New compensation entitlements on dismissal, the removal of the 48-hour week, and the expansion of discrimination laws to cover age and pregnancy are among the changes proposed by a fundamental redraft of the Dubai International Financial Centre (DIFC) Employment Law, which governs employees who work in the DIFC zone of the United Arab Emirates (UAE). The new law will replace DIFC’s current employment law in its entirety.

The proposed law outlines several key changes, including the following:

• Leave entitlements: The proposed law prorates leave entitlements for part-time employees.
• Article 18 penalty: Employers are currently required to pay all wages and termination payouts to an employee within 14 days of termination of employment or face a penalty of the last daily wage for each day delayed. The proposed law states that the penalty is no longer automatic and provides some relief to employers if the outstanding amount is less than 5 percent of the full amount due. It also caps the penalties at six months’ wages.
• Sick leave pay: The proposed law retains the current annual entitlement of 60 working days of sick leave but requires employers to pay in full only 10 working days of that leave, as an employer may dock wages after the first 10 working days of sick leave.
• Discrimination: The proposed law adds “pregnancy” and “age” to the list of protected characteristics and provides for compensation in relation to a discrimination claim (capped at one year’s wage).
• Termination for cause: The proposed law contains provision for a compensation claim of up to one year’s wage if an employer terminates for cause. Thus, the proposed law effectively introduces the concept of unfair dismissal. It also mandates that employers pay gratuity even in circumstances where the termination is with cause.
• Salary split: The proposed law provides that an employee’s basic salary must comprise at least 50 percent of their total wages—reducing the proportion of variable pay that can be paid.
• Weekly working hours: The proposed law removes the current 48-hour provision but retains provisions governing daily and weekly rest.
• Paternity leave: The proposed law introduces paternity leave of five working days for male employees who have or adopt a child.
• Use of settlement agreements: The proposed law allows for the waiver of rights if the waiver intends to settle a dispute. However, the DIFC Courts will have the discretion to void any settlement agreements found to be unreasonable, but it cannot do so when independent legal advice has been obtained by the parties.

Comments

The DIFC’s proposed law has been put forward for consultation, and subject to any amendments, it is expected to be published and go into effect shortly. Employers may want to review their existing employment contracts and employee handbooks, as changes will almost certainly be required in the light of this significant reform.

Written by Gordon Barr of Al Tamimi & Co. and Roger James of Ogletree Deakins