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The New DIFC Employment Law- What Has Changed?

November 2019 - Employment. Legal Developments by Fichte & Co Legal Consultancy.

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DIFC Employment Law no. 2 of 2019 (“New Law”) has recently been enacted which repeals and replaces the DIFC Law no. 4/2005 as amended by DIFC Law no. 3 of 2012 (“Previous Law”). There has been an ongoing debate about the implemented changes introduced by the New Law. Some changes have been enacted to protect the employers, such as the limitation of liability period of 6 months and the provisions which allow employees to waive their rights under the New Law subject to agreements put in writing. Other changes have been enacted to protect the employees, such as provisions for non-discrimination and non-victimization, the penalties imposed by the DIFC for employer’s non-compliance, and forbidding the employer to retain the employee’s original passport (although the latter was always the legal position in the UAE).

DIFC Employment Law no. 2 of 2019 (“New Law”) has recently been enacted which repeals and replaces the DIFC Law no. 4/2005 as amended by DIFC Law no. 3 of 2012 (“Previous Law”). There has been an ongoing debate about the implemented changes introduced by the New Law. Some changes have been enacted to protect the employers, such as the limitation of liability period of 6 months and the provisions which allow employees to waive their rights under the New Law subject to agreements put in writing. Other changes have been enacted to protect the employees, such as provisions for non-discrimination and non-victimization, the penalties imposed by the DIFC for employer’s non-compliance, and forbidding the employer to retain the employee’s original passport (although the latter was always the legal position in the UAE). Below we have summarized some of the most essential changes under the New Law:

Application of the Law:

  • Art. 4(2) stipulates certain individuals who may be employed in the DIFC but subject to other applicable laws in their employment contracts, such as secondees and those employed in the DIFC by a local or federal government entity.
  • Art. 4(3) extends the application of the New Law to those employees listed in Art. 4(2) – but only to some of the New Law’s provisions- including (but not limited to): employer’s general obligations under Part 7, certain provisions related to working times and rest periods, and general contraventions and penalties listed under Part 11.

Limitation Period:  Art. 10 of the New Law stipulates that the courts will not consider a claim unless it is brought within 6 months of the relevant employee’s termination date.

Hiring Children:  The minimum age has increased from 15 to 16 under the New Law.

No Waiver:  Art. 11 allows the employee to waive their rights and remedies under the new law by entering into a written agreement with the employer (to terminate or resolve a dispute) provided that the employee either agrees in writing to confirm that they were given an opportunity to receive independent legal advice from a lawyer or that the employer and employee took part in mediation proceedings provided by the court prior to entering into the written agreement.

Payroll Records:  Art. 16 now provides that records relating to the employee must be kept for at least 6 years after an employee’s termination date, as opposed to 2 years as per the Previous Law.

Part-Time Employees:  Art. 17 provides certain provisions relating to part-time employees and the method of calculation of the part-time employee’s working days.

Recruitment Costs:  Art. 21(3) provides that if an employee terminates their employment contract for any reason other than termination for cause as per Art. 63 within the first 6 months of their employment, the employer may recoup reasonable costs and expenses which were directly incurred by the employer, expenses supported by proof of expenditure and those specified in the employment contract as being payable by the employee. Such a provision did not exist under the Previous Law.

Vacation Leave : Under Art. 27, employees are entitled to carry forward up to 5 working days of accrued leave into the next year for a maximum period of 12 months. Under the Previous Law, employees could carry forward 20 working days.

Sick Pay:  As per Art. 35, employees shall only receive 100% of their daily wage for the first 10 working days of their sick leave and 50% of their daily wage for the next 20 working days – taken within 12 months. No additional sick leave is payable after 20 working days. Under the Previous Law, employees were allowed 60 working days of full pay.

Paternity Leave and Pay:  Art. 39 now provides for 5 working days paternity leave as long as the male employee notifies his employer that his wife is pregnant at least 8 weeks before the expected week.

Time off for Ante-Natal Ccare and Adoptions Proceedings:  Art. 41 provides certain provisions and rules for time off for employees with ante-natal care and appointments.

Liability of Employers for Employees’ Conduct:

  • Employers will only be held liable for claims of losses, damages or compensation if the act/omission is sufficiently connected with the employee’s employment that it would be fair and reasonable to hold the employer vicariously liable.
  • In cases of discrimination or victimization, if the employer is unable to show that it took steps that were reasonably practicable to prevent the employee from carrying out the act or omission, then the employer shall be liable. The employer’s vicarious liability has now been clarified, whereas no such limitations or distinctions were made under the Previous Law.

Visas and Permits: Art. 57 of the New Law provides the employer’s responsibility to obtain and maintain the sponsorship and visa documents without being able to reclaim any of the costs. Furthermore, this provision stipulates that the employer is not allowed to retain the employees’ passport or other original documents of the employee.

Discrimination and Victimization: 

  • Age and pregnancy/maternity are now included in the list of discrimination.
  • Art. 60 has been included and forbids the victimization of an employee, specifically where the employer dismisses the employee or subjects him to a detriment if the employee brings proceedings under Part 9 (Non-Discrimination) of the New Law.
  • Art. 61 provides that the burden of proof shall be on the complainant; a limitation period of 6 months is also imposed for bringing proceedings under Non-Discrimination, further provisions were included regulating the court proceedings for this section (Proceedings under Part 9).

Termination:

  • Art. 63 provides that employees who have been terminated for cause are now eligible to receive gratuity payments.
  • Under the Previous Law, written reasons for terminated employees must be provided upon their request. The New Law requires employers to provide such statements within 14 days.
  • The basic salary of an employee for the purposes of their gratuity shall not be less than 50%. No such divisions were included in the Previous Law.
  • Under the Previous Law, employees could choose between a pension scheme and their gratuity. The New Law further clarifies that employees may agree to contributions from their employer into a pension scheme, retirement savings scheme or any substantially similar scheme, whether located in the UAE or elsewhere instead of gratuity. The New Law further states that such a scheme must not be less than the gratuity payment.

Penalties and General Contraventions:  Art. 67- 70 of the New Law now provides for fines and penalties against the Employer for breaching their obligations. The DIFC Board of Directors are entrusted with further powers to administer additional fines and penalties. The DIFC Board of Directors may also appoint an inspector to investigate the affairs of the employers to confirm compliance.