Employment Regime in the DIFC
“A diploma is a piece of paper that is used to acquire another piece of paper: an employment contract.”
Time and again, our team of employment lawyers in Dubai have discussed the provisions of UAE Federal Law Number 8 of 1980 on Regulation of Labour Relations to shed light on the employee and employer relations in the dynamic business environment of the United Arab Emirates (the UAE). Numerous law firms and legal pundits furthered this charade in 2016 with the enforcement of certain amendments that aimed to restructure the employment relations in the country by providing more transparency and flexibility in a growing business economy within the UAE mainland. However, one of the most important factors that played a crucial role in the country's development was left untouched: employment in the free zones, since free zones get regulated by the employment laws that are enacted by their respective authorities. In this article, we have tried to cover this void by elucidating the employment provisions of one of the principal financial free zones of the region, the Dubai International Financial Centre (the DIFC). The fundamental assertion in this regard is whether the educational level of employees is taken into consideration while appointing an employee to a particular position in a company established in the DIFC. This article will look into the overview of the DIFC employment law, its effect on growth potential, and its comparison with UAE mainland employment law.
The DIFC is one of the most thriving free zones in UAE, and it is expected to be triple in size over the next ten years. The international standard of employment law in DIFC attracts many foreign professionals to work in the financial free zone. For that reason and the enthusiasm of employees to work under a good employment regime with full protection is the composition of the real background behind the success of DIFC.
DIFC is the most advanced free zone in UAE due to its dedicated enactments and regulations based on the financial sector. These laws include 26 laws and 17 regulations. The recent amendment of DIFC Law Number 4 of 2005 (the DIFC Employment Law) vides DIFC Law Number 3 of 2012 (the New Law) has brought forward substantial changes in the work-force regime of the DIFC. This employment law has facilitated in the success of the DIFC due to its conformance to international standards and increased the degree of employee protection. We summarize these changes below:
I. General duties of employers to their employees
An employer must ensure, as far as is reasonably practicable, the health, safety, and welfare at work of its all employees.
II. Vacation Leave
Article 27 of the Labour Law has stated that employers should give a paid vacation leave of minimum of twenty (20) days to employees employed for at least ninety (90) days. The calculation of this vacation leave will be on pro-rata basis and employees are not permitted to carry accrued vacation leaves of more than twenty (20) days for a maximum period of twelve (12) months.
III. Working Hours
An employee's maximum working hours is forty-eight (48) hours for each week. However, an employee may work for longer hours if he has given written consent to his employer under Article 21.
IV. Employment contract
According to Article 13 of the Employment Law, an employee has the right to a written employment contract at the commencement of his employment. The written agreement shall set out full particulars (including without limitation the name of the parties, date of commencement of work, employee's remuneration and all other terms and conditions) regarding the employment.
V. Maternity Leave and Pay
Article 37 has stated that an employee shall be entitled to a minimum maternity leave of sixty-five (65) working days. However, maternity leave is also applicable to female employees who seek to adopt a child below three (3) months of age.
Employer’s Liability and Other Provisions
Article 51(2) has explicitly stated that an employer is liable for any act of an employee done in the course of employment. DIFC employment law provides fair and efficient procedures for resolving disputes arising from the application and interpretation of the employment law. It promotes the fair treatment of employers and employees make the condition between an employer and employee gentle. It is evident that DIFC employment law is one of the main reasons for the improvement of DIFC as it provides the best relationship between an employer and an employee.
The DIFC draft of the employment law primarily aims at achieving international standards in employment law. The changes brought about to meet this goal is a strategic move towards better standards and compatibility with the international standards as well. However, it is not yet clear whether it is adequately abiding by the rules of International Labour Organization (the ILO). The ILO established with the aim of developing international labor standards has from time to time assigned conventions agreed with its member states including UAE. The intent of taking every member states to such a measure is, so these rules provide protection from inhuman labor and provide protection to workers for their freedom of association, collective bargaining, and many other rights. Unfortunately, the practicality of the above is still doubtful in the DIFC. For example, there is no provision mandating or allowing the establishment of a workers union. Therefore, employees are not able to negotiate improved working conditions or the right of collective bargaining.
Comparison with the Federal Labour Regime
Also, another disadvantage with the Labour Law is the inexistence of a minimum wage rate. Compared to the United Kingdom, the USA and most countries with developed employment regulations that have established a minimum wage rate. But DIFC has failed to accomplish this significant issue just like the Federal Law Number 8 of 1980 (as amended) (the Federal Labour Law).
Furthermore, The Labour Law does not provide any summary dismissal for termination of an employee without notice. According to their employment law, the employer is entitled to dismiss “immediately” for “cause” where the conduct of the employee warrants termination and where a reasonable employer would have terminated the employment under Article 59(A).
However, both, the employees and employers have both benefited from the Labour Law. For example, companies have fourteen (14) days to pay all wages owed to an employee following the termination of employment. They are also only required to provide health insurance for their employees rather than cover for health and disability loss of income. The employment law also provides an advantage to employers with the ability to dismiss an employee who takes sick leave more than their entitled limit.
On the other hand, employees have benefitted from being able to obtain a health insurance, entitlement for the end-of-service gratuity (for the employees who completed one year or more of continuous services) and maternity leave with antenatal care.
Moreover, many employees are becoming scared or are found to be less motivated to work in Dubai mainland throughout the past few years due to the low level of benefits and protection provided for employees who are to be serving under the Federal Labour Law.
Therefore, another crucial question arises as to why DIFC has its separate employment regulations. Apart from all the other differences between the Federal Labour Law and the (DIFC) Employment Law, the “Discrimination Provision” for employees has become the core difference and the highest concern. It is a well-known communal fact that salaries in UAE are computed based on individual's ethnicity and nationality. This situation is a direct breach of the discrimination right in working industry. According to Startford (2009), Dr. Zumfuli, a Human resources professor at Sharjah University, "There is a lot of discrimination of nationality and religion in the labor market, and this affects the contribution of those who suffer from this situation.” It is vital to mention that the Federal Labour Law does not have any provision on discrimination, but compared to that Labour Law explicitly prohibits employers discriminating against employees.
Importantly, DIFC employment law differentiates from UAE mainland employment law in few other elements as well. The distinction matter because workers have individual rights, such as advantage on sick leave and termination notice. Employers also have additional rights, such as the right on dismissal for misconduct and overtime work of an employee. DIFC law has another significant advantage compared to the Federal Labour Law. The (DIFC) Employment Law stipulates that employers must provide and maintain a workplace that is free from harassment, safe and without risk to employee’s health. Further, an employer must not threaten, intimidate or coerce an employee because of a complaint or investigation. However, UAE employment law does not have any provision on harassment.
To conclude, the primary factor behind the rapid growth of Dubai as a whole country is the workers and investors who are behind the stage developing the country landmarks and businesses in both small and large scale. The Federal Labour Law was enacted at a time when the UAE was still emerging as the world leader in commerce and trade. The corporate and commerce-related laws in the UAE have transformed to another level with the rapid development. But Federal Labour Law still lacks in many aspects. This lacking has ultimately created a negative impression about the standards of Dubai working industry and employers, among the potential personnel who are willing to work in the future. Whereas in comparison to that people are more ready to work with DIFC; since the employees are more satisfied with the international standard of labor law, benefits and labor protection provided by DIFC. Also, DIFC has become the place that could offer them the best working environment and welfare within in UAE. This fact itself proves the rapid growth of DIFC thanks to its employment law regulations.