DIFC announces Presidential Directive to provide greater protection for companies & employees

Dubai International Financial Centre (DIFC), the leading international financial hub in the Middle East, Africa and South Asia (MEASA) region, today announced DIFC Presidential Directive No. 4 of 2020, which seeks to help limit the impact of the COVID-19 situation, Effective from 21 April 2020 until 31 July 2020 (the Emergency Period), the new Directive provides greater flexibility to DIFC-based employers and increased protection to employees.

Companies based in DIFC will have the ability to introduce several emergency employment-related measures during the COVID-19 environment to expeditiously deal with the impact of the pandemic. Employers can now impose reduced working hours, paid or unpaid leave, reduced pay, restrict workplace access and put in place remote working conditions without the consent of their employees for the duration of the Emergency Period. The primary motivation of the Directive is to make it easier for DIFC employers to impose temporary changes to their employees’ terms of employment, which in turn will reduce the likelihood of employers having to resort to terminate employment of their staff. This is beneficial to employees in the long run. It is important to note that these measures may only be imposed for the duration of the Emergency Period and any permanent changes will require employee consent.

The Directive ensures that any DIFC-based employee who contracts COVID-19 or has been quarantined by the local authorities to limit the spread of the virus, will retain full remuneration. This is in respect of their COVID-19 related sick leave pay and any such sick leave shall not be counted towards their annual sick leave entitlement.

Employers may also defer the visa cancellation process for their terminated employees to avoid any unnecessary hardship for them provided the employers continue to provide basic medical insurance cover. Employees working in the retail, service and hospitality sectors must also be provided accommodation in such circumstances.

The Directive also protects employees’ end-of-service gratuity accrued prior to the recent introduction of DEWS. The gratuity payments for a terminated employee’s gratuity payment will be calculated on their basic salary as of 29 February 2020 to ensure that any subsequent reduction of pay does not affect what they receive.

Through these measures, DIFC expressed the hope that employers will benefit from having the ability to take drastic measures to reduce operating costs and sustain business operations. They also give them the flexibility not to take drastic measures, such as ending an employee’s employment, as well as retaining key protection and benefits for employees and those who are terminated.

The Directive also makes provision for DIFC to create an Available Employee Database for employees who were made redundant in the current crisis, as well as those that are surplus to their employers’ current needs. The aim is to do the utmost to support these individuals find alternative employment.

Additionally, the Directive also deals with important considerations of privacy and cyber security for employees working in remote working conditions. Follows the example of other key jurisdictions such as the United Kingdom, DIFC seeks to temporarily suspend the wrongful trading obligations of companies based in the Centre under the DIFC Insolvency Law. It also eases concerns of DIFC company directors that they may be held personally liable for continuing to trade amid the heightened uncertainty created by the COVID-19 pandemic.

His Excellency Essa Kazim, Governor of DIFC, said: “The severity of the COVID-19 situation on businesses cannot be understated and we have a clear responsibility to do everything possible to mitigate its impact. Through the new DIFC Directive, we intend to provide companies and their employees with certainty and flexibility in a practical way that will help see them through this challenging crisis.

“Undoubtedly, senior executive management teams across the Centre have been forced to take tough decisions to implement measures that provide relief and sustains business operations. The new DIFC Directive will help decision makers effectively take stock and swiftly introduce the necessary measures to survive and prosper throughout this unprecedented period.

“We are taking all the steps necessary to fortify the future of Dubai’s economy and the Directive is part of our wider efforts to support businesses and the entire community. Our robust legal framework is able to reinforce provisions and secure the interests of every company and professional based in DIFC, not only in times of crisis, but every day.”

In line with international best practice, DIFC consulted with leading law firms Al Tamimi & Co, Clyde & Co and DWF in the development of the Directive.

The Centre has acted quickly to introduce a series of stimulus initiatives to support businesses and retailers in response to the impact caused by COVID-19. Packages include fee waivers, discounts, deferred payments and rent-free periods to preserve its entire community.