card must be procured from the DIFC Authority and maintained, in order to legitimise and validate the secondment arrangements. However, specific provisions of the New Law do not apply to seconded employees.

Other differences between the New Law and the consultation draft

The proposed schedule of compensation to be awarded for injuries has not been included in the New Law. The provisions now state that the court will determine damages up to a cap of two years' gross salary.

Provisions in the consultation draft which granted employees time off to look for work after receiving notice of termination have not been included in the New Law.

The consultation draft allowed an employer to waive the notice period and make a payment of wages in lieu of notice. This has been included in the New Law; however, it appears to state that payment of wages in lieu of notice will only be allowed if agreed to as part of a settlement agreement.

The consultation draft provided that if an employee terminates their employment within the initial six months of employment, the employer may recoup reasonable costs and expenses. The New Law has added that any recoverable costs must be specified as being payable in the employment contract.

Luke Tapp and Andrea Hewitt-Sims are Dubai-based employment law experts at Pinsent Masons, the law firm behind Out-Law.