It has been almost six months since DIFC Law No.2 of 2019 (the DIFC Employment Law), came into force, introducing some important changes affecting employers and employees in the DIFC. 

In this article we look at a number of employment cases to see how the DIFC Small Claims Tribunal (SCT) has interpreted some of the key changes brought about by the new law. Although SCT decisions are not binding on other DIFC Courts, they act as an important guide for employers when dealing with employment matters in the DIFC.

Kaapro v Kacee (Dubai) LLC [2019] DIFC SCT 470

The SCT confirmed that (i) an employee is entitled to receive end of service gratuity when their employment is terminated for "cause" under Article 63(1) of the DIFC Employment Law; and (ii) there is no equivalent of "arbitrary" or "unfair" dismissal compensation in the DIFC.

However, the SCT adopted a surprising approach to Article 19(4)(a) of the DIFC Employment Law, which states that any financial penalty payable to an employee for late payment of their remuneration "will be waived by a Court in respect of any period during which a dispute is pending in the Court…"

The SCT found that the Defendant (employer) had failed to pay all the Claimant's (employee) remuneration within 14 days of the employee's termination date, which was held by the SCT to be 17 September 2019. The SCT therefore concluded that a penalty under Article 19 had been triggered.

The Claimant filed their claim in the SCT on 6 October 2019. We would therefore have expected the SCT to (i) award the Claimant a penalty for the period from 1 October 2019 (i.e. 14 days following the employee's termination date) to 6 October 2019; and (ii) waive the penalty in respect of the period after 6 October 2019. However, the SCT instead declined to award any penalty to the Claimant.

Kins v Krina Holdings Limited [2019] DIFC SCT 511

The SCT held that the Claimant's (employee) actions in engaging in protracted settlement discussions with the Defendant (employer) did not amount to unreasonable conduct for the purposes of Article 19(4)(b) of the DIFC Employment Law.

Article 19(4)(b) of the DIFC Employment Law states that a penalty for late payment of remuneration will be waived by a court where the employee's conduct is the material cause for the employee failing to receive their remuneration.

Employers will inevitably attempt to use Article 19(4)(b) to justify any non-payment of an employee's remuneration within the 14 day time-limit. However, our understanding of the intention behind Article 19(4)(b), which is reinforced by the SCT's decision in this case, is that the waiver will only be applied in exceptional circumstances (for example, where the employer is unable to pay the employee's remuneration because the employee has closed their bank account, or refuses to accept delivery of a cheque).

Employers should therefore do everything they can to pay an employee's remuneration within the 14 day time-limit and should not view Article 19(4)(b) as a convenient get-out clause

Krity v Karan Restaurant and Bar [2019] DIFC SCT 487

The Defendant (employer) counterclaimed against the Claimant (employee) for all visa costs it incurred in employing the Claimant. It sought to rely on:

• Article 21(3) of the DIFC Employment Law, which permits an employer to recoup reasonable costs or expenses incurred in the course of recruiting an employee provided certain criteria are met; and
• the Claimant's employment contract, which stated:"The Company is liable to pay only for the employment visa expenses. If you resign from your services before completion of two years, the said expenses will be deducted from your final settlement".

However, the SCT dismissed the Defendant's counterclaim, highlighting that Article 57(2) of the DIFC Employment Law expressly prohibits employers from recouping any costs and expenses incurred in obtaining an employee's visa.

Key takeaways for employers

• All eligible employees will be entitled to receive end of service gratuity (or, since 1 February 2020, the requisite contributions into the DIFC Employees Workplace Savings Plan) regardless of the reason for their dismissal.
• The threshhold for justfying termination for cause under Article 63(1) of the DIFC Employment Law is high and employers and employees will require clear evidence to support their case. 
• There is no regime for "arbitrary" or "unfair" dismissal compensation in the DIFC.
• Employers should proceed with caution when seeking to avoid any non-payment of an employee's remuneration within the 14 day time-limit.
• Employers should be mindful that engaging in lengthy settlement discussions may increase their exposure to a financial penalty under Article 19 of the DIFC Employment Law.
• Employers are prohibited from recouping any costs and expenses incurred in obtaining and maintaining an employee's UAE sponsorship documentation (including EID and visa).