Overview of the DIFC Employment Law

The Dubai International Financial Centre (DIFC) operates as an independent jurisdiction within the UAE, governed by its own legal framework based on English common law. Employment matters within DIFC are regulated by DIFC Law No. 2 of 2019 (as amended) (hereinafter referred to as the “DIFC Employment Law”), which establishes rights and obligations for both employers and employees within the DIFC.

Starting with its purpose, the DIFC Employment Law is designed to:

(a) establish minimum employment standards for employees;

(b) promote fair and equitable treatment by employers; and

(c) encourage workplace practices that contribute to the DIFC’s growth and success.

While employers may provide additional benefits at their discretion, they shall not offer terms or conditions that fall below the minimum requirements set out in the DIFC Employment Law. To reinforce this principle, Article 11 of the DIFC Employment Law explicitly states that its provisions establish the minimum requirements for employment and any agreement that seeks to waive these requirements, unless expressly permitted by the DIFC Employment Law, shall be deemed void in all circumstances.

However, the DIFC Employment Law does not prevent an employee from voluntarily waiving any right, remedy, obligation, claim, or action under the law by entering into a written agreement with their employer to terminate their employment or resolve a dispute. This waiver is only permissible under two conditions: (i) the employee must warrant in the settlement agreement that they had the opportunity to receive independent legal advice from a legal practitioner regarding the terms and effect of the agreement; or (ii) both the employer and employee must have participated in mediation proceedings provided by the Court prior to entering into the agreement.

In terms of its applicability, the DIFC Employment Law applies to any entity with a place of business in the DIFC that employs one or more individuals. Hence, it also extends to individuals employed under an employment contract by such an entity, provided they are based in, or ordinarily work in or from, the DIFC, or have contractually agreed to be governed by the DIFC Employment Law. This ensures that employment relationships within the DIFC adhere to the statutory standards, promoting a fair and regulated work environment.

Regarding the terms of the employment relationship, it is governed by an employment contract, which must be provided by the employer. This contract must include the mandatory elements outlined in the DIFC Employment Law, including but not limited to the employee’s wage, pay period, and working hours and days. The employer is required to provide the Employment Contract within seven (7) days of the employee’s commencement of employment.

In addition to outlining the fundamental terms of employment, an employment contract may also include provisions that extend beyond the duration of employment. One such key aspect is post-termination restrictions, which employers may impose to protect their business interests after an employee’s departure. These restrictions, commonly referred to as restrictive covenants, primarily include non-compete, non-solicit, non-poaching, and non-dealing clauses. While these terms are not explicitly outlined in the DIFC Employment Law, they are recognized by the DIFC Courts. However, the enforceability of such covenants depends on several factors. When imposing such restrictions, employers should carefully consider whether they are reasonable, how much exposure the employee has had to clients, what interests they are trying to protect, and the employee's role prior to leaving.

The enforceability of restrictive covenants must remain within the limits of protecting the employer's legitimate business interests. If the restrictions are deemed to be overly broad or not aimed at safeguarding the employer’s legitimate business interests, their enforceability may be at risk. Therefore, any restrictions should be limited in terms of duration, geographical scope, and the type of activities being restrained.

The DIFC Employment Law also outlines the employee's rights regarding leave, including annual leave, public holidays, sick leave, and maternity and paternity leave, as well as the conditions governing such leaves. Notably, employees who have completed 90 days of service are entitled to 20 paid working days of annual leave each year and have the right to carry over up to 5 days of accrued annual leave for a period of 12 months.

Furthermore, it is important to highlight the principle of non-discrimination, which is a core aspect of the DIFC Employment Law. In this regard, one of the employer's key obligations is to ensure that they do not discriminate against an employee in relation to any aspect of employment or its terms and conditions based on any of the following: the employee’s sex, marital status, race, nationality, age, pregnancy and maternity, religion, or mental or physical disability. In the event of a breach of this obligation, remedies may include compensation of up to one year of the employee's annual gross salary, along with the potential for a declaration, a recommendation, or a combination of these remedies to be made in accordance with the DIFC Employment Law.

Having outlined the key provisions of the DIFC Employment Law regarding employee rights, it is essential to also address the terms and conditions governing the termination of employment. The employment relationship can be terminated without cause by either the employee or the employer, subject to written notice. The notice period will be specified based on the length of the employment relationship. However, employees and employers may agree to a longer notice period as stipulated in the employment contract.

Another form of termination occurs when either the employer or the employee terminates the employment with immediate effect for cause. This may happen when the conduct of one party warrants such termination, and a reasonable employer or employee would have made the decision to terminate the employment as a result. If an employee terminates their employment for cause, they shall be entitled to: (a) payment of wages in lieu of their notice period; (b) a gratuity payment calculated to include the notice period the employee would have been required to give to terminate their employment and (c) payment in lieu of the employee's accrued, untaken vacation leave, calculated to include the notice period the employee would have been required to give to terminate their employment. In this case, the employee must be paid all dues within 14 days of the termination date. Failure to comply with this requirement may result in the employer incurring penalties as stipulated under the DIFC Employment Law.

Ultimately, it is crucial for both the employee and the employer to adhere to the terms and provisions outlined in the DIFC Employment Law. Compliance with these terms is essential not only to fulfill their respective obligations but also to ensure the proper enforcement of their rights, thereby maintaining a fair, regulated, and transparent employment relationship.