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ED KEMP WRITES ON THE CHANGING LANDSCAPE OF DIFC EMPLOYMENT LAW

The consultation period for the new draft Employment Law in the Dubai International Financial Centre (“DIFC”) is rapidly drawing to a close. The new Law, if enacted, is expected to come into force imminently. The new regime contains many significant changes: an expanded scope and the creation of statutory rights to damages for discrimination and constructive dismissal. Ed Kemp surveys the new landscape.

The scope of the new Law

The proposal is to expand the scope of protection of DIFC employment law dramatically. Firstly, there are new specific provisions confirming that Part-Time and Short Term employees will be covered. The coverage in respect of the latter (those working no more than 30 days per year for a DIFC employer) will be limited because they are excluded from many of the statutory rights such as the non-discrimination and the termination provisions.

Secondly, the new Law will apply in its entirety to those working in the DIFC on a secondment. The term “secondment” is defined broadly to include any agreement or arrangement for a “temporary transfer” by an employer to its place of business in the DIFC or for part of an employee’s duties to an employer to be performed from a place of business in the DIFC. Further Regulations are envisaged to restrict this term to strictly defined categories but it is uncertain how this will sit within the width of the definition. DIFC employers will be able to effectively contract out of certain provisions by choosing a different applicable law in employment contracts for those on secondment. However, a number of provisions in the Law will remain mandatory including, notably, the non-discrimination provisions.

Finally, a residual provision confirms the new Law’s territorial scope, where the law “…has been determined by the Court to have a sufficiently close connection with the DIFC for it to be appropriate to deal with any right, remedy, privilege, debt or obligation of that individual pursuant to this Law.” This test will be familiar to UK employment lawyers from Lawson v. Serco Ltd [2006] ICR 250 and Ravat v. Halliburton [2012] ICR 389. However, it is broader than the UK test. It does not also require any connection to DIFC employment law. Therefore, it appears that an individual on an overseas employment contract administered from overseas but working part of the time for an entity in the DIFC would be covered under DIFC employment law whereas if the “DIFC” is substituted for the “UK”, they would not be covered by UK statutory labour law (see: Fuller v. United Health Care UKEAT/0464/13/BA).

The upshot of the above, when combined with some of the new statutory rights, is that the DIFC may become a more attractive forum for senior executive claimants than the UK. In the UK, damages for unfair constructive dismissal are capped at a current maximum of £95,211. In the DIFC, the proposal is to cap constructive dismissal damages to an amount not exceeding the employee’s annual wage at the termination date. Annual wage includes salary, allowances and fixed contractual bonuses, commission or other payments. It can be seen immediately that an employee earning £100,000 or more would be better off bringing a constructive dismissal claim in the DIFC Courts. In addition, such an employee would (subject to the employer’s consent) benefit from access to the DIFC Small Claims Tribunal with a swift, anonymous and lawyer-free resolution rather than having to bring a claim in the overloaded and under-resourced UK Employment Tribunal system.

The new penalty provision

The penalty payment provision in Article 18 of the current Law for non-payment of wages within 14 days of termination has led to unjust and harsh results. The headline example was cited in Frontline Development Partners Limited v Adil [2016] DIFC CA 006 at [26], as “…An employee who is owed AED 1 on termination is entitled to a daily penalty that is equivalent to wages that would have been payable had the employee’s employment not been terminated”.

The proposal is to preserve the penalty while introducing conditions as to eligibility (the employee must be owed more than 5% of the full amount due on the termination date), imposing a long-stop limit as to the amount (six months wages) and giving the Court a general discretion to reduce or waive the penalty where imposing the penalty is unreasonable. These are very welcome changes for DIFC employers who face artificially inflated cases with employees being financially rewarded for refusing to settle or for delays by the Court in listing cases and handing down judgment.

Discrimination

There has been a general principle of non-discrimination (including a reasonable adjustments duty) in DIFC employment law since DIFC Law No.4 2005. In 2012, the current Law expressly replicated a series of provisions in the UK Equality Act 2010 (“EqA”) including the concepts of direct discrimination, indirect discrimination and harassment. The proposed new Law adds victimisation to this list subject to the treatment being harassment rather than merely a detriment.

The key innovation is to give employees the right to claim damages for discrimination in the DIFC Courts. This follows the lead of the Abu Dhabi Global Market (“ADGM”) which permits a civil claim for damages for breach of statutory duty in respect of the Employment Regulations 2015 including non-discrimination provisions. These provisions have not yet been tested but as the law currently stands there is no limit on the amount of compensation that may be awarded. The DIFC Consultation Paper takes a different approach by proposing to limit damages to a year’s wages. This difference is not explored in the Consultation Paper but, on the face of it, would create legislative arbitrage between two anti-discrimination regimes in the UAE.

A discrimination claimant in the DIFC may face obstacles to obtaining the information and evidence needed to assess the strength of their case. Unlike the UK, under the Rules of Procedure of the DIFC Courts (“RDC”) in respect of standard disclosure, a party is only required to produce those documents “on which it relies” rather than documents that adversely affects its own case (see: RDC 28.15). A request to produce relevant documents can be made but an employer is only compelled to produce such documents following a successful application to the Court. The proposed new Law acknowledges this by providing a questionnaire procedure enforceable by order of the Court. It is envisaged that further Regulations will provide guidelines imposing limits on the scope of the questionnaires.

When applying DIFC discrimination law, case law under the EqA will be persuasive because of the similarity in wording between the two regimes. For instance, the expression “on grounds of” in direct discrimination or the definition of indirect discrimination which replicates s.19 EqA in its entirety. There will, however, be limits as to the extent to which English law can shape the DIFC common law in this field. UK employment law has been heavily influenced by EU law and decisions of the CJEU. There will be scope for debate as to the extent to which this, in turn, can be a permissible influence in the DIFC Courts. Finally, many of the leading UK discrimination cases have been driven by public policy considerations. For example, the proposition that fact-sensitive discrimination claims should be heard on their merits and not struck out (see: Anyanwu v. South Bank Student Union [2001] ICR 391). Will the DIFC Courts adopt such an approach when faced with apparently weak or implausible claims?

The new termination for cause provisions

The draft new Law replicates the “termination for cause” provision in the current Law and does not provide statutory unfair dismissal protection. This maintains the status quo. In McDuff v. KBH Kaanuun Limited [2014] CA 003, the Court held that a “range of reasonable responses” test does not apply to the “reasonable employer” who would have terminated the employee for cause.  In Silva v. United Investment Bank Limited [2014] CA 004, the Court rejected the importation of the test in Burchell v. British Home Stores [1978] ICR 303 namely that of reasonable belief on reasonable grounds following a reasonable investigation.

However, the new Law also seeks to extend this definition by expressly adopting certain long-standing provisions from UK unfair dismissal law: ss.98(4)(a)-(b) Employment Rights Act 1996. The UK Supreme Court in Reilly v. Sandwell Metropolitan Borough Council [2018] UKSC 16 has recently queried (obiter) whether Burchell applies to the inquiry under s.98(4) ERA (per Lord Wilson at [20] and Lady Hale at [33]). It may be that the words “in accordance with equity and the substantial merits of the case” give the Courts a direct and interventionist role in assessing reasonableness. This might be an area in which UK employment lawyers can learn from the DIFC common law as the Courts in both jurisdictions struggle to apply provisions in similar terms.

Constructive dismissal

This is a radical proposal. The employee will be able to claim capped damages for terminating employment “for cause”. In other words, the new Law would create a form of statutory unfair dismissal law applicable only to resignation but not to express dismissal by the employer. DIFC employers will need to tread carefully before dismissing an employee for cause. If a proposed dismissal fails to afford the employee a fair procedure, the employee could resign and bring a claim for damages in respect of the manner of dismissal. This change may pave the way for the next amendment: a wider statutory unfair dismissal scheme with limited damages recoverable for both types of dismissal.

Ed Kemp has an international employment practice. He has been involved in a number of employment cases in the DIFC Courts as well as cases with international elements in the UK Courts and Employment Tribunals.
Posted: 20.03.2018 at 12:02
Tags:  Comments  Employment Law  Articles  International
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