06 Apr 2016

Court of First Instance ruling sets new legal precedent which binds the DIFC small claims tribunal in future cases

Authored by: Jamie Liddington

Court of First Instance ruling sets new legal precedent which binds the DIFC small claims tribunal in future cases

The DIFC Court of First Instance (“CFI”) issued its decision in Asif Hakim Adil v Frontline Development Partners Limited (CFI-015-2014)(“Adil”) on 30 March 2016.

The Adil judgment is the first decision from the CFI which deals with the penalty payment under Article 18 of DIFC Employment Amendment Law No. 3 of 2012.

Background

Article 18 of DIFC Employment Amendment Law No. 3 of 2012 provides as follows:

(1)  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.

(2)  If an employer fails to pay wages or any other amount owing to an employee in accordance with Article 18(1), the employer shall pay the employee a penalty equivalent to the last daily wage for each day the employer is in arrears.

Facts and Findings in Adil

Justice Roger Giles held that Frontline had failed to make payment (i) in lieu of Mr Adil’s contractual notice period and (ii) 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 USD $1,643.84 became payable per day from 15 July 2013 until the date on which the Court ordered payment. Although, the judgment does not quantify the exact penalty sum, it is thought that the penalty accruing over the 990 days between 15 July 2013 and 30 March 2016 will amount to USD $1,627,401.60.

In reaching the conclusion that Frontline was bound to pay a penalty, the Court dismissed Frontline’s invitation to modify the language of Article 18 and to 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.  

Conclusion 

Prior to Adil, Article 18 had only been considered by the DIFC 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 will now be binding in relation to future SCT cases. In turn, this should result in 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) so employers should take care to ensure that 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.

 

This article was originally written for the Chartered Institute of Personnel and Development magazine The People Management Middle East (April 2016) under the title NEW JUDGMENT FAVOURS EMPLOYEES ON THE PAYMENTS OF END OF SERVICE GRATUITY 
 
This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the developing jurisdiction of the UAE.