This Small Claims Tribunal judgment clarifies the application of DIFC Employment Law regarding end-of-service gratuity calculations, the mandatory nature of annual leave usage during garden leave, and the enforceability of CPI-linked salary adjustments.
What was the specific monetary dispute between Nadia and Nabhan regarding end-of-service entitlements?
The dispute centered on the Claimant’s assertion that her employer, Nabhan, had significantly underpaid her terminal benefits following the termination of her employment. The Claimant alleged that the Defendant had unilaterally reduced her pre-DEWS gratuity and monthly DEWS contributions during her maternity leave in 2022, leading to a substantial shortfall in her expected payout.
As noted in the court record:
On 26 July 2024, the Claimant filed her claim with the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking visa cancellation and payment of pending end of service dues to the sum of AED 277,334.72.
The Claimant further argued that the Defendant failed to apply the 2023 Consumer Price Index (CPI) adjustment to her salary for the first half of 2024 and disputed the calculation of her accrued but untaken annual leave. The total claim of AED 277,334.72 represented the aggregate of these perceived shortfalls, which the Defendant contested by arguing that the Claimant’s calculations were based on a misinterpretation of the statutory requirements under DIFC law. Nadia v Nabhan [2024] DIFC SCT 308
Which judge presided over the SCT hearing in Nadia v Nabhan [2024] DIFC SCT 308?
The matter was heard before H.E. Justice Nassir Al Nassir in the Small Claims Tribunal of the DIFC Courts. Following an unsuccessful consultation held on 8 August 2024 before SCT Judge Maha Al Mheiri, the case was referred to H.E. Justice Nassir Al Nassir for determination. The formal hearing took place on 20 August 2024, with the final judgment issued on 29 August 2024.
What were the primary legal arguments advanced by Nadia and Nabhan regarding gratuity and leave?
The Claimant argued that the Defendant’s reduction of her gratuity and DEWS contributions during her maternity leave was unlawful, citing discrepancies between the Defendant’s payments and figures confirmed by DIFC Authorities and Zurich/DEWS. She further contended that she was entitled to a 3.30% CPI adjustment on her salary for the period of January to July 2024.
The Claimant submits that during her maternity leave in June 2022, the Defendant cut substantially her gratuity (both: pre-DEWS lumpsum gratuity was cut from AED 419,360.23 to AED 248,045.23).
Conversely, the Defendant argued that the Claimant’s reliance on correspondence with DIFC and DEWS authorities was irrelevant, asserting that the court must look strictly to the legislation. Regarding annual leave, the Defendant relied on Article 29(2) of the DIFC Employment Law, arguing that the Claimant was required to exhaust her 12 days of accrued leave during her notice period (garden leave). The Defendant also maintained that CPI adjustments were discretionary and applicable only to ongoing employment, not to an employee whose contract had already terminated.
What was the core jurisdictional and doctrinal question the SCT had to resolve regarding the CPI adjustment?
The court was tasked with determining whether an employer is legally bound to apply a CPI salary adjustment to a former employee’s terminal benefits if the employer had previously communicated or established a practice of such adjustments. The doctrinal issue was whether the CPI adjustment, typically an ongoing employment benefit, could be claimed as a debt due upon termination, and whether the Defendant’s internal communications created a binding obligation to apply a specific percentage increase to the Claimant’s final salary calculation.
How did H.E. Justice Nassir Al Nassir apply the test for CPI entitlement in this case?
The Court examined whether the Defendant had committed to the CPI adjustment in its communications with the Claimant. Upon reviewing the evidence, the judge found that the Defendant had indeed confirmed the application of the CPI adjustment, rendering it a binding component of the Claimant’s remuneration.
The Claimant’s salary is AED 52,008.66 x 12 months = AED 624,103.92 x 1.60% = AED 9,985.66 + 624,103.92 = AED 634,089.58/12 months = AED 52,840.79.
The judge rejected the Defendant's argument that the CPI adjustment was inapplicable post-termination, finding that the specific evidence provided by the Claimant—an email from the Defendant—confirmed the entitlement to a 1.60% increase. By validating this evidence, the Court established that employer-led confirmations regarding salary adjustments override general arguments about the discretionary nature of such payments.
Which specific provisions of the DIFC Employment Law were applied to the calculation of annual leave?
The Court relied on Article 29(2) of the DIFC Employment Law to resolve the dispute over the 12 days of untaken annual leave. The Defendant successfully argued that the Claimant was obligated to utilize these days during her garden leave period.
The Defendant provided evidence that the Claimant is required to take her accrued but untaken annual leave of 12 days during the garden leave in accordance with accordance with Article 29(2) of the DIFC Employment Law.
Additionally, the Court referenced Article 28(3) and Article 66 of the DIFC Employment Law (as amended by Law No. 4 of 2021) to assess the broader framework for end-of-service gratuity and the correct methodology for calculating terminal dues, ensuring that the final award adhered to the statutory requirements for gratuity payments.
How did the court treat the Claimant's submission regarding the alleged shortfall in payments?
The Claimant’s submission regarding the shortfall was framed as a direct consequence of the Defendant’s failure to adhere to both statutory gratuity requirements and the promised CPI adjustments.
Therefore, the Claimant submits that there is a shortfall of payment in the sum of AED 238,261.08.
2023 consumer price index (CPI) adjustment on 2024 salary from January to June 2024 not applied
12.
The Court ultimately reconciled these figures by accepting the Claimant’s evidence regarding the CPI adjustment while rejecting the claim for additional holiday pay, as the Defendant had correctly applied the garden leave provision under Article 29(2). This resulted in a partial allowance of the claim, with the final award reflecting the court's recalculation of the gratuity and the verified CPI shortfall.
What was the final disposition and the specific monetary relief ordered by the SCT?
The Court allowed the claim in part, finding that the Claimant was entitled to the CPI adjustment but not to the additional holiday pay she had sought. The Defendant was ordered to pay the Claimant the total sum of AED 217,522.54.
In the light of the abovementioned, I find that the Defendant shall pay the Claimant the total sum of AED 217,522.54.
44.
In addition to the principal sum, the Defendant was ordered to reimburse the Claimant for court fees in the amount of AED 4,350.45, bringing the total financial liability to AED 221,872.99.
What are the practical implications for DIFC employers regarding CPI adjustments and garden leave?
This judgment serves as a reminder that internal employer communications regarding salary adjustments—even those labeled as CPI-based—can be treated as binding contractual obligations by the SCT. Employers must ensure that their financial records and communications are consistent, as the Court will prioritize specific evidence of an agreed adjustment over general arguments that such benefits are discretionary. Furthermore, the case reinforces the utility of Article 29(2) of the DIFC Employment Law, confirming that employers may mandate the use of accrued annual leave during a notice period (garden leave), thereby mitigating the risk of additional holiday pay claims upon termination.
Where can I read the full judgment in Nadia v Nabhan [2024] DIFC SCT 308?
The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/nadia-v-nabhan-2024-difc-sct-308 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/small-claims-tribunal/DIFC_SCT-308-2024_20240829.txt
Cases referred to in this judgment:
N/A
Legislation referenced:
- DIFC Law No. 4 of 2021 (Employment Law Amendment Law) Article 66
- DIFC Employment Law Article 29(2)
- DIFC Employment Law Article 28(3)