Dh5 million damages for delayed wages

In a historic case, an employee working for a company based in the DIFC has been awarded a penalty payment expected to be in excess of Dhs 5.5 million against his employer for non-payment of dues.
 
This ruling is likely to set a precedent that will ensure that employees working in the country get what is legally their right and within the set framework.
 
“The factual background [of the case] was quite complicated but could essentially be described as a breakdown in the relationship between two key individuals, one of whom was employed by the defendant and the other was the shareholder,” Jamie Liddington, Head of Employment at legal firm Hadef & Partners, told Emirates 24|7 while explaining the background of the case.
 
The claimant was employed as the managing director of the company until his employment was terminated on 30 June 2013. The claimant alleged that the defendant failed to pay his salary or provide his other employment benefits within 14 days from the termination date (as required under Article 18 of DIFC Employment Law).
 
The claimant’s total claim was in the order of $1.77 million plus an ongoing statutory penalty at $1,643.83 per day (under Article 18 of the DIFC employment law).
 
“The litigation itself was prolonged and the hearing took place in May 2015. A further 10 months later, the decision was published by which time 990 days had elapsed between July 15, 2013 (by which date the claimant should have received all of his end of service payments) and the decision being handed down.
 
“In accordance with Article 18 of DIFC Employment Amendment Law, this meant that the claimant succeeded in showing that there were wages and/or other amounts owed to him after 15th of July 2013 and the defendant was therefore obliged to pay a penalty payment in accordance with the calculation set out in Article 18(2),” elaborates Liddington.
 
“Unless the decision is appealed, the full judgement amount (including the penalty) becomes payable immediately plus interest on the full amount awarded until date of payment. If the award is not satisfied within any prescribed period for payment, the successful claimant may take steps to have the award enforced in the Dubai Courts,” he adds further.
 
What is Article 18 of DIFC Employment Law?
 
Article 18 of the DIFC Employment Law specifies that an employer shall pay all wages and any other amount owing to an employee within fourteen (14) days after the employer or employee terminates the employment.
 
This Article “was intended to compel employers to make a timely payment of all end of service payments within a reasonable timeframe. However, Article 18(2) contains the real sting in the tail as it prescribes the penalty of one day’s wages (being all payments made to the employee during employment) for each day that the payment remains overdue beyond the 14th day,” states the Hadef lawyer.
 
For companies outside the DIFC
 
This law is not applicable for companies domiciled outside the DIFC. As per Liddington “there is no equivalent outside of the DIFC under Federal Law but the Abu Dhabi Global Market Employment Regulations 2015 has an equivalent (Article 13) which states that payment must be made within 14 days. However, ADGM Employment Regulations 2015 has no equivalent to Article 18(2) which prescribes the daily penalty in the event of default.”
 
What does this mean for companies/employees in the future?
 
The judgement serves as a warning to an employer based in the DIFC to ensure that employees are paid all dues on termination of employment within the set timeframe, failing which there can be serious repercussions.
 
“Employers must err on the side of caution when calculating end of service payments as an inadvertent underpayment could trigger Article 18. The decision has confirmed that the DIFC Court Judges do not consider that they have been afforded any discretion not to apply Article 18 and the wording of Article 18 does not require a deliberate underpayment. Employees will need to be alive to the fact that the penalty exists and that it could become important leverage in employment disputes,” emphasises Liddington.

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