This judgment clarifies that the DIFC Presidential Directive issued during the COVID-19 pandemic did not suspend an employee’s statutory right to accrue annual leave while on unpaid leave.
What was the specific nature of the employment dispute between Luyana and Lune regarding the final settlement of her salary?
The dispute centered on the Claimant’s entitlement to payment in lieu of accrued annual leave and public holidays following her resignation from the Defendant, a restaurant operating within the DIFC. The Claimant, who served as General Manager, sought compensation for leave accrued between 9 April 2020 and 31 July 2020, a period during which the restaurant was closed due to the pandemic and she was placed on unpaid leave. The Defendant contested the claim, arguing that the financial impact of the pandemic and the emergency measures implemented under the Presidential Directive precluded the accrual of such benefits.
As the court noted in its background summary:
The underlying dispute arises over the employment of the Claimant by the Defendant pursuant to an Employment Contract dated 14 August 2017 (the “Employment Contract”).
The total amount at stake involved the calculation of 9.18 days of vacation leave based on a monthly salary of AED 10,500. The court ultimately found in favor of the Claimant regarding the annual leave, awarding her AED 4,448.81. The full text of the judgment can be accessed at https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/luyana-v-lune-2020-difc-sct-334.
Which judge presided over the Luyana v Lune SCT hearing and when was the amended judgment issued?
The matter was heard and determined by SCT Judge Maha Al Mehairi. The hearing took place on 27 October 2020, with the initial judgment issued on 1 November 2020. An amended judgment was subsequently issued on 3 November 2020 to finalize the court's orders regarding the monetary relief and associated costs.
What arguments did Lune advance regarding the impact of the Presidential Directive on the Claimant’s leave accrual?
At the hearing, the Defendant did not dispute the underlying terms of the Employment Contract but relied heavily on the "Emergency Employment Measures" introduced by the President of the DIFC to mitigate the economic fallout of the pandemic. The Defendant argued that because it had placed the Claimant on unpaid leave in accordance with these emergency measures, she was effectively barred from accruing annual leave during that period.
The Defendant’s position was framed as follows:
At the Hearing, the Defendant did not contest the Claimant’s entitlements under the Employment Contract but argued that its business and financial position have suffered as a result of the Pandemic Discussion 10.
The Defendant specifically cited Clause 6 of the Directive, which permitted employers to impose unpaid leave without employee consent, to suggest that the suspension of the employment relationship's active duties also suspended the accrual of statutory benefits like annual leave.
What was the precise legal question the SCT had to resolve concerning the interpretation of the Presidential Directive?
The court was tasked with determining whether the Presidential Directive, which granted employers the power to impose unpaid leave and reduce remuneration during the emergency period, implicitly authorized the suspension of the accrual of annual leave under the DIFC Employment Law. The core doctrinal issue was whether the Directive’s list of permissible emergency measures was exhaustive and whether it overrode the statutory protections afforded to employees under the DIFC Employment Law No. 2 of 2019.
How did Judge Maha Al Mehairi interpret the Presidential Directive in relation to the DIFC Employment Law?
Judge Al Mehairi rejected the Defendant’s interpretation, holding that the Directive did not grant employers the authority to cease the accrual of annual leave. The Judge reasoned that the Directive provided a specific, limited list of measures that an employer could implement, and the suspension of leave accrual was conspicuously absent from that list. By applying a strict constructionist approach to the Directive, the court concluded that the employer’s financial hardship did not permit it to unilaterally alter statutory accrual rights.
The court’s reasoning is captured in the following finding:
The Directive in its Article 6(1) sets out the measures that an employer can take, and the prevention of the accrual of annual leave is not one of those measures.
Consequently, the court determined that the Claimant remained an employee until 31 July 2020, and her entitlement to annual leave continued to accrue throughout the period of unpaid leave.
Which specific sections of the DIFC Employment Law No. 2 of 2019 were applied to determine the Claimant’s entitlements?
The court relied upon the provisions of the DIFC Employment Law No. 2 of 2019 to calculate the final settlement. Specifically, the court looked to the statutory framework governing annual leave and the requirements for payments in lieu of leave upon the termination of employment. While the Defendant attempted to use the Presidential Directive as a shield, the court maintained that the primary governing law remained the DIFC Employment Law, which mandates that employees are entitled to payment in lieu of accrued but untaken annual leave upon the termination of their employment contract.
How did the court address the Claimant’s specific claim for annual leave accrual during the period of unpaid leave?
The court utilized the Claimant’s salary of AED 10,500 to calculate the daily rate of pay, subsequently applying this to the 9.18 days of leave that had accrued between 9 April 2020 and 31 July 2020. The court explicitly rejected the Defendant’s attempt to exclude the period of unpaid leave from the accrual calculation.
As stated in the judgment:
As such, the Claimant is entitled to payment in lieu of 9.18 days of vacation leave for the period from 9 April 2020 to 31 July 2020, as she was an employee of the Defendant until 31 July 2020.
The court also addressed the claim for public holidays, ultimately dismissing it on the basis that the Claimant had already exceeded her accrual for those specific days, thereby limiting the final award to the annual leave component.
What was the final disposition and the specific monetary relief ordered by the SCT?
The court allowed the claim in part, ordering the Defendant to pay the Claimant the sum of AED 4,448.81 for the accrued annual leave. Additionally, the court ordered the Defendant to reimburse the Claimant for the costs associated with filing the claim.
The final order regarding the monetary relief was:
In light of the aforementioned, I find that the Defendant shall pay the Claimant the sum of AED 4,448.81.
Regarding the costs of the proceedings, the court ordered:
The Defendant shall pay the Claimant the Court fee in the sum of AED 367.25 .
What are the wider implications of this ruling for DIFC employers and employees regarding emergency measures?
This decision serves as a critical precedent for the interpretation of emergency legislation within the DIFC. It establishes that emergency directives are to be interpreted strictly; if a directive does not explicitly grant an employer the power to suspend a specific statutory right, that right remains intact. Employers must be aware that even during periods of financial distress or government-mandated closures, the fundamental statutory entitlements of employees under the DIFC Employment Law—such as annual leave accrual—cannot be unilaterally suspended unless expressly permitted by the text of the emergency measure. Future litigants should anticipate that the SCT will prioritize the clear language of the Employment Law over broad interpretations of "emergency measures" that seek to diminish employee benefits.
Where can I read the full judgment in Luyana v Lune [2020] DIFC SCT 334?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/luyana-v-lune-2020-difc-sct-334. The CDN link for the document is https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/small-claims-tribunal/DIFC_SCT-334-2020_20201103.txt.
Legislation referenced:
- DIFC Employment Law No. 2 of 2019, Article 27
- DIFC Employment Law No. 2 of 2019, Article 28(3)
- Presidential Directive regarding Emergency Employment Measures (COVID-19), Clause 6(1)