Background

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai, has enacted Employment Law DIFC Law No. 2 of 2019 (the New Employment Law) which will come into effect on 28 August 2019.  The New Employment Law replaces the previous Employment Law DIFC Law No. 4 of 2005 (as amended). This is welcome news to DIFC businesses and employees, and provides clarity to the DIFC employment legislative regime following the consultation which began in early 2018 and the draft law which was published as part of that consultation.

The New Employment Law does not carry through all of the proposed amendments from the draft law, but introduces some new provisions. This article highlights some of the most noteworthy changes brought about by the New Employment Law.

Positive news for employees

• Maternity and paternity:
  
  • Mothers returning from maternity leave who work more than six hours per day are entitled to nursing breaks of up to one hour for the six months after childbirth.
  • Male employees may take up to five days of paternity leave if they have at least a year's service and must notify the employer at least eight weeks in advance of the due date. Leave must be taken within the first month of the child's birth. 
  • Previously, maternity leave was provided to female employees adopting a child under the age of three months. This right is extended to cover children who are under five years old.
  • The right to paternity leave extends to fathers of adopted children who are under five years old.
  • A male employee has the right to paid time off to accompany his pregnant wife to antenatal appointments.
• Non-discrimination:
  • The non-discrimination provisions have been expanded to include discrimination based on age, pregnancy and maternity, and clarity is provided on what constitutes discriminatory behaviour. 
  • Protection is provided to avoid the victimisation of employees who make allegations or bring a claim for discrimination.
  • Courts can award employees who face discrimination with compensation of up to their annual wage.
• Gratuity payment:
  • Now specified that gratuity payment is paid out even in circumstances where the employee is dismissed for cause.
  • Basic wage must not be less than 50% of the annual wage.
  • Employee may choose to receive contributions from their employer into a pension scheme (located in any country) provided that the employer's contribution is not less than the payment the employee would have received under the gratuity payment system.
• Settlement agreements:
  • Previously, employees were unable to waive their minimum statutory employment rights (except where expressly permitted to do so under the law) which proved troublesome for settling disputes. Employees may now waive their rights by entering into a settlement agreement.
  • Other than where an employee terminates for cause, making a payment in lieu of notice is only permitted when the parties enter into a settlement agreement. 
  • Settlement agreements must confirm that the employee was given an opportunity to receive independent legal advice, unless the parties took part in mediation proceedings provided by the court prior to entering into the agreement.

Positive news for employers

• Time limitations on claims:
  • Six months from date of employee's termination.
  • Six months from the date of a discriminatory act (although the court has discretion to extend).
• Probation period:
  • These are now specifically permitted, so long as they are stated in the related employment contract. 
  • Minimum notice periods do not apply during the probation period.
• Sick pay:
  • Previously, employees received 100% sick pay for the first 60 days of absence in a single year. Employees now only receive 100% sick pay for the first 10 days. Thereafter, sick pay is at 50% for the next 20 days, followed by no sick pay for the next 30 days.
• Time off to look for work whilst on notice:
  • Previously employees were entitled to take reasonable time off. This right has been repealed.
• Garden leave:
  • Employers can insist that employees do not attend work or undertake duties during their notice period.

General

• Retention of employee records:
  • Obligation on employers to maintain records is increased from two years to six years.
• Financial penalties for late payment of employee remuneration:
  • Current 14-day time period for payment of remuneration following termination and existing penalty of a day's wages are retained. However, a penalty is only due if the amount not paid is held by the court to be in excess of a week's wages.
  • Penalties are waived where (i) a court dispute is pending or (ii) the material cause of the failure of the employer to pay is due to the employee's unreasonable conduct. 
  • As any claim must be brought before the court within six months of termination, in practice this means that claims are effectively capped at six months of pay.
• Other penalties:
  • Schedule 2 of the New Employment Law sets out specific fines and penalties ranging from US$2,000 to US$10,000 for various breaches by the employer of the New DIFC Employment Law.
  • The court may impose additional penalties or orders.
  • The board of directors of the DIFC Authority may expand on the fines and penalties, in addition to the fines stipulated in Schedule 2, and may also appoint inspectors to investigate the affairs of employers to ensure their compliance.
• Constructive dismissal:
  • The draft law incorporated a concept of compensation in circumstances where an employee terminates their employment contract for cause, such compensation to be determined by the DIFC Court at a level it considers to be reasonable in the circumstances. This concept was not contained in the New DIFC Employment Law and, as such, an employee’s entitlement upon terminating for cause is limited to only contractual and statutory entitlements (e.g. wages in lieu of notice, gratuity and payment for untaken leave).
• Whistleblower protection:
  • This concept was specifically introduced in the draft law but is not contained in the New DIFC Employment Law, other than to note that employers must not victimise (i.e. subject to a detriment or dismiss) employees who perform protected acts, such as bringing proceedings and taking other related actions under the non-discrimination provisions of the New DIFC Employment Law (as noted above). 
  • More general whistleblower protection for employees is otherwise provided for in the Operating Law, DIFC Law No. 7 of 2018.

How Dentons can help your DIFC business

DIFC employers will need to familiarise themselves with the changes brought in by the New DIFC Employment Law so they are not liable to fines and other potential penalties. Additionally, DIFC employers and their HR professionals will need to consider the extent to which existing pro-forma employment contracts, employee handbooks and document retention procedures may need to be amended to reflect the changes.

Our UAE-based employment and labour team has an in-depth understanding of local issues and is regularly instructed by local and international clients doing business in the DIFC. We have a diverse practice giving focused, experienced advice and assistance on contentious, non-contentious and advisory employment work.