On 30 May 2019, the new DIFC Employment Law, Law No 2. of 2019 (the "Employment Law") was enacted replacing DIFC Employment Law no.4 of 2005 (as amended) (the "Old Employment Law"). This Employment Law comes into effect on 28 August 2019. Employers based in the Dubai International Financial Centre (the "DIFC") are advised to make the necessary amendments to their employment contracts, staff handbooks, policies and procedures to reflect the changes in the Employment Law.
This article outlines the top 10 changes in the Employment Law that all employers shall be aware of.
There is now a time limit of 6 months for employment claims to be filed in the DIFC Courts. This 6 months' time limitation is from the date of the termination of employment or from the date of the discriminatory act (the DIFC Courts do have the power to extend this in cases of discrimination).
Unlike previously, employees are now able to waive their minimum statutory rights by entering into settlement agreements with their employers. The employee needs to confirm in the settlement agreement that they have taken independent legal advice prior to signing the agreement.
Termination for cause and impact on end of service gratuity
Previously, an employee who was dismissed for cause' would forfeit their entitlement to statutory end of service gratuity. Pursuant to the Employment Law, even if an employer terminates the employee for cause the employee is entitled to receive their end of service gratuity.
Sick leave pay
The sick leave entitlement in respect of full time employees remains unchanged. A full-time employee is still entitled to 60 working days of sick leave per year. However, in the Old Employment Law the sick pay for an employee was more generous in that the employee received 100% remuneration for the full 60 days of sick leave. In contrast, under the Employment Law, the employee is entitled to receive 100% of their daily wage for the first 10 days of sick leave, 50% of their daily wage for the following 20 days and the remaining 30 days is unpaid.
Part-time/short term employees
The Old Employment Law did not make any distinctions between part-time and full-time employees in the DIFC. However, the Employment Law clearly makes provision for employers to pro-rata certain entitlements such as those relating to leave for part-time/short-term employees.
Pursuant to the Employment Law, employers can engage employees on the basis of secondment arrangements, provided that the employee holds a valid secondment card from the DIFC Authority.
End of service gratuity calculations
Previously, the law did not specify the exact split between basic salary and allowances. The last drawn basic salary is used to calculate an employee's end of service gratuity. The Employment Law now clearly specifies that the employee's total remuneration shall consist of a minimum of 50% basic salary (although the percentage can be higher). This means that the end of service gratuity for the employee would need to be calculated using the minimum 50% of the total salary, which is basic salary.
Family friendly rights
The Employment Law, for the first time sets out certain family friendly rights that include:
- the introduction of paternity leave of 5 business days for an employee who has had a continuous service of 12 months with the employer and provided that he notifies his employer in writing at least 8 weeks before the due date;
- a male employee's right to paid time off to accompany his pregnant wife to ante-natal appointments; and
- a nursing break (applicable to a female employee who works in excess of 6 hours a day) of 1 hour for a mother returning from maternity leave for a period of 6 months after childbirth.
The Employment Law has expanded the list of protected characteristics in respect of discrimination claims. The 3 new protected characteristics are: age, maternity and pregnancy.
The Old Employment Law did not provide a remedy in respect of discrimination cases. Under the Employment Law, in successful cases of discrimination, the DIFC Courts can award compensation of up to the annual wage of the employee.
Financial penalties for late payments to employees
The penalty for late payment of termination dues and the current penalty of a day's wages remain unchanged. However, under the Employment Law a penalty can be imposed if the unpaid amount due to the employee is more than one week's remuneration.
A waiver of the penalties is possible in cases where:
- a court dispute is pending; or
- the material reason the payment has been delayed is because of the employee's unreasonable conduct.
Given that the time limitation to bring employment claims is now 6 months, this effectively means that any financial penalties for late payment are capped at 6 months.
The Employment Law has introduced some very important and interesting changes for DIFC employers. It is therefore significant for DIFC employers to familiarise themselves with these changes.
The DIFC Authority may impose a range of sanctions on DIFC employers who are not fully compliant with the Employment Law.
We would strongly recommend all DIFC employers to have all HR documents reviewed in particular the employment contracts, staff handbooks, policies and procedures to ensure that all HR documents are in compliance with the Employment Law.
We are able to offer the following services:
- Overall HR health check which includes an in-depth review and advice on your current employment contracts, staff handbooks and policies and procedures.
- Offer DIFC legal update sessions for your key HR personnel and key members of management to familiarise staff with the key provisions of the new Employment Law.
- Draft new employment contracts and other HR policies, in particular those relating to part-time employees, secondment and the new family friendly rights.
- Prepare briefing documents on the new Employment Law for your HR personnel.