The Dubai International Financial Centre (“DIFC”) intends to refresh its employment laws. Under proposals set out in a consultation paper published last week, a new employment law would be introduced to replace the DIFC’s existing employment law.

Background

The central pillar of employment law in the DIFC is DIFC Law No. 4 of 2005 (as amended, the “Current Law”).

The consultation paper envisages that the Current Law will be replaced by a new DIFC Law No. 6 of 2018 (the “Proposed Law”).

Proposed Law – key changes

The Proposed Law would, amongst other things:

• Extend the types of individual who could fall to be treated as employees.
• Clarify which sections of the Proposed Law would apply to:
  • secondees contracting with their employer under a law other than DIFC law;
  • short-term employees; and
  • part-time employees.
• Introduce a regime pursuant to which fines and penalties could be imposed on employers.
• Give employers and employees the right to waive their rights under the Proposed Law (in the context of settlement agreements).
• Restrict the circumstances in which an employer, having failed to pay an employee their final termination payment on the due date, would become subject to a financial penalty.
• Revoke the current restriction on maximum weekly working hours; some protections for employees regarding excessive hours and daily rest periods would, however, remain.
• Reduce sick leave pay to 30 days (of which only the first 10 would be at full pay).
• Clarify that employers would be responsible for obtaining and paying for their employees’ visas, sponsorship documents, permits etc.
• Restrict the circumstances in which an employer could be held to be vicariously liable for the acts of its employees.
• Introduce the principle that claims against employers (for an employee’s injury or death) could be reduced in the event of an employee’s contributory negligence.
• Create a more robust legal framework for discrimination claims and the remedies for discrimination.
• Prohibit employers from discriminating on the grounds of pregnancy or age.
• Set out the financial entitlements of an employee following the termination (whether by an employer or an employee) of an employment agreement for cause.
• Give the DIFC Court the discretion to award additional compensation following the termination by an employee of an employment agreement for cause.
• Give employees the right to receive an end of service gratuity where their employment had been terminated for cause (employees are only entitled to an end of service gratuity under the Current Law where their employment has been terminated otherwise than for cause).
• Incorporate by reference the provisions of the DIFC Companies Law with respect to whistle-blowing.

Additional analysis

The meaning of “employee” in the Proposed Law

The types of individual that could fall to be treated as employees for the purposes of the Proposed Law would be as follows:

1. Individuals who work for a DIFC employer and who are based in, or ordinarily work in or from, the DIFC;
2. Individuals who have agreed with their DIFC employer that their employment will be subject to DIFC law; and/or
3. Individuals with DIFC employers who are determined by the DIFC Court to have a “sufficiently close connection” with the DIFC for it to be appropriate to apply any part of the Proposed Law.

Under the Current Law, the test is essentially as stated in (1) above, and so the alternative tests in (2) and (3) would be additional and would result in more individuals being treated as employees. Test (2) would allow individuals who work for DIFC-based employers to be treated as employees, even where their work is outside the DIFC. Test (3) would mean that individuals who work for DIFC-based employers outside the DIFC could also fall to be treated as employees, even if they were secondees with an employment contract that is not expressed to be subject to DIFC law.

Secondees

The Proposed Law would make a key distinction between secondment arrangements that are expressed to be subject to the Proposed Law, and those that are not. Those that are not will be subject to most, but not all, of the Proposed Law.

Importantly, the section of the Proposed Law relating to termination, which includes an employee’s right to an end of service gratuity, would not apply to secondees that are not subject to the Proposed Law; the consultation paper notes that regulations would be put in place to ensure that this carve-out is not abused by employers.

Short-term employees

Any employee working for an employer for no more than 30 days over a 12-month period would be treated as a short-term employee. Broadly speaking, the provisions of the Proposed Law relating to leave, anti-discrimination and termination of employment would not apply to short-term employees.

Part-time employees

The Proposed Law would apply to employees who work on a part-time basis, although these employees would only be entitled to leave on a pro-rated basis.

Comment

In conducting its review, the DIFC Authority has been guided by international best practice, including recent developments in English employment law.  The Proposed Law would also provide some welcome clarifications in relation to certain aspects of the Current Law.

The Proposed Law is not yet in force and effect, and it would not be unreasonable to expect that it will be subject to further revision prior to its enactment. That said, DIFC employers and employees would be well advised to conduct a detailed review of the Proposed Law, so as to understand:

• how secondees, part-time employees and short-term employees would fall to be treated under the Proposed Law; and
• how the Proposed Law would affect the financial and other rights and obligations of employers and employees following its implementation.

It would also be prudent for employers to start the process of reviewing their template employment agreements, as the Proposed Law would undoubtedly have an impact on how these agreements are drafted.

The consultation paper can be accessed here. The full text of the Proposed Law, blacklined against the Current Law, can be accessed here.