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17 July 2019
The new Dubai International Financial Centre (DIFC) Employment Law (DIFC Law 2/2019) has now been published and will come into force on 28 August 2019. This article discusses what this means for employers in the DIFC and the impact of the key changes being introduced.
The new law has been introduced following the consultation process which took place in 2018, following the issue of the draft new law (DIFC Law 8/2018) (for further details please see "DIFC authority proposes sweeping changes to Employment Law"). During the consultation stage, the DIFC Authority considered comments and discussion from legal practitioners in the DIFC on the draft law. The new law is the much-awaited product of these discussions.
The new law contains significant amendments to the old DIFC Employment Law (DIFC Law 5/2004) and there have been revisions to the draft law.
The new law extends the application of the law to short-term and part-time employees (with regard to certain provisions).
While the draft law contained provisions extending the scope of the law to cover individuals with a 'close connection' to the DIFC, this has not been included in the new law.
Waiving statutory rights
Employers can 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 effect of the settlement agreement from a registered DIFC lawyer.
The draft law expressly provided for the DIFC court to be able to set aside settlement agreements 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 under the old law has been updated by Article 19 of the new law, which establishes as follows:
These provisions in the new law are a welcome reform of the old law's Article 18, which included an unlimited financial penalty if all employment liabilities were not paid within 14 days of the 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 that they bring.
Annual leave and sick leave
The new law has reduced the amount of accrued but untaken annual leave that an employee can carry forward from 20 to five working days.
Sick pay has been reduced under the new law to:
The new law has added several new provisions relating to parental leave:
The draft law provided that a breach of the right to return 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.
The new law has widened the remit of the anti-discrimination provisions in the old law and now includes:
While the additions to the new law significantly improve the anti-discrimination provisions in the old law – in particular, by setting out a specific compensation remedy for employees – it is interesting to note that certain key changes from the draft law were omitted, such as enabling the court to address any discriminatory act by:
End of service gratuity
The new law provides that end of service gratuity is payable to all employees, even in circumstances where the termination is for cause. This was proposed in the draft law and is based on the rationale that end of service gratuity stands in place of employer contributions to pension, and it would be unfair to deprive employees of this, regardless of the reason for their termination.
Further provisions have been included in the new law to ensure that salary breakdowns meet particular thresholds. Basic pay must now comprise at least 50% of the employee's gross wage. This will prevent employers from reducing end of service gratuity by fixing the basic pay at an artificially low level.
As an alternative to end of service gratuity, DIFC employees can opt to receive pension contributions in lieu of gratuity, provided that the pension contributions are not less than the value of gratuity that the employee would otherwise have received.
The draft law contained provisions relating to whistleblowing which protected employees from civil or contractual liability or suffering any detriment or dismissal for disclosing confidential information in good faith and in accordance with the DIFC Companies Law.
These provisions were not included in the new law and the position remains the same as under the old law (ie, there are 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.
Although proposed in the draft law, the new law contains no provisions for constructive dismissal. The position remains the same as under the old law – there is no option for the court to award compensation in circumstances where an employee terminates their own employment, regardless of reason, as a standalone claim.
However, depending on the circumstances leading to the resignation, such employees could issue a claim for a discriminatory act under the new law.
The much-anticipated new law is a welcome overhaul of the previous employment provisions in the DIFC and brings the DIFC employment regime further in line with international best practice. In particular, the re-drafted anti-discrimination provisions will now ensure that remedies are available for discriminatory acts and the new parental leave provisions 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.
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.
For further information on this topic please contact Luke Tapp, Andrea Hewitt-Sims or Ruth Stephen at Pinsent Masons by telephone (+971 4 373 9700) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Pinsent Masons website can be accessed at www.pinsentmasons.com.
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