DIFC enacts changes to its employment laws

The Dubai International Financial Centre, the DIFC, has enacted changes to its employment law to bring in a number of clarifications and account for working from home arrangements. The Authority says they demonstrate the DIFC’s commitment to maintaining a transparent and robust legal and regulatory framework aligned with global best practice.

A reminder. The DIFC is a special economic zone in Dubai that was established in 2004 as a financial hub for the Middle East, Africa and South Asia markets. It has its own independent regulatory and judicial system and, of course, it has a very large business community. The district is home for hundreds of financial institutions as well as hosting multinationals, retail outlets, cafés, and all sorts of businesses attracted by the guarantee of zero taxes on corporate income and profits.

The DIFC’s website sets out the amendments to the Employment Law. So, they clarify the application of limitation periods to claims made under the Employment Law, the accrual of vacation leave, the duration of the probationary period for short term fixed-term contracts, and certain defined terms used in the law. The Amendment Law also modifies the basic workplace health and safety requirements under the Employment Law, to account for working from home arrangements.

Luke Tapp and Ruth Stephen have written about the changes in their Outlaw article ‘DIFC simplifies and clarifies employment law in amendments’. Ruth says ‘the added certainty that these changes bring to law should further boost the DIFC as being an international centre of excellence with a sophisticated employment law regime’. She says “In comparison with the sweeping changes we saw made in 2019, these most recent amendments demonstrate the DIFC’s commitment to maintaining a transparent and robust legal and regulatory framework aligned with global best practice.’

So let’s hear more on this and how employers in the region will be affected. Ruth Stephen joined me by video-link from Dubai to discuss the issues. I asked her why these changes have come in:

Ruth Stephen: “So in comparison to the sweeping and substantive changes that we saw to the law back in 2019, this is more of a tidying up exercise, really, to clarify unintended consequences that were arising under the law. So to update defined terms and wording under Articles that were leading to a bit of ambiguity and uncertainty for businesses.”

Joe Glavina: “So what do you think are the most significant changes, Ruth?”

Ruth Stephen: “So some of the most significant changes would be, for example, the backstop of two years on unlawful deduction from wages claims where previously, without this provision, employees could have claimed deductions from salary going years back. Also, in relation to the pension regime, there's been a lot of clarity set out in the law such that there is now only one layer of regulation which makes it a lot easier for businesses and employers to understand what their obligations are to their employees in respect of the pension regime. Additionally, probationary periods under the law have always been for up to a maximum of six months and this caused some confusion and uncertainty surrounding fixed term contracts where the term was for less of a period than six months. Now the law tells us that for contracts of a fixed term for less than six months the probationary period cannot extend half of the contract’s term. What this means is that it gives employees on a fixed term contract certainty around how their statutory entitlements will be dealt with, for example, pension contributions, which could have been deferred but now they will have certainty that they will get them.”

Joe Glavina: “I’m wondering if there are any steps for employers to be taking now in light of this. So updating policies perhaps?”

Ruth Stephen: “Yes, definitely updating policies is going to be key. So, for example, in relation to holiday rollover, because under the law there was some confusion whether it was a maximum of five days’ holiday that could be rolled into subsequent holiday year but no, that is the minimum entitlement, five days, and that's what the law now clarifies meaning that employers and employees are free to agree to an increased rollover period and, if that's what you want, it will be very helpful for this to be set out under a policy. Equally, what we are already helping our clients do at the moment is to update secondment agreements because, for example, enhanced rights have been given to secondees and, equally, short term and fixed term employees together with their templates of employment. So lots of changes to be implemented in light of these changes which should hopefully make everything clearer, more transparent and better for business and employees alike.”

Ruth’s recent article on this provides more detail on those changes, and the sweeping changes made in 2019 which she mentioned. It is called ‘DIFC simplifies and clarifies employment law in amendments’ and is available now from the Outlaw website.