July 29, 2024 SCT - JUDGMENTS AND ORDERS
Claim No. SCT 201/2024
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai
IN THE SMALL CLAIMS TRIBUNAL OF DIFC COURTS
BEFORE H.E. JUSTICE NASSIR AL NASSER
BETWEEN
NIKHOLAI
Claimant/Defendant in Counterclaim
and
NEWTON
Defendant/Claimant in Counterclaim
| Hearing : | 17 July 2024 |
|---|---|
| Judgment : | 29 July 2024 |
JUDGMENT OF H.E JUSTICE NASSIR AL NASSER
UPON this Claim being filed on 20 May 2024
AND UPON a hearing having been held before H.E Justice Nassir Al Nassir on 17 July 2024, with the Claimant and the Defendant’s representative in attendance
AND UPON reviewing the documents and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
1. The Defendant shall pay the Claimant the total sum of AED 75,249.87.
2. The Defendant’s counterclaim shall be dismissed.
3. The Defendant shall pay the Claimant the Court fee in the sum of AED 1,504.99.
4. There is no order as to costs in relation to the Counterclaim.
Issued by:
Hayley Norton
SCT Judge and Assistant Registrar
Date of issue: 29 July 2024
At: 2pm
THE REASONS
The Parties
1. The Claimant is Nikholai (the “Claimant”), an individual filing a claim against the Defendant regarding his employment at the Defendant’s company.
2. The Defendant is Newton (the “Defendant”), a company registered and located in DIFC, Dubai, UAE.
Background and the Preceding History
3. The dispute arises over the employment of the Claimant by the Defendant pursuant to two employment contracts dated 19 July 2016 to 31 January 2022 (the “Dubai Employment Agreement”), and 1 February 2022 to 29 February 2024 (the “DIFC Employment Agreement”).
4. On 20 May 2024, the Claimant filed his claim with the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking payment for various employment entitlements to the sum of AED 123,832.25.
5. On 21 May 2024, the Defendant filed a claim under case number SCT-207-2024 claiming the sum of AED 27,668.58.
6. On 22 May 2024, the Defendant filed an Acknowledgment of Service with the intention to contest the jurisdiction of the DIFC Courts.
7. On 6 June 2024, an order was made confirming that the DIFC Courts has the jurisdiction to hear and determine the claim.
8. On 12 June 2024, a consultation was held before SCT Judge Delvin Sumo, however the parties failed to amicably settle the claim.
9. On 13 June 2024, SCT Judge Delvin Sumo issued an order consolidating claims SCT-201-2024 and 207-2024 into claim no. SCT-201-2024.
10. In line with the rules and procedures of the SCT, this matter was referred to me for determination, pursuant to a hearing held on 17 July 2024 (the “Hearing”). The Claimant and the Defendant’s representative attended.
The Claim
11. The Claimant submits that he joined the Defendant from 19 July 2016 to 29 February 2024. The Claimant explained that it is his understanding that the company re-domiciled to the DIFC on or around 2019.
12. The Claimant added that upon the Defendant being re-domiciled to the DIFC he was advised that his employment was to be treated as continuous, therefore he accepted the arrangement and had not received his end of service gratuity during that period.
13. The Claimant submits that he commenced employment under the Dubai Employment Agreement, where he was an employee of the Defendant in an onshore Dubai company until 31 January 2022. He then signed a DIFC Employment Agreement from the period of 1 February 2022 to 29 February 2024.
14. The Claimant submits that on 8 May 2024, the Defendant made a partial payment of the end of service gratuity to the sum of AED 44,846. The Claimant added that he advised the Defendant that the amount paid was incomplete and requested information as to when the remainder of the amount was to be made.
15. Therefore, the Claimant filed his claim in the Small Claims Tribunal (“SCT”) claiming the remainder of the end of service gratuity and penalties for late payment under Article 19 of the DIFC Employment Law to the sum of AED 123,832.25, and the Court fees.
The Defence and Counterclaim
16. The Defendant admits that the Claimant was an employee of the Defendant in an onshore entity under the Dubai Employment Agreement. The parties then terminated the Dubai Employment Agreement, however, the parties agreed that the Claimant is entitled to the total sum of AED 22,234 which will be deferred to a later date.
17. The Defendant submits that the Claimant commenced employment on 1 February 2022 with a fixed salary of AED 34,000. His last working day was 29 February 2024.
18. The Defendant submits that upon the Claimant’s resignation an Exit Agreement was signed in which the Claimant was to receive the deferred amount from his previous Dubai Employment Agreement, end of service gratuity from the DIFC Employment Agreement, pending salaries, and accrued annual leave. The Defendant confirms that the Claimant received the total sum of AED 44,846 on 1 May 2024 subject to the Claimant signing the Exit Agreement on 29 April 2024.
19. The Defendant also submits that they had miscalculated the Claimant’s end of service gratuity and confirms that the amount should be increased from AED 16,011.78 to AED 24,452.05.
20. In relation to the accrued annual leave, the Defendant submits that the Claimant is entitled to the sum of AED 28,246.15.
21. In relation to penalties under Article 19 of the DIFC Employment Law, the Defendant submits that as per Article 19(4) of the Law, a penalty pursuant to Article 19(2) will be waived by a Court in respect of any period during which:
“1.1. (a) a dispute is pending in the Court regarding any amount due to the Employee under Article 19(1); or
(b) the Employee’s unreasonable conduct is the material cause of the Employee failing to receive the amount due from the Employer.”
22. The Defendant submits that the Claimant was paid the end of service gratuity in good faith, based on their understanding that the employment agreement is governed by UAE Labour Law. In addition, the Defendant submits that the Claimant acted unreasonably in not accepting the sums which he has signed and agreed on, which delayed the matter.
Counterclaim
23. The Defendant filed a counterclaim claiming breach of Exit Agreement by the Claimant and loss of revenue of 4 clients generating the sum of AED 110,674.32.
24. The Defendant submits that the parties entered into an Exit Agreement dated 29 April 2024. Clause 2 of the Exit Agreement provides that:
“[T]he waiver of the non-compete clause is strictly limited to the clients listed in Annexure A of the Exit Agreement. For all other purposes, including but not limited to the company’s brand ambassador, coaches, and employees, (clients and names not listed in Annexure A), the non-compete clause in Employee’s employment contract remains in full force and effect. Employee is not allowed to approach or solicit the Company’s clients not listed in Annexure A, brand ambassadors, any of its coaches, or any of the company’s employees for a period of two years. This includes employees who are deemed off-limits as per this Agreement. The non-compete period will be 2 years.”
25. The Defendant submits that they have identified 4 former clients who no longer use the Defendant’s services, opting to follow the Claimant. All of these clients were regular customers of the Defendant over a substantial period of time dating back to 2023. The Defendant submits that pursuant to the Claimant’s breach of Exit Agreement, the Defendant incurred losses:
(a) With regards to the unlawful solicitation of Nolan, the Claimant has incurred losses of AED 27,768;
(b) With regards to the unlawful solicitation of Norval, the Claimant has incurred losses of AED 28,986;
(d) With regards to the unlawful solicitation of Norwood, the Claimant has incurred losses of AED 22,680; and
(e) With regards to the unlawful solicitation of Nixie the Claimant has incurred losses of AED 31,240.32.
Discussion
26. This dispute is governed by DIFC Law No. 4 of 2021 (Employment Law Amendment Law) (hereafter the “DIFC Employment Law”) in conjunction with the relevant Agreement.
End of Service Gratuity
27. First, pursuant to the Dubai Employment Agreement, the relationship between the Claimant and the Defendant (as an onshore Dubai company) ended on 31 January 2022, and the Claimant had signed the final settlement letter agreeing to the amount owed and agreeing that payment will be deferred to a different date.
28. There is no evidence before the Courts that the DIFC Employment Agreement is a continuous Agreement of the Dubai Employment Agreement. Therefore, I shall not discuss this matter further as the DIFC Courts has no jurisdiction to hear and determine employment matters of Dubai onshore entities.
29. The Defendant provided that the Claimant is entitled to the sum of AED 22,234 as agreed in the final settlement letter.
30. The DIFC Courts has the jurisdiction in relation to the DIFC Employment Agreement. The Claimant once again signed the final settlement in which he agreed to the amount, however, he then filed a claim claiming that the calculation is wrong.
31. The Defendant admitted that the calculation was incorrect, and that the Claimant is entitled to more than what he received and signed for. For the avoidance of doubt, I shall recalculate the Claimant’s entitlement as per the DIFC Employment Law for the period of 1 February 2022 to 29 February 2024.
32. Article 66 of the DIFC Employment Law which provides the following:
“(1) An Employee who is not required to be registered with the GPSSA under Article 65(`), and who completes continuous employment of at least one (1) year with their employer, before or after the Qualifying Scheme Commencement Date is entitled to a Gratuity Payment for any period of service prior to the Qualifying Scheme Commencement Date on the termination of their employment. …
(2) An Employee’s Gratuity Payment shall be calculated as follows:
(a) an amount equal to twenty one (21) days of the Employee’s Basic Wage for each year of the first five (5) years of service prior to the Qualifying Scheme Commencement Date; and
(b) an amount equal to thirty (30) days for the Employee’s Basic Wage for each additional year of service prior to the Qualifying Scheme Commencement Date. …
(7) From the Qualifying Scheme Commencement Date an Employer shall, on a monthly basis, pay to a Qualifying Scheme, for the benefit of each Employee who is not an Exempted Employee, an amount equal to as least the Core Benefits, which shall be calculated as follows:
(a) five point eight three percent (5.83%) of an Employee’s Monthly Basic Wage for the first (5) years of an Employee’s service, inclusive of any period of employment of Secondment served to prior to the Qualifying Scheme Commencement Date; and
(b) eight point three three percent (8.33%) of an Employee’s Monthly Basic Wage for each additional year of service…
(8) for the purpose of Article 66(7):
(b) any calculation to establish an Employee’s monthly basic wage shall not be less than fifty percent (50%) of the Employee’s monthly wage.”
33. The Claimant’s employment with the Defendant was for the period from 1 February 2022 to 29 February 2024. Therefore, 2 years and 1 months. As such, the end of service gratuity shall be calculated in accordance with Article 66(7) of the DIFC Employment Law. The Claimant’s monthly salary is AED 34,000, therefore, the end of service gratuity shall be calculated as follows:
34. Between 1 February 2022 to 29 February 2024:
The Claimant’s monthly basic wage is AED 17,000 x 5.83% being the minimum contribution amount defined by the Employment Law) = AED 991.1 per month x 25 months = AED 24,777.5
35. The Claimant have already received the sum of AED 16,011.78, therefore, the remaining is AED 8,765.72.
Accrued and untaken Annual Leave
36. The Defendant submits that they calculated the Claimant’s accrued annual leave pursuant to the UAE Labour Law. However, they provided the re-calculation in accordance with the DIFC Law and admit that the Claimant is entitled to AED 28,246.15.
37. For the avoidance of doubt, I shall calculate the Claimant’s accrued but untaken annual leave entitlement in accordance with Article 28(3) of the DIFC Employment Law which provides: “compensation in lieu of vacation leave, or any amount owed by the Employee in respect of excess vacation leave taken, shall be calculated using the Employee’s Daily wage at the termination date.”
38. Therefore, the calculation shall be as follows:
AED 34,000 x 12/260 days = AED 1,569.23 daily wage x 18 days = AED 28,246.15.
39. Therefore, the Claimant is entitled to AED 28,246.15. However, the Claimant hasalready received the sum of AED 6,600. The outstanding balance is AED 21,646.15.
Penalties under Article 19 of the DIFC Employment Law
40. Article 19 of the DIFC Employment Law provides the following:
“Payments following termination
(1) An Employer shall pay to an Employee, within fourteen (14) days after the Termination Date:
(a) all Remuneration, excluding, where applicable, any Additional Payments deferred in accordance with Article 18(2);
(b) where applicable, any Gratuity Payment that accrued prior to the Qualifying Scheme Commencement Date under Article 66(1) not transferred to a Qualifying Scheme under Article 66(6);
(c) a Daily Wage for each day of accrued Vacation Leave not taken; and
(d) all outstanding amounts due in respect of the Employee under Article 66(7) not yet paid to a Qualifying Scheme.
(2) Subject to the provisions of Article 19(3) and 19(4), an Employee shall be entitled to and the Employer shall pay a penalty equal to an Employee’s Daily Wage for each day the Employer is in arrears of its payment obligations under Article 19(1).
(3) A penalty pursuant to Article 19(2) may only be awarded to an Employee if the amount due and not paid to the Employee in accordance with Article 19(1) is held by a Court to be in excess of the Employee's Weekly Wage.
(4) A penalty pursuant to Article 19(2) will be waived by a Court in respect of any period during which:
(a) a dispute is pending in the Court regarding any amount due to the Employee under Article 19(1); or
(b) the Employee's unreasonable conduct is the material cause of the Employee failing to receive the amount due from the Employer.”
41. The Claimant submits that he is entitled to penalties under Article 19 to the sum of AED 44,838 from the period of 29 February 2024 to 20 May 2024 as the Defendant did not pay him until 1 May 2024.
42. Firstly, the penalties trigger after 14 days from the last day of employment pursuant to Article 19(1) of the DIFC Employment Law, therefore, penalties will only be triggered from 15 March 2024 to 1 May 2024, the agreed payment date for the final settlement.
43. The Defendant disputes that the Claimant is entitled to penalty payments due to the Claimant acting unreasonably by not accepting the sums despite previously agreed on.
44. The Defendant had an obligation to pay the Claimant within 14 days from the last day of work, on 15 March 2024, however, the Defendant failed to do so. There is no evidence before the Courts that the Claimant acted unreasonably; the Claimant only raised issues with the calculation after receiving the amount on 1 May 2024 and filed his claim on 20 May 2024.
45. I find that the Claimant is entitled to penalties between 15 March 2024 to 30 April 2024, calculated as:
Daily wage of AED 1,569.23 x 47 days = AED 73,753.81.
46. However, as the Claimant only claimed AED 44,838, he shall receive that amount only.
Counterclaim
47. The Defendant filed a counterclaim claiming breach of Exit Agreement by the Claimant and loss of revenue of 4 clients generating the sum of AED 110,674.32.
48. The Defendant failed to submit sufficient evidence to show that the Claimant breached the Exit Agreement by reaching out to existing clients of the Defendant.
49. Therefore, I shall dismiss the Defendant’s counterclaim for insufficient evidence.
Conclusion
50. In light of the aforementioned, I find that the Defendant shall pay the Claimant the total sum of AED 75,249.87.
51. The Defendant’s counterclaim shall be dismissed.
52. The Defendant shall pay the Claimant the Court fee in the sum of AED 1,504.99
