Global Compliance Desk – Dubai

The New DIFC Employment Law 2019

On June 12, 2019, the Dubai International Financial Center (the DIFC) announced the enactment of DIFC Law 2 of 2019 (the New DIFC Employment Law) to replace the existing DIFC Law 4 of 2005 (the Old DIFC Employment Law). The New DIFC Employment Law is to come into force on August 28, 2019, and will directly affect almost 24,000 employees based in the DIFC.

A number of key changes have been introduced as part of the New DIFC Employment Law which employers operating in the DIFC will need to be mindful of, not least because a new penalty system of fines has been annexed as part of the New DIFC Employment Law for contraventions, non-compliance and/or breaches. The main reason for the enactment of the new law is to overcome many issues of the current Employment Law such as paternity leave, sick leave, and end of service settlement.

Applicability

This new law applies to all employers and employees which also includes part-time and short-term employees. A part-time employee is defined as an employee whose employment contract either stipulates:

• Less than eight working hours per workday, inclusive of any rest, nursing or prayer breaks;
• Less than five workdays per workweek; or
• Terms of employment do not constitute full-time employment.

All provisions of the new law apply to part-time employees except for leave entitlements which are to be calculated on a pro-rata basis.

Employers and employees can now contractually opt into the New DIFC Employment Law (previously its application was restricted only to employees of an establishment having a place of business in the DIFC and who were based within, or ordinarily working within or from, the DIFC).

The concept of “secondments” has been expressly recognized under the New DIFC Employment Law with a specific secondment card being required to be procured and maintained by the parties from the DIFC Authority in order to legitimize and validate the secondment arrangements (specific provisions of the New DIFC Employment Law will not have application to seconded employees, however).

Key Changes

Increased or expanded family-friendly benefits include:

• Male employees who will have been continuously employed for at least twelve months immediately preceding the expected or actual week of his wife giving birth will be entitled to five working days of paid paternity leave.
• A male employee has the right to take paid time off to accompany his pregnant wife to appointments for antenatal care.
• Mothers returning from maternity leave who work more than six hours per day are entitled to nursing breaks of up to one hour for the six months after childbirth.
• Female employees who are adopting a child will be entitled to statutory maternity leave if the child is less than five years old at the time of adoption. 
• The right to paternity leave extends to the father of adopted children who are under the age of 5.

Reduction of Sick Pay

The current statutory sick pay entitlement of 60 days on full salary will be reduced and replaced with the following staggered payment system:

• 100% of the employee’s daily wage for the first 10 working days of sickness absence;
• 50% of the employee’s daily wage for the following 20 working days of sickness absence; and
• Unpaid for the remaining 30 days of sickness absence.

In terms of Article 11(2), the conditions of employment set out in the New DIFC Employment Law are “minimum requirements” and cannot be waived even by express agreement by the employer and the employee unless such waiver is specifically allowed under the new law. It is possible to agree on conditions that are more favorable to the employee in an employment contract.

One such instance where an employer may change the minimum requirements by express written agreement is the maximum weekly working time of an employee. In terms of Article 22, the employee’s maximum working time is 48 hours per week. However, Article 22 allows an employer to increase this limit if the employee consents in writing. Taking into account the mandatory daily rest period (11 hours per day) and the weekly rest period (24 hours per week), an employer may increase the weekly working time up to 78 hours if the employee consents to such an increase in writing.

Time Off to Look for Work Whilst on Notice

Previously employees were entitled to take reasonable time off. This right has been repealed.

Garden Leave

Employers can insist that employees do not attend work or undertake duties during their notice period.

Conclusion

The modifications made about by the New DIFC Employment Law are significant and widespread in nature and due to the penalty system of fines in place for breach, employers are well-advised to ensure their employment contractual documentation, policies and handbooks are in alignment with the New DIFC Employment Law. 

Employees’ entitlement to end of service gratuity under the existing Employment Law requirements will continue to accrue until the end of January 2020, with DIFC employers then required to make contributions into a qualifying scheme with effect from February 1, 2020.

The DIFC has affirmed that there will be a grace period up to March 31, 2020, for DIFC employers to enroll employees however, contributions will need to be made retrospectively from the February salary. Employers will not be accountable for any investment profits or losses in respect of any contributions made retrospectively on or before March 31, 2020.