Non-compliance with employment regulations under the Dubai International Financial Centre (DIFC) can lead to significant penalties. Below are key points on the penalties and repercussions for failing to abide by with DIFC employment laws
Failure to Pay Employees on Time
Employers must pay salaries within 7 days after the end of the wage period. A fine of USD 2,000 may be imposed for each violation of this regulation. The court may also inform the employers that an added interest should be put on the unpaid wages. If the delay in payment results in an employment dispute, the employee may be eligible to receive extra compensation for any financial suffering caused by the postponed wages. The DIFC Employment Law provides employees with the right to file a claim with the DIFC Courts or the Small Claims Tribunal (SCT) for unpaid wages. If the claim is delayed in payment, the employer may also be liable for court fees and legal costs in addition to the fines and compensation owed to the employee.
Disambiguation: This article discusses DIFC employment laws. For ADGM labour laws, please refer to ADGM Employment Laws. For UAE Federal labour laws, please refer to UAE Federal Employment Laws.
Failure to Provide an Employment Contract
Employment contracts are crucial for protecting both the employer and the employee, as they clearly state the terms and conditions of employment. The DIFC requires contracts to ensure clarity and maintain the minimum employment standards set out by the law. Employers must provide employees with a written contract defining employment terms, salary, and benefits. Failure to provide this contract may result in a fine of USD 2,000 per employee. Not providing a written contract can add to the risk of employment disputes, specifically if there are disagreements over terms such as salary, working hours, or entitlements. In such cases, the absence of a clear contract may weaken the employer’s defense in court.
Failure to Comply with End of Service Gratuity (EOSG)
Employers must pay a statutory end-of-service gratuity to employees who have completed at least one year of service unless they are part of the DIFC Employee Workplace Savings (DEWS) plan. Employers who fail to fulfil EOSG payments may be fined USD 2,000 per employee. Employees who do not receive their EOSG may approach court and later order the employer to pay the owed gratuity amount along with any additional damages for delays, including interest on the unpaid amount until it is settled. Employees who are denied their entitled gratuity have the right to seek legal remedy through the DIFC Courts or Small Claims Tribunal.
Non-Payment of Overtime
Overtime must be paid to employees who work beyond the legal hours, typically 48 hours per week, or 8 hours per day unless otherwise stated in the contract. Some types of employees, such as those in managerial or supervisory positions, may not be liable for overtime pay requirements. Employers may be fined USD 2,000 for non-payment of overtime, in addition to compensating employees for the amount owed. Employers who repeatedly fail to comply with overtime regulations could face reputational damage and, in extreme cases, restrictions on their ability to operate within the DIFC.
Discrimination and Harassment
The DIFC Employment Law prohibits workplace discrimination based on gender, race, age, and other factors. Employees who have suffered discrimination or harassment may be awarded compensation for the emotional and financial harm they experienced. This can include damages for trouble, humiliation, and loss of employment opportunities. In addition to financial penalties, employers found responsible of discriminatory systems or harassment can face severe reputational damage, which may affect their business operations and ability for further employees to join them.
Failure to Provide Annual Leave
Employees are entitled to at least 20 working days of paid annual leave after completing at least one year of service. Employers who fail to provide annual leave may be fined USD 2,000 per employee, along with compensation for unpaid leave. Employees may seek further damages if the failure to provide leave results in major suffering or stress. In such cases, the court may also award compensation for emotional distress and legal costs incurred by the employee. If the employer delays payment for unused leave or fails to pay, the DIFC Courts may order interest to be paid on the owed amount until it is settled.
Unfair Dismissal
Unfair termination, including termination without proper notice or for discriminatory reasons, can lead to significant penalties. If a court finds that an employee was unfairly dismissed, the employer may be required to pay compensation of up to one year’s wages. If the employer dismisses an employee without following proper procedures such as providing a warning or conducting a fair investigation (in cases of misconduct or performance issues), the dismissal may be considered unfair. Compensation for unfair dismissal may include up to 12 months’ salary as compensation, depending on the severity of the unfair dismissal and its impact on the employee.
The court may also order payment of any pending amounts, such as unpaid wages, end-of-service gratuity, or unused leave.
Failure to Provide Health Insurance
Employers in the DIFC could provide health insurance coverage to all their employees, regardless of their job status. This requirement is aligned with the Dubai Health Authority (DHA) regulations, which mandate that all employers in Dubai (including DIFC entities) provide at least the basic minimum health insurance plan as defined by the DHA. Health insurance is mandatory for all employees working in the DIFC. It is not mandatory under DIFC law to provide health insurance for employees’ dependents (such as spouses or children), many companies choose to do so as a part of their employee benefits package. However, the employees’ own coverage is compulsory. The health insurance plan must cover essential health benefits such as inpatient and outpatient services, emergency care, medications, and preventive care. Employers must ensure that the plan meets at least the minimum coverage requirements set by the DHA. Employers who fail to provide health insurance coverage as required by applicable law would start from USD 2,000. If an employee incurs medical expenses because their employer failed to provide health insurance, the employer may be required to reimburse the employee for those costs.
Non-Compliance with Maternity and Paternity Leave
Female employees are entitled to 65 calendar days of maternity leave. This includes 30 days of paid leave and 35 days of unpaid leave. Employers who fail to comply with the maternity and paternity leave provisions may be subject to fines inflicted by the DIFC or relevant authorities. Penalties can range from USD 2,000 to USD 10,000, depending on the severity and number of violations. Compensation may also include damages for any additional losses or hardships suffered due to the denial of leave, including emotional distress and any impact on family life.
Non-Compliance with Health and Safety Standards
Employers are required to ensure that their workplace complies with DIFC health and safety standards. Failure to maintain safe working conditions can result in fines of USD 2,000, which could also increase depending on the level of violation and risk to employees.
Employees who suffer injuries or health issues due to non-compliance with health and safety standards may be entitled to compensation.
Medical Expenses: Return for medical costs resulted due to the health and safety breach.
Lost Wages: Damages for lost income if the employee is unable to work due to injury or illness.
Additional Damages: Compensation for pain, suffering, and any long-term impact on the employee’s quality of life.
Conclusion
Employers in the DIFC should ensure full agreement with employment laws to avoid penalties. This includes regular inspections, legal consultations, and revising employment practices in line with the latest regulations. Understanding and adhering to the DIFC’s employment regulations is crucial for avoiding legal and financial consequences. Employers in the DIFC must be wary in observing employment regulations to avoid penalties, legal disputes, and damage to their reputation. In addition to fines, non-compliant employers may also be liable for the legal costs by employees in pursuing claims.
If you need specific guidance, it would be beneficial to consult with legal experts familiar with DIFC regulations.
