Employment Dismissals in the AIFC

Under the AIFC Regulations No. 4 of 2017 (as amended) ('Employment Regulations'), employers have a reasonable amount of discretion to dismiss their employees when restructuring their workforces. However, the Employment Regulations do not give employers a completely free hand, and substantial risks remain for employers when dismissing employees that can have significant consequences if not done correctly.

Employers operating in the AIFC must therefore know what obligations they are under; what employees are entitled to and what the best practices are in the AIFC relating to employee dismissals.

There are three categories of dismissal under the Employment Regulations:

dismissal on notice;

dismissal for cause; and

mutual termination.

The most common way for an employer in the AIFC to dismiss an employee is by dismissing them 'on notice'. This involves an employer informing the employee of the company's decision to dismiss them, and providing them with the correct notice period. Different rules apply when dismissing employees who are still in their probationary period, or due to excessive sick leave.

Under the Employment Regulations, all employees are entitled to a minimum period of notice that is calculated based on length of service. These statutory minimum notice periods are:

for less than three months' service - seven days notice;

for between three months and five years' service - 30 days notice; and

for more than five years' service - 90 days notice.

These statutory notice periods are mutual, applying to both employers and employees; and are minimum notice periods only. It is common practice in the AIFC for longer contractual notice periods to be agreed in an employee's employment contract, with one-month notice periods being standard for the majority of employees and longer notice periods of potentially three months, six months or even longer common for more senior or business critical employees.

Notwithstanding the applicable statutory and contractual notice periods, the employer and employee can mutually agree to amend an employee's notice period at the point of dismissal. This can include agreeing to waive the notice period completely; to shorten it; to lengthen it; or to end the employment immediately with the employer paying the employee in lieu of their notice period.

Provided notice requirements are complied with, an employer can choose to dismiss an employee for any reason that is not discriminatory. No specific processes technically need to be followed beyond the employee being provided with their notice, which should be done in the form of a written termination letter. The Employment Regulations do not set out a concept of unfair or arbitrary dismissal. This substantially lowers the risks for employers when dismissing employees when compared to many other jurisdictions, where employees can often bring a claim for compensation if they believe their dismissal to be 'unfair'.

Article 61 of the Employment Regulations allows an employer to dismiss an employee immediately, without complying with any notice requirements or providing the employee with any end of service gratuity entitlement, where the dismissal is for 'cause'.

What constitutes 'cause' under the Employment Regulations is set out in article 61, which provides set reasons that an employer can dismiss an employee without providing them with the necessary notice. These include some fairly limited reasons (for example, where an employee has committed a crime that has a material and detrimental impact on the employer); but also provide additional flexibility to the employer by stating that an employee can be dismissed "for another reason prescribed by the rules made by the Board or by the employee's contract of employment".

This provision allows employers to set their own reasons for dismissing for cause. However, some limitations will exist in practice and employers should ensure that they are reasonable when setting these reasons.

Although not technically necessary under the Employment Regulations, it is recommended and best practice for employers to put in place a set of procedures that are followed before an employee is dismissed - for example, a disciplinary policy for conduct issues or a performance procedure for poor performing employees. Employment contracts should also be sufficiently detailed.

Putting these policies and allowing procedures in place will provide structure, management and HR teams to maintain an element of control and oversight over the dismissal process. In turn, this will allow any risks or issues to be identified ahead of time and protective steps taken in order to minimize the risk for the business as far as possible.

Dismissing for cause is higher risk for employers than dismissing on notice and it has the potential to lead to the dismissed employee bringing a claim against the company, not least for their notice pay and end of service gratuity entitlement. Where an employer is in any doubt about its obligations or the risk that it faces regarding a particular dismissal, advice should be sought ahead of time.

Employee rights regarding dismissal are relatively limited in the AIFC, and employers do have freedom to act as they need with few risks attached. However, one area where enhanced employee protections exist under the Employment Regulations is in relation to discrimination.

Although employers do not need a set reason in order to dismiss an employee under the Employment Regulations, in practice there will always be some reason for the dismissal. That reason cannot be discriminatory, other than in very limited cases where discrimination can be justified. Dismissing an employee for a discriminatory reason can have serious consequences for an employer, as it risks the employee bringing a claim and being awarded damages by the AIFC courts.

There are seven 'protected characteristics' in the AIFC Regulations that provide employees with enhanced protection: sex; marital status; race; nationality; age; and disability. An employee who possesses any of these protected characteristics is protected against different types of discrimination including direct discrimination; indirect discrimination; harassment; failure to make reasonable adjustments; and whistleblowing.

Employers should take care to ensure that an employee's dismissal is not related to any of these protected characteristics and so could be seen as discriminatory. Discrimination can be straightforward to identify - for example, an employee cannot be dismissed because she is a woman or because of their nationality. However, it can often be less obvious, and managers and HR departments should be aware of the risks. For example, dismissing an employee for performance reasons is lawful; but if the employee's poor performance is because of an underlying health condition then the employee may be entitled to enhanced protections and their dismissal potentially discriminatory.

Under the Employment Regulations, an employee cannot waive their employment rights ahead of time - for example, an employee cannot agree to waive their right to a notice period in their employment contract. However, an employee can agree to waive any claims that they may have against their employer as part of a settlement agreement.

A settlement agreement must be in writing, and confer some benefit on the employee for waiving their claims. This will often, but not exclusively, take the form of an additional monetary payment. Settlement agreements are a useful tool for employers in order to avoid any potential issues or mitigate any risk involved in a dismissal, and should be considered by employers when dismissing an employee.

Originally posted on: Out-Law Guide, Pinsent Masons https://www.pinsentmasons.com/out-law/guides/employment-dismissals-astana-international-financial-centre,  7 December 2020.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the AIFC Academy of Law, any other AIFC body or entity, or any other agency, organization, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the authors and these views are always subject to change, revision, and rethinking at any time.