Dubai consultancy ordered to pay ex-employee more than US$1,500,000 for non payment of salary

Author: Jamie Liddington | Date: 6 Apr 2016

Court of First Instance ruling sets new legal precedent which binds the DIFC Small Claims Tribunal in future cases

A development consultancy in Dubai has been ordered to pay a former employee a penalty payment thought to be worth US$1,627,401.60, after they failed to comply with Article 18 of DIFC Employment Amendment Law No. 3 of 2012.
 
The DIFC Court of First Instance (CFI) issued its decision in the case of Asif Hakim Adil v Frontline Development Partners Limited on 30 March.
 
The Adil judgement is the first decision from the CFI that deals with the penalty payment under Article 18 of DIFC Employment Amendment Law No. 3 of 2012, which states:
 
  1. An employer shall pay all wages and any other amount owing to an employee within 14 days of the employer or employee terminating the employment.
  2. If an employer fails to pay wages or any other amount owing to an employee in accordance with Article 18, the employer shall pay the employee a penalty equivalent to the last daily wage for each day the employer is in arrears.
 
Justice Roger Giles held that Frontline had failed to make payment in lieu of Mr Adil’s contractual notice period and in respect of End of Service Gratuity, within the period of 14 days following the termination of Mr Adil’s employment on 30 June 2013.
 
As a consequence, the court found that a penalty payment of US$1,643.84 became payable each day from 15 July 2013 until the date on which the Court ordered payment. The judgement does not quantify the exact penalty sum but it is thought that the penalty accruing over the 990 days between 15 July 2013 and 30 March 2016 will total US$1,627,401.60.
 
The court dismissed Frontline’s invitation to modify the language of Article 18 and imply a judicial discretion as to whether a penalty should be ordered on the facts of each particular case and/or the amount of any such penalty. In particular, Frontline asked the Court to read the word ‘shall’ as meaning ‘may’ so as to make payment of the penalty discretionary.
 
Justice Roger Giles declined to do so and held that Article 18 must be construed on its own terms and that strong terms (‘shall’ as opposed to ‘may’) were deliberately chosen. It was held that there ought not to be any alleviation of the penalty due to the issues of wilfulness or reasonable excuse despite the fact that Article 18 could lead to harsh consequences.
 
Before this judgement, Article 18 had only been considered by the DIFC’s Small Claims Tribunal (SCT) where it has been applied inconsistently, if at all. However, by operation of the common law system of case precedence, the CFI decision in Adil’s case will now be binding in relation to future SCT cases. In turn, this should mean a much more consistent and regular application of Article 18. The vast majority of employment disputes will be heard in the SCT (unless the value of the claim exceeds AED 500,000 and one of the parties refuses to consent to the claim being heard in the SCT). Employers should make sure all end of service entitlements are paid within 14 days of the termination of the employee’s employment, otherwise there may be an additional penalty amount payable for any delay in making payment.
 
Jamie Liddington is the head of employment at Hadef & Partners.