Dismissals keep lawyers busy

Feature For one group of legal professionals in the Gulf, the economic crisis is providing a lucrative line of new work.

The London-based legal firm, Linklaters, has joined many of its competitors to announce staff layoffs.

The ranks of the legal profession have been thinned out by the global financial crisis, but for one group of lawyers in the Gulf, that crisis is providing a lucrative line of new work. Employment lawyers of international law firms say they have never been busier, cleaning up the mess left by corporate restructuring, company closures and redundancy programmes. Unfair dismissal cases and severance disputes have them working overtime while their company's corporate practices await better times. "We have at least one new employment case every day because banks are retrenching without giving reasons," says Kavitha S Panicker, the chairman of the global law firm ACE Consulta Juris's UAE operations. "Six months ago we had about one case a week related to employment." The company has had to recruit six more lawyers to the employment practice. Redundancies among banks, brokerages and property developers have also forced other local legal practices to hire more lawyers at a time when many international law firms are reducing staff. Global law firms including Clifford Chance, White & Case and Linklaters have all shed jobs since the start of the year as the big-ticket mergers and acquisitions, buyouts and share sales on which they relied for billable hours have slowed to a trickle. Most local employment disputes relate to end-of-service gratuities and resolving differences between international and local employment law, where multinational companies have fired expatriates. Eversheds, a London-based law firm with 2,000 employees, is one of several international legal practices that have seen a sharp increase of pay grievances in its new business. "It seems to be the number one query these days," says Kuljit Ghata-Aura, the Abu Dhabi-based partner of Eversheds. "Over the last couple of months, 90 per cent of what we've been doing is based on employment issues." Sharon Procter, a senior associate at the Dubai office of Clyde and Co, says: "Businesses are suffering financial problems and are resorting to redundancies at all levels, particularly the high-end earners, to save costs. "Many are dismissing employees without paying any gratuity or end-of-service dues, and are attempting to argue that the employees have been dismissed for gross misconduct. They are then running the risk of being on the wrong end of a court case." Companies across the Gulf have cut jobs in response to the global downturn while major construction projects are shelved and stalled credit markets prevent firms from raising new capital to expand. Nakheel, the Dubai-based builder of the Palm Islands, said in November it planned to cut 500 jobs, or 15 per cent of its workforce, while its sister company, Istithmar World, also reduced its workforce by about 10 per cent. Banks including Shuaa and Mashreqbank have also cut jobs. Other companies are offering employees extended periods of unpaid leave. Just less than half of all cases being heard at the Dubai International Financial Centre Court of First Instance involve employment disputes, says Mark Beer, the registrar of the DIFC Courts. Many of the cases being heard hinge on differences in employment law in the UAE, and those of the countries from which employees were hired, according to Mr Ghata-Aura. "Often, if you're an employee of an international organisation, you've got two contracts in place: one with the employer overseas and one with the local Ministry of Labour," he says. "Companies come to us to understand how much to pay people if they need to reduce the workforce and whether to honour more generous contracts, or the UAE law. "These are the more common questions we get and this whole issue of terminating employees is the majority of the work we do now." Saurabh Dhall, a former Rasmala Investments employee, was one of 20 made redundant by the company at the end of October last year. Mr Dhall and five others launched an unfair dismissal action against the investment company in the DIFC Court. The judge asked Rasmala to pay the claimants up to three months' salary at the end of last year, but the decision was reversed on appeal. Mr Dhall and his five former colleagues feared they might have to pay US$42,000 (Dh154,266) for lawyers and court fees. But a statement from Rasmala Investments said: "Of course they were all granted any end-of-service benefits that they were entitled to, and though the court ruled for them to pay us the court fees, we forgave them those and did not ask them to pay it." Rasmala said the employees were dismissed as part of a routine annual performance review. Former employees of Libertas Capital (Dubai), previously a subsidiary of the UK-based Libertas Capital Group, have also taken their firm to DIFC Court seeking their end-of-service benefits. Libertas's Dubai operation shed 14 of its 20 staff members last October. Management say staff resigned or were made redundant during management reshuffles as Libertas Capital Group went through refinancing plans and eventually sold its Dubai operation. The new management said it intended to settle payment issues amicably. While employers look to save costs through staff redundancies, the legal expenses involved in settling pay disputes can often outweigh the value of the damages claims being brought, lawyers say. "We would always advise a client to try to settle employment cases outside court because of the expense involved and the unpredictability of the court's decisions due to there being no binding precedent in place," Ms Procter says. [e-mail] [e-mail]