From 28 August 2019 onwards, a new DIFC Employment Law (DIFC Law No. 2 of 2019 / the “New Employment Law”) will come into effect in the DIFC, which replaces the existing DIFC Law No. 4 of 2005 (the “Old Employment Law”).
The aim of this article is not providing a detailed analysis of all changes that the New Employment Law will introduce, which various other parties have done already.
Instead, this article reviews the changes that will be applicable and aims to give an outlook on the impact these changes will have on employers.
B. Positive Changes
C. Debatable Changes
In the current economic climate in the UAE, a few of the changes in the new Employment Law appear debatable, however.
While at least in principle it is good news that the New Employment Law takes a tougher stance on discrimination, holding an employer liable for any discrimination taking place in the company strikes as a little harsh.
This is even more true if non-compliance is penalised with compensation being payable of up to a full year’s worth of (gross) salary of the allegedly discriminated employee.
Yes, the employer is given the chance to prove that it has taken steps to avoid such discrimination taking place, but what would such steps be? Posting signboards throughout the office stating that discrimination is not tolerated?
I have not come across a company that would have actively encouraged discriminating behaviour.
At the same time, however, the provisions in the UAE Labour Law dealing with arbitrary dismissal are heavily “overused” in a sense that nowadays virtually each and every termination of an employee is considered arbitrary.
Are we looking at a future where employers in the DIFC will be held liable even for perceived “discriminations” taking place at the workplace they provide?
I see a substantial risk of employees hoping for a big payday and believe that it remains to be seen whether the New Employment Law will actually lead to less discrimination or to employers employing less people in DIFC instead.
In addition, the new Employment Law introduces a whole range of new penalties and fines, ranging from US$ 2,000 to US$ 10,000 per breach.
While it goes without saying that acts of non-compliance must be sanctionable, the question remains whether fines are really the only, or best, way of guaranteeing compliance.
Systems that focus on issuing financial penalties instead of preventing wrongdoing tend to degenerate into income generators instead of upkeeping peace.