• Employment

    The New DIFC Employment Law – What Will Change?

    DIFC Employment Law

    The New DIFC Employment Law – What Will Change?

    The legislation that regulates employment relationships within the Dubai International Financial Centre (the ‘‘DIFC’’) will receive a substantial update come August 28th 2019, after the Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, announced the enactment of DIFC Law No.2 of 2019 (the ‘‘New Law’’).

    The New Law, which was originally announced in early 2018 and which has undergone substantial consultation, attempts to strike a more even balance between the interests of employers vs employees, whilst also updating and incorporating provisions to reflect best current global practices.

    Davidson and Co examine some of the key new changes set to be introduced.

    End of Service Gratuity:

    Regardless of the circumstances which give rise to a termination, end of service gratuity payments must now be made, even where an employee is dismissed for cause.

    The New Law also provides employees with the choice of receiving either an end of service gratuity payment, or a pension contribution, provided that the total contributions are not less than what the employee would be entitled to by way of end of service gratuity.

    Under the New Law, the end of service gratuity calculations remain the same, however, the law does stipulate that the basic wage must not be less than 50% of the employee’s annual wage.

    Amendment to Article 18 Penalty Provision:

    The New Law has completely re-written Article 18 under the current law, the somewhat controversial penalty for the late payment of end of service benefits to an employee on their termination.

    Similar to the current law, employers will face a daily penalty where an employee has not received their full remuneration 14 days following the termination date, however, entitlement to any such penalty payment will now only arise where the court rules the amount due to an employee is in excess of their weekly wage. The court furthermore will have discretion to waive the penalty payment in circumstances where: i) the dispute is pending in the court; or ii) where the employees unreasonable conduct is the material cause of the employee failing to receive the amount due from the employer.

    Another key change introduced by the New Law is a cap on the penalty payment of 6 months, equivalent to the employee’s remuneration for 6 months employment.

    Notice Periods:

    Under the New Law, parties can now only agree to extend a notice period, whereas previously notice periods could also be reduced or waived by mutual agreement. While the minimum notice periods prescribed under the current law remain the same, the minimum notice periods will not apply to: i) employees who are in their probation period; ii) employees who have a fixed term contract with a fixed end date; or iii) where an employee has been terminated for excessive sick leave.

    Where an employer wishes to make a payment in lieu of notice, the employee must agree to this by the way of a settlement agreement.

    Sick Pay & Accrued Holiday:

    Currently, employees are entitled to full pay for 60 working days, however, under the New Law this has been reduced to full pay for the first 10 working days, half pay for the following 20 working days, and the remaining 30 days without pay.

    In respect of annual leave, employees will no longer be allowed to carry over 20 working days holiday into the next working year, with the New Law introducing a cap of 5 working days.

    Settlement Agreements:

    The current law is silent on this aspect, however, the New Law provides that settlement agreements may be utilised by employers and employees to resolve disputes or govern the end of an employment relationship. In order for settlement to be upheld, an employee will be required to confirm that they have been given the opportunity to seek legal advice on the terms of the agreement, and such advice must be given by a lawyer registered with the DIFC Academy of Law.

    Anti-Discrimination Provisions:

    The protected characteristics under the current law have been expanded to include discrimination based on age, pregnancy and maternity. The New Law also introduces a prohibition on victimisation.

    Of significance, the New Law introduces remedies for circumstances in which an employer is found to have discriminated against or victimised an employee including:

    1. To make an order for payment of compensation (capped at an amount equivalent to the employee’s annual wage) which the court considers reasonable in the circumstances;
    2. To make a declaration as to the rights of the employee and employer in relation to the subject of the proceedings; and
    3. To make a recommendation regarding changes to a company’s internal policies and practices.

    The court is given express powers to increase the amount of compensation awarded where the employee fails, without reasonable excuse, to comply with a recommendation of the court.

    Any claim for discrimination under the New Law must be raised within 6 months of the alleged behaviour or failure of the employer to act in circumstances where a complaint has been raised, otherwise the claim is time barred.

    Paternity Leave:

    Fathers now have the right to up to five working days of paid paternity leave, alongside the right to take time off to attend antenatal appointments, where they have been continuously employed for one year immediately preceding the expected or actual week of his wife giving birth, and where the employer is notified at least 8 weeks in advance. The New Law also extends to the adoption of a child.

    For further information in relation to the New Law and/or how Davidson & Co can help your company ensure that its employment contracts and associated documentation are in compliance with the new provisions, please contact Victoria Smylie on +971 434 8897 or vsmylie@davidsoncolaw.com

  • Employment/ Legal Update

    All UAE workers entitled to 14 public holidays in 2019 and 2020

    uae worker

    The UAE government has taken the decision to remove the distinction between private sector and public sector in terms of public and national holidays. Previously the public sector had been granted more public holiday than the private sector every year, and the decision is seen as one designed to encourage more Emiratis to enter into the private sector.

    All workers in the UAE for the next 2 years are therefore entitled to 14 days public and national holiday.

  • Employment/ Legal Update

    Terminating an unlimited term contract under Article 117

    Terminating an unlimited term contract under Article 117

    Federal Law number 8 of 1980 (as amended), colloquially known as the UAE Labour Law, regulates all employment contracts in the UAE, with the exception of certain ‘offshore’ jurisdictions such as the Dubai International Financial Centre or Abu Dhabi Global Market. It is therefore a fundamental piece of legislation, the understanding of which is essential to both employees and employers alike.

    The UAE Labour Law distinguishes between two types of employment contracts; limited term and unlimited term. In their basic forms, the contracts are as the name suggests; limited term contracts specify a fixed term and an end date, and unlimited term contracts are open ended and therefore seen as more flexible. Different articles relate to the termination of the two separate contract types, and for the purposes of this commentary, we will review one of these articles – article 117 – one of the two main ways in which an employer may lawfully terminate an employee’s unlimited term contact.

    Article 117 stipulates that there must be ‘valid grounds’ by which either an employer or employee can terminate an unlimited contract. These ‘valid grounds’ are not defined, although the UAE Labour Law does specify that they must be work related when seeking to be relied upon by the employer, and from previous judgments, the Labour Courts have been willing to accept poor performance or misconduct as a ‘valid reason’. Where an employee is terminated for a valid reason, they are entitled to their full end of service gratuity and other entitlements under the law.

    Where a company fails to comply with the UAE Labour Law provisions regarding termination, they may be found to have arbitrarily dismissed the employee, and subject to a penalty of between 1-3 months compensation based on an employee’s full final salary. The penalty is at the court’s discretion, usually having regard to the specifics of each case; eg. length of employment, seniority etc.

    Under the terms of article 117, a minimum mandatory notice period of thirty days is also prescribed, during which an employee is entitled to their full pay and benefits, and are still bound by the terms of their employment contract. Failure to abide by the notice period, by the employer or employee, opens up the possibility for a payment in lieu of notice. Whether the employer wishes the employee to remain an active part of the business during the notice period, or decides that gardening leave is more appropriate, is a matter of company policy. The requirements of an employee on notice should be set out clearly so as to avoid dispute, and should ensure that handover, and any other company requirements, happen during the notice period and specifically while the employee is still contracted with the company.

    The legal obligations on an employer do not end once article 117 has been satisfied, but having a coherent and well-drafted company policy that expands upon what ‘valid grounds’ are, provides for company work standards and details procedure on termination, can ensure that the termination process is as straightforward as possible. The best outcome in any termination is one whereby both the employer and employee know the process, and are committed to it.

    Where an employer is looking to rely on article 117 to terminate an employee, it is extremely important that the correct procedure is followed and the necessary paperwork is in place.

    For further information on article 117 or any other employment advice

    Christopher Chipperton
    +971 4 343 8897

  • Employment

    FAQ’s – Terminating an Employment Contract in the UAE

    Terminating an Employment Contract in the UAE

    The decision to end an employment relationship for both an employee and employer is often one that is difficult to make, and stressful for all those involved. This is heightened by the requirement to ensure that the termination of the employment contract is handled correctly and in line with the applicable law. To assist, we address the key provisions of Federal Law No.8 of 1980 otherwise known as the UAE Labour Law, on the termination of both limited and unlimited term contracts.

    Limited vs Unlimited Term Contract

    1. Limited – Generally a start and end date are provided for in the body of the contract up to a maximum of 2 years.
    2. Unlimited term contract – An open-ended contract with no specified end date.

    How is a Limited Term Contract Terminated?

    Unless both parties agree by mutual consent prior to the end date to either; i) renew the contract or ii) convert the contract in to an unlimited term contract, the contract is cancelled automatically. It is therefore unusual for a limited term contract to include notice provisions.

    i) Termination by Employer

    An employer may terminate a limited term contract before the end date if it can be proved the employee breached one of the grounds provided for in Articles 120 and 88  (as detailed below).

    ii) Termination by Employee

     Under Article 121, where an employer fails to honour his obligations to an employee under the terms of the employment contract or, if an employee is assaulted by the employer or the employer’s legal representative, an employee may lawfully resign without notice.

    Early Termination of a Limited Term Contract by Employer

    Where an employer seeks to terminate a limited term contract prior to the end date, for reasons other than those specified in Articles 120 or 88, they will become liable to pay the employee compensation of a maximum of 3 months’ full salary or the remainder of the term of the contract, whichever is shorter.

     Early Termination of a Limited Term Contract by Employee

     Where an employee seeks to terminate a limited term contract prior to the end date, for reasons other than those specified in Article 121, they will become liable to pay the employer compensation of a maximum of 3 months’ half salary or the remainder of the term of the contract, whichever is shorter.

    How is an Unlimited Term Contract Terminated?

    i) Termination by Employee

    An employee may terminate their employment contract by providing the employer with notice as per their contract (minimum of 30 days’ and maximum 3 months’).

    In addition, an employee may lawfully terminate their contract of employment, without notice, for either of the reasons stipulated under Article 121 as aforesaid.

    ii) Termination by Employer

    The UAE Labour Law provides for two ways in which an employer can lawfully terminate an employee.

    1 – “Valid Reason”

    Under Article 117, an employer may terminate an employee with notice as per their contract (minimum of 30 days’ and maximum 3 months’) for a “valid reason”. While the term “valid reason” is not defined under the law, any reason must be work related for example, poor performance or misconduct.

    2 – Gross misconduct as defined in Articles 88 and 120 of the UAE Labour Law

    The UAE Labour Law provides that an employer may terminate an employee without notice for specific acts that amount to gross misconduct as provided for under Articles 88 and 120:

    • Assumes a false identity or nationality or submits forged certificates or documents;
    • Engaged on probation and is dismissed during or at the end of probationary period;
    • Commits a fault resulting in substantial material loss to the employer, provided that the latter notifies the labour department of the incident within 48 hours of him becoming award of its occurrence;
    • Disobeys instructions on the safety of work or workplace, provided that such instructions are in writing and posted as a conspicuous place and are communicated verbally to the worker, in case he is illiterate;
    • Defaults on his basic duties under the employment contract and fails to redress such default despite a written interrogation and a warning that he will be dismissed if such default is repeated;
    • Reveals any confidential information of the firm for which he works;
    • Is convicted by a competent court of a crime against honour, honestly or public morals;
    • Is found in a state of drunkenness or under the influence of a narcotic drug during working hours;
    • Assaults the employer, the manager in charge or any of his workmates during working hours;
    • He is absent from work without a valid reason for more than 20 non-successive days in one single year, or for more than 7 successive days.
    • If found to be working for another employer while on annual or sick leave [Article 88].

    Where an employee is validly found to be terminated under any of the aforementioned grounds, they will forfeit their entitlement to end of service gratuity.

    What will happen if the notice period is not complied with?

    In the event that either party fails to serve notice in accordance with the law and/or employment contract provisions, or has waived/reduced the period of notice, the other party is entitled to payment in lieu of notice equivalent to the entire or reduced notice period. Compensation is calculated based on an employee’s last salary.

    End of Service Gratuity Provisions when Employer Terminates Contract (Limited and Unlimited Term Contracts)

    If an employee has completed at least twelve months in continuous employment with an employer, then they are entitled to payment of end of service gratuity upon the termination of their employment. The end of service gratuity is calculated as follows:

    • 21 days wages for every year of employment completed, and for each year of the first five years of employment (calculated pro rata for any additional days served).
    • 30 days wages for each additional year of employment after five years, (calculated pro rata for any additional days served).

    End of Service Gratuity Provisions when Employee Terminates Contract

    i) Limited Term Contract

    An employee is not entitled to end of service gratuity unless they have been in continuous employment for over 5 years. In these circumstances, end of service is calculated as if the employee terminated the employment relationship under an unlimited term contract.

    ii) Unlimited Term Contract

    Provided an employee has completed at least twelve months in continuous employment with an employer, then they are entitled to payment of end of service gratuity upon the termination of their employment on a reduced rate as follows:

    • 1 – 3 years’ employment, one third of 21 days’ basic wage for each year of service.
    • 3 – 5 years’ employment, two-thirds of 21 days’ basic wage for each year of service.
    • 5 years’ employment, full 21 days’ basic wage for each year of service.
    • 5+ years employment, 30 days’ basic wage for each additional year.

    In all circumstances, the amount of gratuity shall not exceed 2 years wage.

    For further information on how we can assist you in your enquiries regarding Labour Laws, or to discuss in more detail any of the general principles raised above, please contact us on 04 343 8897 where one of our team will be delighted to assist you.

     Please note that the DIFC has a separate legal framework for Employment matters.

    Victoria Smylie
  • Employment/ Legal Update

    New labour insurance initiative to enhance rights of employees and free up cash liquidity for UAE companies

    New labour insurance initiative

    From 15 October 2018, the UAE Cabinet has announced a new labour deposit scheme initiative which will enhance the rights of employees and free up cash liquidity for UAE companies.

    Currently, for each new employee hired, a company is obliged to pay an AED 3,000 deposit to the Ministry of Labour as a way of securing that employees receive all or part of their entitlements due and payable at the end of their termination of employment, such as end of service gratuity, holiday pay and payment in lieu of notice, if a company is unable to pay,

    Typically however, the structure of the current deposit scheme is limited to the value of the deposit and as a result, those employees who are owed significantly more than AED 3000 on the termination of their employment, are left with a substantial shortfall in the event that their employer is unable to meet the applicable payments.

    From 15 October 2018, the proposed new deposit scheme will drastically reduce the deposit payable by employers to just AED 60 for each new employee, thereby significantly reducing the upfront costs of recruiting staff, together with releasing liquidity which is currently tied up in the Ministry of Labour.

    Furthermore, the new system entitles employees to payouts of up to AED 20,000 by raising the insurance coverage, a marked increase on the current deposit amount, and fantastic news for all workers in the region, particularly vulnerable blue-collar workers.

    As with any insurance policy, successful claims may lead to increased premiums however for now, both businesses and employees alike will benefit from the new deposit scheme.

    For more information on company set up in the UAE or any other legal requirements please contact:

    Finlay Donaldson on +971 4 343 8897

  • Corporate Law/ Employment/ Property

    Retirement Visas to be made available in the UAE


    The UAE will offer 5-year visas to expats aged over 55 who meet certain criteria in yet another relaxation of the region’s visa regulations.

    Who can apply?

    This Retirement Visa will be available for expats who are over the age of 55 and have retired from working.

    What are the criteria?

    Applicants must be over the age of 55 and retired. They must also meet one of the following criteria:

    1. Have investments in real estate worth over AED 2 million (~£415,000.00);
    2. Have financial savings of not less than AED 1 million (~£208,000.00); or
    3. Provide proof of a monthly income of over AED 20,000.00 (~£4,150.00).

    How long is the visa valid?

    The visa will be valid for 5 years, providing that one or more of the above criteria is continually met. Initial indications are that the visa will possibly be renewable.

    When can I apply?

    The UAE cabinet recently announced that the application process will open sometime in 2019.

    Who will benefit?

    Given the age requirement, the new retirement visa will benefit those who wish to continue to reside in the UAE full time without the more stringent criteria imposed by work visas.

    For further information on Retirement Visas or for any other legal queries, please contact Victoria Smylie on +971 4 343 8897

  • Economy/ Employment/ Family Law

    Visa amnesty begins in the UAE


    Starting August 1 2018, the UAE government have granted a three-month general visa amnesty for foreigners violating the residency law.

    All individuals who are overstaying in the country can either regularize their visa status legally or exit the country without paying overstay fines.

    For those who wish to leave the UAE, amnesty-seekers have to get an exit permit and emergency certificate (if they are without a passport) and have a flight booked for within 10 days of making an application.

    For those who wish to stay in the UAE, individuals can regularize their status if they have a job offer or apply for a six-month temporary visa to search for a new job. Additionally, absconders can get an absconding case closed for a nominal fee.

    The amnesty will run until October 31 3018 with a possible two-month extension depending upon the circumstances.

    For any of your visa, employment or company set up requirements please do not hesitate to get in touch.

  • Economy/ Employment/ Private Client

    The UAE launches a 10-year residence visa


    The outcome of a cabinet meeting chaired by His Highness Sheikh Mohammed Bin Rashid Al Maktoum on Sunday 20th May 2018 is set to improve the trust and confidence of foreign investors, creating countless new opportunities within the UAE.

    The meeting established the implementation of a 10-year residence visa aimed at applying to foreign investors and specialists such as doctors, engineers, researchers and scientists. The new rule will also apply to the family members of any such entitled persons. Eligibility for the visa will also extend to top performing students.

    His Highness Sheikh Mohammed Bin Rashid Al Maktoum stated, “Our open environment, tolerant values, state-of-the-art infrastructure, and flexible legislation are the best plan to attract international investment and exceptional talents. The UAE will remain the land of opportunity, the best environment for realising human dreams and unleashing their extraordinary potential”.

    The new law is expected to be implemented by the end of 2018.

    Amendments to Foreign Ownership (Company) Laws

    In the same meeting, the Cabinet also announced proposed changes to the foreign ownership system of UAE based enterprises, approving a decision to allow 100 percent ownership for international investors in specific business sectors.

    The current position, found under Article 10(1) of the Federal Law No. 2 of 2015 (UAE Commercial Companies Law), requires onshore companies inaugurated by international persons to have a UAE National partner holding a 51 percent share of the company. The introduction of the new law would allow certain foreign investors to have 100 percent sole ownership of their enterprise, bringing the position of onshore LLC companies in line with existing Free Zones, and offshore entities.

    For any of your visa, employment or company set up requirements please do not hesitate to get in touch.

  • Employment

    New license required for Dubai social media influencers

    davidson blogger article

    Social media influencers who promote brands, products and businesses for financial gain have until the first week of June 2018 to apply for a special e-media license, under new regulations issued by the National Media Council (NMC) in March 2018.

    The requirement falls from the NMC’s recognition that an advanced legislative and regulatory environment for the UAE media sector is vital – especially given the highly influential and widespread marketing tool channelled and promoted by electronic media.

    In accordance with the draft law, paid influencers must satisfy two mandatory requirements:

    • They must have a valid trade license in place; and
    • They must obtain a special e-media license from the NMC – costing in the region of AED 15,000.

    The latter of the two licenses is essential as it enables influencers to post content that advertises and endorses brands on various social media platforms.

    We understand that freezones such as the Dubai Creative Clusters Authority (DCCA) and twofour54 can issue a freelancer visa, which would satisfy the first mandatory requirement.

    Any failure to comply with the new rules could result in the individual incurring a fine of up to AED 5,000 and closure of their social media accounts, blogs and other related websites – a potentially far reaching consequence given the potential for some bloggers to earn more than USD 25,000 per post.

    The new law has sparked debates between balancing regulatory compliance and enhancing competition in an increasingly lucrative and ever-evolving market, on the one hand, and stifling the growth of smaller “micro-influencers” on the other hand. However, it is clear that individuals must profit from their posts in order to be captured by these requirements – those who simply share everyday posts with followers without any financial gain do not require a license.

    This article is intended to notify individuals of recent legal and regulatory developments in social media based on a variety of published sources. In any situation, individual facts would need to be fully explored before legal advice could be provided.

    For further information on how Davidson & Co can assist you and your regulatory requirements, or to discuss in more detail any of the general principles raised above, please contact us on 04 343 8897 where one of our team will be delighted to assist you.

  • Employment

    New visa requirements for working in the UAE


    The UAE Coordination Committee has announced that as of 4th February 2018, any expatriates looking to work within the UAE, must also acquire a Certificate of Good Conduct as a pre-requisite to being issued a work permit. Essentially a police check, this Certificate must be issued by an expatriate’s home country, or the country in which they resided for the past 5 years.

    In addition to obtaining the Certificate, expatriates must also have the Certificate attested by either the UAE Diplomatic Missions prior to departure, or at one of the Customer Happiness Centers at the Ministry of Foreign Affairs and International Cooperation on arrival. 

    The reasoning behind the additional requirement is a move by the Government to maintain a safe living environment for UAE residents, cementing the UAE’s position as one of the most secure countries in the world. 

    The Certificate is not required for individuals travelling to the UAE on a tourist visa, nor is it a requirement for dependents. Expatriates who already reside in the UAE on a valid work permit, will also not require to obtain a Certificate on renewal of their visas.