March 1, 2018

DIFC proposes New Employment Law: What does it mean for you?

The Dubai International Financial Centre Authority has published a consultation paper on replacing DIFC Law No. 4 of 2005, as amended, with DIFC Law No.6 of 2018. If enacted, the new DIFC Employment Law may come into force before the summer of 2018. This article outlines the key proposed changes.

Clyde & Co consultation

Clyde & Co is to participate in the DIFC Authority's consultation process on DIFC Law No.6 of 2018 (New DIFC Employment Law). We would therefore like to invite comments on the New DIFC Employment Law to the following email address: DIFCconsultation@clydeco.ae [1]

To ensure that your comments are taken into account when Clyde & Co considers its submission to the DIFC Authority, please send them to us by no later than 15 March 2018.

The DIFC Authority's consultation paper, together with the New DIFC Employment Law, is available here.

The key changes

We have set out below the key changes proposed by the New DIFC Employment Law.

Application of the New DIFC Employment Law

The New DIFC Employment Law will apply to:

  • short term and part-time employees (although a number of provisions are excluded from short term employees); and
  • Individuals who are determined by a Court to have "a sufficiently close connection to the DIFC for it to be appropriate to deal with any right, remedy, privilege, debt or obligation of that individual".

Probationary periods

If a probationary period is agreed between the parties it must be included in the employment contract (although there is no limit on the length of the probationary period which may be agreed).

Employee duties

An employee's duties to their employer are expressly stated to include:

  • serving their employer faithfully;
  • complying with their employer's reasonable instructions;
  • exercising reasonable skill and care in performing their duties;
  • not disclosing their employer's confidential information; and
  • not disrupting their employer's business.

Financial penalties for late payment

A penalty for late payment of remuneration and/or end of service gratuity will:

  • only be triggered if the outstanding entitlements exceed 5% of the total amount due to the employee on the termination of their employment;
  • be capped at 6 months' wages; and
  • may be reduced or waived by a Court if it considers such a penalty to be unreasonable in the circumstances including where:
    • there is an ongoing dispute in the Courts; or
    • the employer can prove that the employee is the cause for the delay in payment.

Family friendly benefits

  • Male employees with the requisite length of service may be entitled to five working days of paid paternity leave.
  • The right to take time off to attend appointments for ante-natal care is extended to expectant fathers.

Reduction of sick pay

Statutory sick pay is to be reduced to:

  • 100% of the employee's "Daily Wage" for thefirst 10 working days of sickness absence;
  • 50% of the employee's "Daily Wage" for thefollowing 20 working days of sickness absence; and
  • Unpaid for the remaining 30 days of sickness absence.

Discrimination

The anti-discrimination provisions are expanded to include:

  • discrimination based on age, pregnancy and maternity and belief;
  • an unjustified practice which has a disproportionate effect on an employee on the basis of a protected characteristic (sex, race, nationality, age etc);
  • unwanted treatment or conduct which has the purpose or effect of creating an intimidating, hostile, degrading, humiliating or offensive workplace or violates the employee's dignity;
  • the victimisation of an employee who assisted another employee in good faith to raise a discrimination; and
  • a mechanism by which employees will be entitled to request information from their employer regarding potential discrimination against them.

Any claim by an employee for discrimination must be brought within six months of the date of the alleged discriminatory act or the failure by the employer to do something (although the Court is given discretion to extend this time limit).

Courts will have the power to address any discriminatory act or omission by:

  • making a declaration as to the rights of the complainant;
  • ordering the respondent to pay compensation to the complainant; and
  • making an appropriate recommendation.

Compensation for a successful discrimination claim will be capped at:

  • the complainant's annual salary (including allowances but excluding bonuses, grants, commission or other payments which are discretionary, non-recurring or expressly agreed not to form part of an employee's wage or allowance); or
  • where an employer fails to comply with a recommendation by the Court, two years' annual salary.

Constructive dismissal

A Court may award an employee compensation of up to one year's annual salary for constructive dismissal (including allowances but excluding bonuses, grants, commission or other payments which are discretionary, non-recurring or expressly agreed not to form part of an employee's wage or allowance).

Payment in lieu of notice

  • Any employer may, at their discretion, make a payment to an employee in lieu of their notice period.
  • Where an employer makes a payment in lieu of notice, it may require the employee to not be employed by any third party for the duration of their notice period.

End of service gratuity

  • End of service gratuity will be payable to an employee even if the employee is dismissed for cause.
  • For the purposes of calculating end of service gratuity, an employee's basic wage shall not be less than 50% of the employee's salary (including allowances but excluding bonuses, grants, commission or other payments which are discretionary, non-recurring or expressly agreed not to form part of an employee's wage or allowance).

Settlement Agreements

  • In order to resolve a dispute, an employee may waive their rights under the New DIFC Employment Law by entering into a settlement agreement.
  • A Court has discretion to set aside a settlement agreement where it is found to be unreasonable in the circumstances, unless the employee has taken independent legal advice prior to entering into the settlement agreement.

Whistleblowing

A person who makes a disclosure of information in good faith and in accordance with the DIFC Companies Law shall be protected from:

  • civil or contractual liability for making the disclosure; and
  • being dismissedor subject to any action which is reasonably likely to cause detriment to that person.

Any breach of these whistleblowing obligations could result in a fine of up to US$30,000.

Contraventions of the New DIFC Employment Law

The DIFC Authority will have the ability to impose fines or penalties of up to US$ 10,000 for breaches of the New DIFC Employment Law (although this will not limit the rights of employers or employees to enforce any rights, remedies, privileges, claims or actions).

Secondment

The concept of employees on "secondment" is introduced, although further clarity is to be provided by secondary employment legislation.

[1] Although we will consider all the comments we receive when providing our input to the DIFC Authority, we will not attribute any comments to a specific sender without the prior written consent of that sender.