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DIFC EMPLOYMENT LAW: WHY 2013 WON’T BE LIKE 2005

February 2013 - Employment. Legal Developments by Hadef & Partners.

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"On January 24th, Apple Computer will introduce Macintosh. And you'll see why 1984 won't be like "1984""

Apple became a household name in the third quarter of SuperBowl XVIII when it aired the enormously popular "1984" commercial, with the above tagline, promoting the then up-and-coming release of the Macintosh computer.  The commercial, which was inspired by George Orwell's dystopian novel of the same name, attempted to transform a technological era of conformity to one of originality, reform and ultimately, progression.  Much like Apple's creative vision for the technology sector, the Dubai International Financial Centre (the DIFC) is to the financial services and related sectors an innovative and pioneering hub; a "city within a city".  Created by the Dubai Government to meet the particular needs of the financial services industry, the DIFC is a dedicated "free zone" area nestling in the heart of Dubai's commercial district.  From a legal perspective, the distinguishing feature of the DIFC is its "stand alone" legislative regime, based upon the common law model and enforced by a separate court system built into the Centre's organised structure.  

In 2005, HH Sheikh Maktoum Bin Rashid Al Maktoum enacted Employment Law No.4 of 2005 (the DIFC Employment Law), a law described at the time as providing "...minimum employment practices comparable to established international standards".  Seven years on and following extensive consultation, the DIFC Employment Law, with effect from 23 December 2012, has now been amended.  The rationale of the changes? A move toward greater clarity and legal certainty. 

In this article, Mandeep Kalsi focuses on certain material changes made to the DIFC Employment Law which may be of general interest.  And, just like "1984", employers and employees falling under the DIFC Employment Law regime will see why 2013 won't be like 2005!

THE CHANGES - AT A GLANCE

Application of DIFC Employment Law

The DIFC Employment Law is to apply exclusively as between employers established in the DIFC and those of their employees who work within or from the DIFC.  The exclusivity of the DIFC Employment Law to employment relationships in the DIFC is, in any event, supported and confirmed by the 2009 Court of First Instance case of Rasmala Investments Limited v. Hatem El Baz & Ors.  The position under the law has not changed but merely been re-affirmed.

Contracts of Employment

Employers must provide every employee (save for those whose employment is for less than 30 days), with a written contract of employment (the Contract) containing certain prescribed information, at the commencement of his (or her) employment.  Employers must also expressly state in writing in the Contract which terms of the Contract shall be supplemented by the employer's policies and may be changed at the employer's discretion from time to time by way of a written notice to the employee.

Pay Statements

Employers are obliged to provide employees with an itemised pay statement at or before each pay day (electronic access will satisfy this obligation).

Pay on termination

Employers are required to pay all wages owing to an employee within 14 days after the employer or employee terminates the employment.  Failure to settle wages (or other amounts owing to the employee) within this extended period will attract a penalty equivalent to the employee's last daily wage for each calendar day the employer is in arrears. 

Vacation Leave

An employer shall give an employee an annual paid vacation leave of twenty (20) working days per annum to be accrued pro rata for employees who have been employed for at least ninety (90) days.  

An employee will be entitled to carry forward his accrued but untaken vacation leave (up to a maximum of 20 working days) into the next calendar year for a maximum period of 12 months, after which the unused leave shall expire.

There are also time-specific notification requirements obliging both employee and employer to provide written notice, of at least 7 days, specifying the days on which vacation leave is to be taken.

Special Leave

A Muslim employee shall (subject to completion of at least 1 year of continuous employment) be entitled to special leave, not exceeding 30 calendar days (without pay), in which to perform the Hajj pilgrimage.  This special Hajj pilgrimage leave may only be taken once during the employee's period of service.

Sick Leave

Every employee shall have a paid sick leave entitlement of up to 60 working days.  Where an employee takes more than an aggregate of 60 working days of sick leave in any 12 month period, the employer may terminate the employment immediately with written notice to the employee.  The provisions governing sick leave and pay do not apply if the contract of employment is for one month or less.

Maternity Leave and Pay

Female employees are entitled to a minimum maternity leave of 65 working days, of which the first 33 working days will be at the employee's normal daily wage and the remaining 32 working days at 50% of the normal daily wage.  Any national holidays falling on a working day within the maternity leave period shall be treated as additional leave, thereby having the net effect of extending the maternity leave by the period of the national holiday.

Paid maternity leave applies where an employee will have been continuously employed with an employer for at least 12 months preceding the expected or actual week of childbirth. 

Termination for cause

An employer can dismiss an employee without notice "for cause" which is described in general terms to be where conduct warrants termination and a reasonable employer would have terminated the employment.

Termination for cause does not apply where an employee has been terminated for having exhausted his (or her) annual maximum sick leave entitlement.

End of Service Gratuity

An employee who completes continuous employment of 1 year or more is entitled to an end of service gratuity (Gratuity) payment at the termination of the employee's employment at the rate of 21 days' basic wage for each year of the first 5 years of service, and thereafter, 30 days wage for each additional year of service, provided that the total Gratuity amount shall not exceed the wages of two 2 years' service.

The Gratuity calculation does not include that portion of an employee's wage received in kind or as allowance for housing, travel, currency exchange, children's education, social and entertainment or any other type of allowance, nor shall it include overtime pay.  Moreover, bonus or commission payments are now expressly excluded from the Gratuity calculation.

Termination "for cause" will result in an employee automatically forfeiting his or her right to receive a Gratuity payment.

UAE and other GCC nationals are not eligible to receive a Gratuity payment at the end of their service.   Instead, employers are required to enroll UAE and other GCC nationals into the state pension scheme, in accordance with the applicable federal legislation.

If an employer has established a pension scheme for its employees, it has an obligation to provide in writing to the employee the option between (a) participation in the employer's pension scheme or (b) entitlement to a Gratuity payment at the end of service.  This amended wording removes the ambiguity in the earlier wording of this provision in the DIFC Employment Law (obliging employers to provide the right of election option "prior to the employee commencing work") which led to arguments to the effect that the employer's failure to offer the election within the specified time-frame entitled the employee to both pension scheme benefits as well as Gratuity.

Time off work

An employee who is terminated in accordance with the minimum notice provisions prescribed in the DIFC Employment Law shall be entitled to "reasonable time off" to seek alternative employment.  The length and timing of any such time off shall be at the employer's discretion, having regard to the company's legitimate business needs and subject to the employee having been continuously employed for at least 2 years on the date on which the notice is due to expire.  The right to take time off to look for work will not be available if the employee is dismissed "for cause".

Discrimination

With the aim of harmonising and strengthening the existing equality protection, the DIFC Employment Law now contains provisions which substantially re-define discrimination.  An employer must not discriminate against an employee regarding his (or her) employment or any term or condition of employment on the grounds of the employee's membership of six protected characteristics: sex, race, disability, marital status, nationality or religion (the protected characteristics).  Unlawful discrimination against an employee is divided into three separate categories:

 

  • direct discrimination: less favourable (or different) treatment on one of the protected characteristics.  The complainant must personally have the protected characteristic:  the use of the words "on grounds of the employee's [protected characteristic]" (emphasis added) limits the scope of the definition, precluding protection against associative discrimination (that is, discrimination based upon a person's association with another person who has the protected characteristic) and/or perceptive discrimination (that is, discrimination based upon the inaccurate perception that someone has a protected characteristic).    

     

  • indirect discrimination: the application of neutral provisions, criteria or practices (PCP) which put employees with a particular protected characteristic at a disadvantage not faced by others who do not share or are not of that particular characteristic, as applicable (e.g. a neutral requirement to work full-time would disproportionately affect women, being the primary carers within a family); and

     

  • harassment: unwanted treatment or conduct which has the purpose or effect of creating an intimidating, hostile, degrading, humiliating or offensive workplace.  Again, the complainant's actual characteristic does have to be the reason for the harassment as the definition does not extend to the capture of associative and/or perceptive discrimination.  However, the use of the words "purpose or effect" (emphasis added) self-evidently broadens the reach of the statutory harassment test: where the conduct has the purpose of violating the recipient's dignity, there is no additional requirement to prove that it actually produced those results and, equally, if it did produce those results, the purpose of the perpetrator is inconsequential. The absence of one does not remove the conduct from the scope of the harassment provisions. 

Whilst both direct and indirect discrimination are defensible on the grounds of a bona fide occupational requirement or (in the case of indirect discrimination), where the employer can show the PCP to be a proportionate means of achieving a legitimate aim, the offence of harassment is not.  A bona fide occupational requirement is defined as a requirement reasonably necessary for the normal performance of a particular role or occupation.

The definition of "disability" has also been significantly re-worded: an employee has a disability for the purposes of the DIFC Employment Law if he has a mental or physical impairment which has a substantial and long term adverse effect on his ability to carry out his duties in accordance with the employment contract. An impairment has a long term effect if it has lasted at least twelve (12) months or it is likely to last at least twelve (12) months.  If the employer fails to make reasonable adjustments to any physical feature of the workplace or the applicable PCP that would, if made, enable the employee to otherwise meet the bona fide occupational requirement, this will amount to disability discrimination.

Employers will continue to be allowed to positively discriminate in favour of disadvantaged groups, including those that are disadvantaged because of mental or physical disability.

Despite containing specific anti-discrimination provisions in relation to a person's protected characteristics, the amended DIFC Employment Law maintains the surprising gap in coverage that existed in the original DIFC Employment Law in failing to provide for any effective (or indeed any) scheme of statutory compensation - be it for future loss of earnings or an award for injury to feelings - for breach of laws prohibiting discrimination.  It is therefore unclear what remedies will be awarded for a successful complaint and arguably employees could be said to notionally enjoy protections which they cannot in fact enforce.

Employment Accidents and occupational diseases

Where an employee sustains an injury as a result of an employment accident arising out of or in the course of his employment, or dies as a result of an employment accident or contracts an occupational disease, the employer shall pay compensation to the employee in accordance with the provisions of Schedule 2 of the amended DIFC Employment Law equal to no less than twenty four (24) months wages calculated on the basis of the last monthly wage the employee was paid before his injury.

Where an employee dies as a result of an accident or illness arising out of or in the course of his employment, the employer shall pay compensation to his named dependants equal to no less than twenty four (24) months wages calculated on the basis of the last monthly wage the employee was paid before his death.

Director of Employment Standards v Small Claims Tribunal

The DIFC Director of Employment Standards' role has been removed entirely.  This means that all employee complaints should be raised, in the first instance, with the Small Claims Tribunal (the SCT).  The SCT has jurisdiction to hear claims where the amount of the claim or the value of the subject matter of the claim does not exceed AED 200,000; or where the claim pertains to the employment or former employment of a party and all parties to the claim elect in writing that it be heard by the SCT.  Under the SCT rules of procedure, after the filing of a claim, the parties concerned are required to attend a consultation before the SCT Judge whose role is to seek to mediate the dispute and broker a settlement, failing which the matter will be fixed for a hearing.  

There are other consequential and miscellaneous amendments made to the DIFC Employment Law, the above commentary being the writer's overview of the key changes.   

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