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.

Consultation on changes

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.

Key changes

Scope 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:

  • The penalty will be triggered only when the amount due and not paid to the employee is in excess of the weekly wage (ie, the basic salary and allowances excluding bonuses, grants and commission payments).
  • The penalty will be reduced if the court considers it reasonable to do so.
  • There is no express cap of six months' wages as proposed in the draft law. 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 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:

  • 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 several 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 onshore employees.
  • 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 antenatal appointments.
  • Paternity leave – in addition, paternity leave of up to five working days is now an entitlement for fathers who have at least 12 months' service. It applies to adoptions as well as biological children.

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:

  • new protected characteristics – age, pregnancy and maternity;
  • a new definition of 'discrimination', which includes the application of a "provision, criterion or practice" in a discriminatory manner to one of the protected characteristics;
  • a new ground of harassment, which 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";
  • a new ground of victimisation, whereby an employer cannot 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;
  • a penalty of up to one year of the employee's annual gross salary added; and
  • a time limit stating that claims for discrimination must be brought within six months of the discriminatory act occurring.

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:

  • making a declaration as to the employee's rights;
  • making a recommendation; and
  • requesting information from the employer regarding potential discrimination against them.

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.

Constructive dismissal 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.

Other differences between old and new law

  • The minimum working age has increased from 15 to 16.
  • Payroll records must be retained by employers for a minimum of six years, rather than two years as under the old law.
  • The concept of secondments is expressly recognised under the new law with a specific secondment card being required to be procured and maintained from the DIFC Authority 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 draft and new law

  • Compensation – the schedule of compensation to be awarded for injuries proposed in the draft law 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' wages.
  • Paid time off – provisions in the draft law which granted employees time off to look for work after receiving notice of termination have not been included in the new law.
  • Notice – the draft law allowed for 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 but it appears to state that payment of wages in lieu of notice is allowed only if agreed to in a settlement agreement.
  • Employment costs – the draft law 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 such recoverable costs must be specified in the employment contract as being payable.


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.

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