June 13, 2019

The new DIFC Employment Law - What does that mean for you?

Clyde & Co is pleased to announce that it has advised the Dubai International Financial Centre Authority on DIFC Law No. 2 of 2019 (the New DIFC Employment Law), which will come into force on 28 August 2019.

Employers who fail to prepare for the changes introduced by the New DIFC Employment Law are exposing themselves to fines and other potential liabilities.

A consultation paper on replacing DIFC Law No. 4 of 2005, as amended, was announced in March 2018. However, the New DIFC Employment Law contains significant amendments to the draft law which was issued as part of the initial consultation.

Employers who fail to prepare for the changes introduced by the New DIFC Employment Law are exposing themselves to fines and other potential liabilities.

Having advised the DIFC Authority on the New DIFC Employment Law, Clyde & Co is uniquely placed to assist employers with preparing for its introduction. To this end, Clyde & Co is offering a number of packages to employers - to obtain a menu of options, please get in touch with your usual contact in Clyde & Co's employment team.

Summary of the key changes

Application of the New DIFC Employment Law

  • The New DIFC Employment Law will apply to Short-Term Employees1 and Part-time Employees (although a number of provisions will not apply short-term employees).

Secondment

  • An Employee will be permitted to work for an Employer in the DIFC on the basis of a Secondment, provided the Employee obtains and holds a valid secondment card from the DIFC Authority.
  • Specific provisions of the New DIFC Employment Law will not apply to Employees working in the DIFC on the basis of a Secondment.

Financial penalties for late payment

A penalty for late payment of Remuneration or a Gratuity Payment will:

  • only be triggered if the amount due and not paid to an Employee is held by a Court to be in excess of an Employee's Weekly Wage;
  • be capped at six months' Daily Wage (as a result of a new six month limitation period); and
  • be waived by a Court in respect of any period during which:
    • a dispute is pending in the Courts; or
    • the Employee's unreasonable conduct is the material cause of the Employee failing to receive the amount due from the Employer.

Discrimination

  • The anti-discrimination provisions are expanded to include:
    • discrimination based on age, pregnancy and maternity;
    • a provision, criterion or practice which is discriminatory in relation to one of the prohibited grounds (e.g. sex, race, nationality, age etc);
    • harassment – i.e. unwanted treatment or conduct related to one of the prohibited grounds which has the purpose or effect of creating an intimidating, hostile, degrading, humiliating or offensive workplace or violates the Employee's dignity; and
    • victimisation of an Employee who does a protected act (e.g. makes an allegation of, or brings a claim for, discrimination).
    • Unlike the initial draft law, the New DIFC Employment Law does not contain a statutory right for Employees to request information from their Employer regarding potential discrimination against them.
    • Any claim by an Employee for discrimination must be bought 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).
    • Employers will be liable for any act of discrimination by an Employee done in the course of their employment unless the Employer can show it took such steps as were reasonably practicable to prevent the Employee from carrying out that act or doing anything of that description.
    • Courts will have the power to address any discriminatory act or omission by ordering the respondent to pay compensation of an amount up to the complainant's Annual Wage.

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 paid time off to attend appointments for ante-natal care is extended to expectant fathers.
  • Female Employees returning to work from Maternity Leave will be entitled to nursing breaks.

Probationary periods

  • Probationary periods of up to six months are specifically permitted provided they are included in an Employee's Employment Contract.

Sick pay

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.

Notice of termination

  • Employers and Employees will not be permitted to agree notice periods in indefinite term Employment Contracts which are less than the notice periods prescribed by the DIFC Employment Law.
  • The minimum notice periods will not apply during an Employee's probationary period or where it has been agreed that an Employee's employment will terminate on the expiry of a fixed term Employment Contract.
  • Employers will only be allowed to make a payment in lieu of notice if an Employee agrees to the payment in a settlement agreement.
  • Employers will be entitled to place an Employee on garden leave for all or part of their notice period.

End of service gratuity / pension

  • A Gratuity Payment will be payable to an Employee even if the Employee is dismissed for cause.
  • For the purposes of calculating a Gratuity Payment, an Employee's Basic Wage must not be less than 50% of the Employee's Annual Wage (including an Employee's Allowance 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).
  • Employees may choose to receive pension contributions into a non-UAE retirement fund (or substantially similar scheme) instead of receiving a Gratuity Payment, provided the aggregate contributions made by an Employer are not less than the Gratuity Payment the Employee would have been entitled to receive.

Settlement agreements

  • An Employer and Employee may enter into a settlement agreement to terminate the Employee's employment or to resolve a dispute. The Employee will be required to confirm in the settlement agreement that they have been given an opportunity to take legal advice from a lawyer registered with the DIFC Academy of Law on the terms and effect of entering into the settlement agreement.

Other

  • The New DIFC Employment Law contains a six month limitation period for Employees to bring claims.
  • The DIFC Authority will have the ability to impose fines or penalties for various breaches of the New DIFC Employment Law.

1 Any defined terms which are not defined in this article shall have the meanings ascribed to them in the New DIFC Employment Law.

 

To view of our short video series highlighting some of the key enhancements of the new Employment Law, click on the links below: 

  • Termination of Employment:

  • Atypical Working:

  • Penalties: