The Small Claims Tribunal clarifies the limits of employer-imposed garden leave and the evidentiary requirements for alleging breach of contract as a basis for withholding statutory end-of-service payments.
What was the specific nature of the dispute between Nohun and Netip regarding the AED 499,493 claim?
The dispute arose following the resignation of the Claimant, Nohun, who served as a GP Aesthetic Doctor at Netip, a DIFC-registered medical clinic. Upon her resignation on 28 September 2023, the Claimant sought her statutory end-of-service entitlements, including payment in lieu of a three-month notice period, gratuity, and payment in lieu of accrued annual leave. Additionally, the Claimant sought an audit of her commission payments, arguing that the remuneration she received did not accurately reflect the revenue generated by her practice. The total value of the claim brought before the Small Claims Tribunal was AED 499,493.
The conflict escalated when the Defendant, Netip, withheld these payments, alleging that the Claimant had breached her Employment Contract by referring a prospective client to a competing clinic. The Defendant argued that this referral violated clauses regarding exclusivity of service and good faith. Consequently, the Defendant filed a counterclaim seeking nearly AED 1 million in damages, purportedly representing marketing and advertising costs invested in the Claimant’s professional profile, as well as legal fees. The core of the dispute centered on whether the Claimant’s professional conduct during her notice period justified the Defendant’s refusal to settle her final dues.
Further to the alleged breach, the Defendant requested that the Claimant enter into undertakings to confirm that she would not act in further breach of her obligations to the company.
Which judge presided over the Nohun v Netip [2023] DIFC SCT 440 hearing in the Small Claims Tribunal?
The matter was heard before SCT Judge Maitha AlShehhi. The hearing took place on 11 January 2024, with the final judgment issued on 19 January 2024. The proceedings were conducted within the Small Claims Tribunal division of the DIFC Courts, which holds jurisdiction over employment disputes involving DIFC-registered entities.
What specific legal arguments did Nohun and Netip advance regarding the alleged breach of contract and commission structure?
The Claimant argued that her referral of a client to another clinic did not constitute a breach of contract, but rather a professional courtesy. She maintained that she was unable to perform the requested filler technique herself due to her status on garden leave and that she had advised the client to consider other doctors within the Defendant’s clinic. She rejected the Defendant’s assertion that marketing efforts were targeted at her personally, characterizing them instead as general clinic promotion. Regarding her remuneration, she contended that the commission structure, as defined in the Memorandum of Amendment dated 29 November 2021, was opaque and required an audit to ensure compliance with the revenue generated.
Pursuant to the Employment Contract, the Claimant’s monthly remuneration was set out to be AED 35,000 in addition to commission which would be calculated in accordance with the generated revenue.
The Defendant, conversely, relied on clauses 12.2 and 13 of the Employment Contract, which mandate exclusivity of service and prohibit the employee from having an interest in any other business or undertaking without prior written permission. The Defendant argued that the Claimant’s referral of a client to a competitor was a direct violation of these provisions. Furthermore, the Defendant sought to recoup marketing and advertising costs, claiming that the clinic had invested significant capital to build the Claimant’s practice, and that her actions during the notice period nullified the value of that investment.
What doctrinal issue did the Court have to resolve regarding the withholding of end-of-service payments?
The primary legal question was whether an employer is entitled to unilaterally withhold statutory end-of-service entitlements—such as notice pay, gratuity, and leave encashment—based on an unproven allegation of breach of contract. The Court had to determine if the Claimant’s act of referring a client to another clinic reached the threshold of a "breach of contract" sufficient to justify the forfeiture of statutory dues under the DIFC Employment Law. Furthermore, the Court had to address the evidentiary burden placed on the employer to substantiate claims of financial loss (the counterclaim) when those claims are predicated on the employee’s alleged professional misconduct.
How did Judge Maitha AlShehhi apply the doctrine of "good faith" to the Claimant’s referral of a client?
Judge AlShehhi employed a restrictive interpretation of the "exclusivity of service" and "good faith" clauses. The Court found that the Claimant’s suggestion to a client—who had specifically requested a technique the Claimant could not perform while on garden leave—did not equate to the Claimant having an interest in or consulting for a competing business. The judge reasoned that the Claimant’s actions were a "mere suggestion" rather than a commercial engagement with a competitor. By distinguishing between a professional referral and a breach of fiduciary duty, the Court effectively narrowed the scope of what constitutes a breach of an exclusivity clause in an employment contract.
I am of the view that the Claimant’s action is not to be construed as her having interest or consulting in any other business, rather it was a mere suggestion.
The Court further noted that the Defendant failed to provide evidence that the Claimant had derived any personal benefit or financial gain from the referral, nor did it prove that the clinic suffered a quantifiable loss directly attributable to the Claimant’s actions. Consequently, the counterclaim for marketing costs was dismissed as unsubstantiated.
Which specific DIFC statutes and regulations were applied to determine the Claimant’s entitlements?
The Court relied heavily on the DIFC Employment Law, specifically regarding the employer’s obligation to maintain accurate records and the mandatory nature of end-of-service contributions. Article 16(g) of the DIFC Employment Law was cited to hold the Defendant accountable for failing to maintain records of vacation days taken by the Claimant. Additionally, the Court applied Article 66 of the DIFC Employment Law and Article 66(7) of the DIFC Law No. 4 of 2020 (Employment Law Amendment Law) to calculate the gratuity and notice period payments. The Court also referenced Article 62(3) and (5) of the Employment Law Amendment Law (DIFC Law No. 4 of 2021) regarding the calculation of contributions to a qualifying scheme.
The Defendant failed to provide the Court with any record of the dates taken by the Claimant as it is its duty to keep a record of the vacation dates taken pursuant to Article 16(g) of the DIFC Employment Law.
How did the Court utilize the cited authorities to calculate the final award?
The Court used the cited statutes to perform a precise calculation of the Claimant’s dues. Regarding the notice period, the Court applied the contractual terms to award three months’ salary. For the qualifying scheme contributions, the Court utilized the formula prescribed by the 2021 Amendment Law.
This is to be calculated as follows:
Between 1 December 2021 to 1 January 2024
The Claimant’s monthly basic wage is AED 21,000 x 5.83% (being the minimum contribution amount defined by the DIFC Employment Law) = AED 1,224.3 per month x 25 months = AED 30,607.5.
The Court also relied on the specific provisions of the Employment Contract to determine the base salary for the notice period payment, rejecting the Defendant’s attempt to offset these amounts against the dismissed counterclaim.
As to the payment in lieu of the notice period, I find that the Claimant is entitled to receive the amount of AED 105,000 which represents payment of 3 months.
What was the final disposition and the specific monetary relief ordered by the Court?
The Court allowed the claim in part and dismissed the Defendant’s counterclaim in its entirety. The Defendant was ordered to pay the Claimant a total of AED 163,228.56, which covered the outstanding notice period pay, gratuity, and annual leave entitlements. Additionally, the Defendant was ordered to reimburse the Claimant for the DIFC Courts’ filing fee of AED 3,264.57.
For the above cited reasons, I hereby order the Defendant to pay the Claimant the amount of AED 163,228.56.
What are the wider implications of this ruling for DIFC employment practice?
This judgment serves as a warning to employers that withholding statutory end-of-service payments based on unsubstantiated allegations of breach of contract is a high-risk strategy. The Court’s refusal to accept the Defendant’s counterclaim for marketing costs underscores the necessity for employers to provide concrete evidence of financial loss if they intend to pursue such claims. Furthermore, the ruling emphasizes that "garden leave" does not grant an employer the right to impose arbitrary restrictions on an employee’s professional conduct that go beyond the scope of their contractual obligations. Future litigants must anticipate that the SCT will strictly scrutinize the evidentiary basis for any counterclaim that seeks to offset statutory employment entitlements.
Where can I read the full judgment in Nohun v Netip [2023] DIFC SCT 440?
The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/nohun-v-netip-2023-sct-440
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external case law was cited in the judgment. |
Legislation referenced:
- Employment Law Amendment Law DIFC Law No. 4 of 2021, Article 62(3) and (5)
- DIFC Employment Law, Article 66
- DIFC Law No. 4 of 2020 (Employment Law Amendment Law), Article 66(7)
- DIFC Employment Law, Article 16(g)
- RDC 53.2(2)