Dubai legal update

Legislation

In March 2018, the draft DIFC Employment Law¹ was released for consultation. This draft law is expected to come into force later this year.

The key changes include:

• discrimination
• part time employees
• constructive dismissal
• gratuity² (termination with cause)

The UAE Labour Law³, which applies to all UAE mainland entities and employees is outside the scope of this update, as the DIFC Employment Law is only applicable to employers and employees based within the DIFC⁴.

Discrimination

Under the current DIFC Employment Law:

• there is no provision for a remedy in respect of discrimination claims
• the protected characteristics include sex, marital status, race, nationality, religion and mental or physical disability.

The proposed key changes under the draft DIFC Employment Law are:

• pregnancy and age have been added to the list of protected characteristics
• a discrimination remedy is introduced for the first time
• compensation, declarations and a recommendation are explicitly set out in the law
• the compensation is to be capped at 1 years’ wages (or two years for repeated breaches)
• the concept of victimisation is included. Victimisation protects employees from any form of behaviour which an employee suffers a detriment after asserting their rights under the law.

This is likely to lead to more claims in the DIFC, given that there is no option to claim arbitrary dismissal /unfair dismissal or equivalent claim in the DIFC. We will follow with interest the impact of the introduction of the new concepts set out in the draft law.

Part-time employees

In the current DIFC Employment Law there is no distinction between the entitlements of part time and full-time employees.

Under the proposed changes to the DIFC Employment Law, part time employees will be entitled to leave entitlements on a pro-rated basis. This is an employer friendly change as it reflects the position in other jurisdictions, such as the United Kingdom, where part time employees’ entitlements are pro-rated under part time regulations.

Termination for cause and constructive dismissal

In accordance with the current DIFC Employment Law, both employers and employees can terminate the employment relationship for cause. The test for a termination for cause is whether the conduct of the non-terminating party warrants termination and whether a reasonable employer or employee would have terminated the employment in such circumstances (Article 59A).

In the forthcoming draft DIFC Employment Law the test for determining whether the termination for cause is reasonable has been expanded. The expanded test includes whether or not the employee/employer acted reasonably or unreasonably, given the circumstances for termination, in accordance with equity in consideration of the substantial merits of the case.

Whilst there is still no unfair dismissal claim in the draft DIFC Employment Law, the concept of constructive dismissal has been introduced, which is a concept that already exists in other common law jurisdictions such as the UK.

End of service gratuity

The position under the current DIFC Employment Law is that where an employer terminates an employee for cause under Article 59A, the employee forfeits their right to end of service gratuity.

However, pursuant to the forthcoming draft DIFC Employment Law, employers would still be expected to pay their employees’ gratuity even when the employees have been terminated for cause/gross misconduct.

This particular change is in stark contrast to the UAE Labour Law position, where employees forfeit their gratuity when they are terminated under one of the gross misconduct grounds in Article 120 of the UAE Labour Law.

Team update

What we have been up to in January 2019:

• Advising and negotiating on a DIFC Employment Law sex discrimination and harassment claim
• Negotiating and reviewing the terms of a Settlement Agreement for a corporate client
• Advising a Senior Executive on the enforceability of post termination restrictions within the DIFC
• Training in-house Counsel and senior management on handling workplace investigations
• Advising corporate clients on redundancies and downsizing headcount
• Advising a multi international client in the Gulf on the variation of employment contracts of key senior staff.

1 The current DIFC Employment Law means the DIFC Employment Law Amendment Law, DIFC Law No 3/2012.

2 Gratuity means End of Service Gratuity.

3 The UAE Labour Law means the Federal Law No 8 of 1980.

4 The DIFC means the Dubai International Financial Centre.