The long-awaited revised DIFC Employment Law (known as DIFC Law No.2 of 2019) (New Law) was issued on 12th June 2019,  repealing the current DIFC Employment Law (DIFC Law No.4 of 2005, as amended by DIFC Law No.3 of 2012) (Old Law).


The New Law aims to protect and balance the needs of employers and employees in the DIFC, while maintaining global best practice and consolidating DIFC's position as an international business hub.  

There are a number of key changes and new provisions set out in the New Law, which will come into force effective from 28 August 2019. Until then, the Old Law will continue to apply. 

Below is a summary of the key changes:

Part-time and Short-Term employees

The Old Law does not recognise the concept of part-time employees and provides the same statutory benefits and leave entitlements as full-time employees. The New Law formally recognises part-time employees as those who work less than 8 hours per day or less than 5 days per week, with specific statutory entitlements to vacation leave, sick leave and maternity/paternity leave on a pro-rated basis.

The concept of short-term (temporary) employees is recognised in the New Law as a period of service that does not exceed an aggregate of 30 days within a twelve month period. There are several provisions in the New Law which do not apply to short-term employees, including leave and end-of-service gratuity.

Secondment

The Old Law does not provide for employee secondments. The New Law recognises an employee who works for a DIFC entity, while employed by a third party outside of the DIFC. The individual must hold a valid DIFC secondment card issued by the DIFC authority (DIFCA) for up to 12 months, or for a longer period as approved by DIFCA. A secondment arrangement is only permissible between a DIFC entity and an entity either situated onshore (or freezone) in the UAE or outside of the UAE.

A number of provisions in the New Law will not apply to employees working under a secondment. A secondee will be entitled to receive limited entitlements, under the New Law, provided that the secondee has previously worked for a DIFC entity and is permanently hired by the same entity, whereby the period of secondment will count towards the one year qualifying period of service.

Parental Leave

The Old Law entitles a female employee, who has adopted a child aged three months or less, to statutory maternity leave. The New Law will permit a female employee, subject to length of service, to take maternity leave where the adopted child is less than five years of age at the time of adoption.

The New Law sees the introduction of paternity leave for male employees. Subject to meeting the criteria of continuous employment for a period of twelve months, the male employee will be entitled to take five working days of paid leave. The New Law also provides for expectant fathers the right to take time off to attend ante-natal appointments or attend adoption proceedings.

Sick Pay

The Old Law entitles an employee to sick leave of 60 days, with full pay, in an aggregate twelve (12) month period. The New Law retains sick leave at 60 days, however introduces a  reduced sliding rate of sick pay effective from 28 August 2019. The first 10 working days will be at full pay and the following 20 days of sick leave will be at half pay. The remaining 30 days will be unpaid. 

Notice Periods 

The Old Law allows for the employer and employee to mutually agree longer or shorter notice periods. The New Law prohibits notice periods shorter than the notice period prescribed by the New Law in unlimited term contracts (however, the minimum notice period does not apply during the probation period). 

The New Law provides that an employee is only entitled to payment (full or part) in lieu of the notice period where the employee terminates the employment in response to an employer's conduct warranting termination or where the employee enters into a settlement agreement.

Garden leave is also a new provision under the New Law which entitles employers to place an employee on garden leave for all or part of their notice period.

Overdue Payments - termination

The Old Law includes a provision where employers are required to release all termination payments owed to the employee within 14 days of the termination date. The controversial provision caused an overwhelming burden on DIFC employers when the payment was not discharged within 14 days and a penalty for late payment consisting of the last basic wage could be imposed for each day the employer is in breach. 

The New Law is similar to the Old Law insofar as the employee is entitled to receive the termination payment and sums owed within 14 days of the termination date. Whilst the New Law allows for a penalty to be applied for a late payment, this has been significantly curtailed. A penalty for late payment shall only apply where a DIFC court determines that the amount owed exceeds the employee's weekly wage and effectively will be capped at six months' pay due to the introduction of the six month limitation period for filing a claim. The court may also waive a late payment penalty where a) there are pending court proceedings in relation to the amount owed; or b) the employee's unreasonable conduct is the material cause for the employer's failure to pay the amount due.

Settlement Agreements

The Old Law does not permit the waiver of employee rights. Under the New Law, the employer and employee can to enter into a settlement agreement to terminate the employment relationship or to resolve a dispute. The New Law permits the employee to waive their rights and record the terms in a settlement agreement, on condition that the employee has either had the opportunity to seek independent legal advice from a registered lawyer in the DIFC on the terms and effect of entering into the settlement agreement or the employer and employee participated in mediation proceedings at DIFC court prior to entering into the agreement.

Limitation Period

The Old Law does not specify a limitation period to bring a potential claim against the employer. The New Law introduces a six month limitation period which applies from the employee's termination date, or in the case of discrimination, any claim must be brought before the court from the date of the alleged act or omission to which the claim relates. 

End of service gratuity

The Old Law does not obligate an employer to pay the end-of-service gratuity (Gratuity Payment or EOSG) where an employee is terminated for cause. The New Law provides for the Gratuity Payment to become payable even where an employee is terminated for cause. The Gratuity Payment is calculated under the New Law based on the employee's basic wage, which is no less than 50% of the employee's total wage (including allowances).

Employers should note that separately, the DIFC has proposed the existing EOSG system to be replaced by a funded workplace savings plan for expatriate employees, intended to take effect from 1 January 2020. The New Law does not address the proposed change although it is likely that an amendment to the law may follow at a later date or separate regulations are issued. 

Discrimination

The protected characteristics for discrimination under the Law include sex, marital status, religion, race, nationality and mental/physical disability.

The anti-discrimination provisions under the New Law are expanded to include:

  • additional protected characteristics - age, pregnancy and maternity. 
  • victimisation – where an employee is subjected to a detriment as a result of a protected act. Such acts would include for example, an employee who makes an allegation of discrimination, or brings a claim for discrimination or provides evidence in relation to a discrimination claim made in good faith.

Whilst the Old Law provides no statutory remedy for a discriminatory act, the New Law introduces a number of new remedies. The DIFC Court can award the following remedies where there is a finding of discrimination and/or victimisation:

  • compensation which can include an award for injury to feelings;
  • a declaration as to the rights of the parties;
  • a recommendation to the employer to take specific steps to reduce the adverse effect on the employee; or 
  • combination of the above.

The amount of compensation which may be awarded to an employee is up to one year's salary. However, in the event of an employer failing to comply with a court recommendation, the DIFC Court has discretionary power to increase the employee's compensation award to up to two years' salary. 

Vicarious Liability

Under the Old Law an employer can be vicariously liable for any act of an employee committed in the course of employment, unless the employer can show it took reasonable steps to prevent the employee from carrying out the relevant act.

The New Law provides that an employer can be held liable for acts of their employees where it is established that the employee's act was sufficiently connected to the employee's employment or in the case of discrimination or victimisation, the employer failed to take steps to prevent the employee from carrying out the act or omission.

General

Other relevant provisions to note:

  • employee records must be retained for six years rather than the previous two years;
  • introduction of penalty system for breaches or non-compliance of the New Law;
  • employees will only be permitted to carry over five days' accrued leave (not 20 days as under the Old Law) to the following year;
  • an employee's right for paid time off to look for alternative employment whilst under notice of termination has been removed.

The New DIFC Employment Law has brought in significant change which will impact employers operating in the DIFC. We advise clients to undertake a  review of existing employment contracts, policies and employee handbooks to ensure your documentation is compliant with the New Law prior to the launch date on 28 August 2019.

For further information or assistance, please contact our Employment Team.

 

Key contacts

Gorvinder Pannu

Gorvinder Pannu

Legal Director, Employment
UAE, Oman and Qatar

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Naila Sarwar

Naila Sarwar

Managing Associate, Employment
Dubai

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