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ED KEMP WRITES ON THE NEW LANDSCAPE OF DIFC EMPLOYMENT LAW

The new Employment Law in the Dubai International Financial Centre (“DIFC”) has been enacted and will take effect from 28 August 2019. The new Law contains a variety of changes compared to the draft Law which was published for consultation in March 2018 with some interesting potential repercussions. Ed Kemp reviews aspects of the new Law (LINK).

The new penalty provision

The penalty provision in Article 18 of the current Law for non-payment of wages within 14 days of termination contained no discretion or waiver and, as a consequence, led to some huge financial penalties being awarded against DIFC employers (see, for example: Frontline Development Partners Limited v. Adil [2016] DIFC CA 006).

Article 19 of the new Law contains a new penalty provision with a series of limitations and a waiver:

  • The new penalty will not bite on deferred additional payments (e.g. deferred discretionary bonuses and commission payments);
  • A penalty will only be awarded if the amount due and not paid to the employee is held by a Court to be in excess of the employee’s weekly wage;
  • The penalty will be calculated on the basis of the employee’s annual wage, divided by 260 days to give a daily wage (additional payments such as discretionary bonuses, commission are excluded from the calculation);
  • There is a backstop of six months on any penalty because of the new 6-month limitation period applicable to all employment claims (Article 10);
  • Finally, there is a waiver on the penalty for any period during which: (i) a dispute is pending in the Court regarding any amount due under the penalty provisions; and (ii) the employee’s unreasonable conduct is the material cause of the employee failing to receive the amount due from the employer (Article 19(4)). This waiver is welcome news for DIFC employers as it calls a halt to the penalty acting as a windfall when there are delays in Court procedure or an employee has been terminated for cause.

What about claims in respect of a penalty accrued under the old Law? There may be a volume of such claims or potential claims in the system given the 6-year limitation period that is applicable under the current Law.  The new Law contains an express carve out for such claims in Article 1(5): “…a claim in respect of any part of a penalty due pursuant to Article 19(2) which would otherwise be excluded by Article 19(4) may be brought prior to the commencement of this Law”. Therefore, it appears to be the case that any claims for a penalty issued prior to 28 August 2019 will not be subject to the waiver in the new Law.

Discrimination

There has been a general principle of non-discrimination 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 200 (“EqA”) including the concepts of direct discrimination, indirect discrimination and harassment. However, there is no entitlement under DIFC Law to statutory damages for breach of the discrimination provisions (see Hana Al Herz v. The Dubai International Financial Centre Authority [2013] DIFC CA 004).

A key innovation in the new Law is to provide a right to compensation for discrimination capped at an amount equivalent to the employee’s annual wage. But, where the employer has terminated the employee for cause and if a compensation order is made under the discrimination provisions, the amount of compensation will be increased up to two times the annual wage of the employee (Article 63(3)). In addition, the Court will have the power to make a declaration, compensation for injury to feelings and make appropriate recommendations.

The enforceability of the principle of non-discrimination is surely a welcome development for discrimination protection in the region and we can now expect case-law to develop on the meaning of the provisions.

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. As EU law has no legal effect in the DIFC, it will be open to argue for different policy-based approaches in the DIFC. It will be interesting to see how the case-law develops in the years to come.

The new Law further expands discrimination protection to include discrimination based on age, pregnancy and maternity and now prohibits victimisation of an employee who does a protected act (e.g. brining proceedings for or making an allegation of discrimination). The victimisation provision is very largely replicated from s.27 EqA and the UK case-law will, in respect of such claims, be highly persuasive.

Discrimination procedure

Finally, the new Law puts the burden of proof on the complainant with no statutory reverse burden (Article 61(1)).

One difference compared to the draft Law is that the new Law does not contain a statutory questionnaire procedure.

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.

In many cases, employees will need to substantially invest by making a pre-action disclosure application and/or a request to produce in order to obtain documents that are not in their possession but may prove their case. In such cases, these applications will be an important procedural step in the litigation, the outcome of which may make or break the claim.

Historic discrimination claims

Article 61(2) of the new Law provides a new limitation period for discrimination claims which is 6 months beginning with the later date on which the new Law comes into force (i.e. 28 August 2019) or from the date of the act or failure to do something, to which the complaint relates.

However, the Court has a power to disapply the limitation period if “there are circumstances which justify” disapplying it and for “such other period as the Court considers reasonable” (Article 61(2)(b)). This provision when read with the transitional provision in Article 1(3) of the new Law may arguably permit historic discrimination claims stretching back to 2005 when the right not to be discriminated against was first introduced. This is because Article 1(3), which is subject to Article 61(2) provides (as may be material): “the repeal and replacement under Article 1(1) shall not affect…(a) any right…incurred by any person…under the Previous Law…”.

As for the circumstances in which limitation might be extended, a useful starting point might be the guidance given by the UK Employment Appeal Tribunal in British Coal v. Keeble [1997] IRLR 336 which sets out a number of factors that may be relevant: 

(a)          The length of and the reasons for the delay;

(b)          The extent to which the cogency of the evidence is likely to be affected by the delay;

(c)           The extent to which the parties sued had co-operated with any requests for information;

(d)          The promptness with which the [Claimant] acted once he or she knew of the facts giving rise to the cause of action;

(e)           The steps taken by the [Claimant] to obtain appropriate professional advice once he or she knew of the possibility of taking action.

But, the context for Keeble was, of course, s.33 of the Limitation Act 1980 which provides for an “equitable” extension of time in personal injury cases and expressly lists the factors set out above. The drafting of Article 61(2)(b) does not use the language of equity rather the Court has a very broad discretion to apply such other period as it “considers reasonable”. It may be that Article 61(2)(b) will be applied more generously.

Termination provisions

The new law maintains the status quo when it comes to the employer’s right to terminate for cause. A proposal in the draft law was to expand the definition by reading across similar wording from s.98(4) of the UK Employment Rights Act 1996 (“ERA”) into the meaning of “termination for cause”.

The new law (Article 63) retains almost identical wording to the current provision (Article 59A). This has the benefit of retaining the current DIFC jurisprudence. The DIFC Court of Appeal raised the bar of the hypothetical “reasonable employer” from a range of reasonable responses test to what the hypothetical employer “would have done”, giving a DIFC autonomous meaning to the concept and rejecting the importation of UK case law under its unfair dismissal scheme in the ERA (see McDuff v. KBH Kaanuun Limited [2014] CA 003).

But, the status quo ends there. An important innovation in the new Law is the statutory right to damages for constructive dismissal. The termination for cause provision has been mutualised such that the employee now has a right to terminate with immediate effect for cause. The employee will be entitled to: (i) wages in lieu of notice; (ii) end of service gratuity to include the notice period the employee would have been required to give to terminate their employment; and (iii) payment in lieu of untaken leave. These claims will be especially valuable in the case of long-serving employees with long contractual notice periods.

The test in McDuff is likely to cut both ways and apply to the concept of the “hypothetical employee”. This will act as a filter in respect of claims founded on a perception or unjustified sense of grievance. But, how the Court will apply the concept in practice remains to be seen. A new risk for DIFC employers to manage, in accordance with their contracts and policies, will be that of employees jumping before they are pushed. The DIFC employer that does not to this or does not do this properly, will be exposed to a successful constructive dismissal claim.

Ed Kemp is chair of Littleton’s Dubai Group. Ed has an international employment practice. He has been involved in a number of important employment cases in the DIFC Courts as well as cases with international elements in the higher UK Courts and in the Employment Tribunals.

Posted: 17.06.2019 at 14:17
Tags:  Comments  Employment Law  International & Offshore
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