On the 15th of November 2021, the United Arab Emirates’ (“UAE”) Ministry
of Human Resources and Emiratisation (“MOHRE”) has announced a new
decree law to regulate labour relations. The first major amendment ever
since the establishment of the first UAE labour law.
Background
Since the establishment of the Federal Law No. 8 of 1980 concerning the regulation of labour
relations (“Current Law”), more commonly known as the UAE Labour Law, very small
amendments were made. The most recent amendment was Federal Decree Law No. 6 of 2020,
which introduced parental leave.
Replacing the Current Law, the Federal Decree Law No. 33 of 2021 (the “New Law”), introduces
new work categories along with additional clauses offering protection of employee rights. The
New Law will essentially offer a more flexible and modern working environment allowing the UAE
to align its employment regulations with the best international practices.
The New Law
Below are some of the key changes set out by the New Law.
Different Work Categories and Condensed Working Hours
In addition to normal full-time work, the following categories were introduced by the New Law
under Article 7(1):
- Part-time: allows employees to work for one or more employers for a specific number of
hours or days; - Temporary: allows for employees to work for a specific period – ideal for project based contracts that end upon the job’s completion; and
- Flexible: offers freedom to work at different times in comparison to the usual 9 to 5 depending on the job’s requirements and conditions.
Furthermore, instead of the common 48 hours in a week or the 8 hours per day work model,
employees may also work for 40 hours in a week on a “condensed working hours model” provided
the employment contract allows it.
It remains to be seen how these working arrangements shall be implemented. However, the New
Law states that an executive regulation shall be released to further explain such working
arrangements and the end of service benefits.
Overtime
Under the New Law, the maximum daily overtime is still 2 hours. In addition to that, as per Article
19(1) of the New Law, an employee’s total hours of working time every 3 weeks must not exceed
144 hours. The New Law has also expressly clarified that the calculation of overtimes shall be
based on an employee’s basic salary only.
New Leave Entitlements
Under the New Law, new leave entitlements have been given to employees:
- Mourning leaves (Article 32(1)(a) of the New Law)
o 5 days is granted in the event of a husband’s or a wife’s death.
o 3 days is granted if the employee’s father, mother, grandfather, grandmother, son,
brother, sister or grandchildren passes away. - Parental leaves (Article 32(1)(b) of the New Law): 5 days is granted for an employee
who has a new born and is to be used intermittently or continuously within the first 6
months of the child being born. - Study leaves (Article 32(2) of the New Law): 10 days is granted for an employee who
has to take their exams, provided only if the employee has been working for the employer
for a continuous period of 2 years. - Maternity leaves (Article 30 of the New Law)
o Maternity leaves are now extended to 60 days wherein 45 days will be fully paid
and the next 15 days with half pay.
o If due to illness the mother is not ready to go back to work, another 45 days of
unpaid maternity leave shall be granted provided a medical certificate is presented.
o If the baby is born with a disability, the mother can be granted another 30-day fully
paid leave in addition to the basic maternity leave of 45 days and can be extended
again to another 30 days with no pay.
End of Service
Under the Current Law, end of service gratuity is reduced depending on when an employee
resigns. For example:
Unlimited Contract
- If an employee resigns after more than one year but less than three years of continuous
service for the employer, the employee’s end of service gratuity will be reduced by two
third. - If the employee has continuously worked for the employer for more than three years but
less than five years, the end of service gratuity will be reduced by one third.
Limited Contract
- If the employee has not completed five years of continuous service for the employer, the
employee is not entitled to end of service gratuity.
Under the New Law, there are no provisions mentioning end of service reductions. In effect, upon
the end of an employee’s service, employees shall become entitled to a full end of service gratuity
payment provided they completed at least one year in the company according to Article 51(2).
Termination without notice will not affect an employee’s gratuity entitlement either. Moreover,
gratuity is no longer calculated based on calendar days but is now calculated based on working
days.
In terms of periods in paying such end of service entitlements, Article 53 of the New Law
specifically states that all end of service entitlements shall be paid within 14 days of the
termination date. Failure to do so will incur a fine between 5,000 AED and 1,000,000 AED.
Fixed Term Contracts
Commonly, employees work under unlimited contracts wherein no contract end date is specified.
However, the New Law has abolished unlimited contracts. Once the New Law becomes effective,
all new employment contracts will be fixed term contracts and active unlimited employment
contracts will need to be converted into the same.
According to Article 8(3), such fixed term contracts shall not exceed three years and can be
renewed for the same period or lesser. For the purposes of calculating end of service gratuity,
any extensions or renewals of fixed term contracts shall be considered continuous service.
Probation
Currently, employers may immediately terminate an employee under probation without any notice.
However, Article 9(1) of the New Law states that employers must provide a 14-day notice of
termination to employees under probation.
Employees under probation must also serve their notice period, which will depend on the reason
for leaving the company.
(a) If changing jobs (i.e. transferring to another company) is the reason, an employee must
serve a 30-day notice (Article 9(3) of the New Law).
(b) If leaving the country is the reason, the employee must give a 14-day notice (Article 9(4)
of the New Law)
For reason (a), the new employer shall be entitled to compensate the former employer for the
recruitment costs spent on the employee. The same shall apply if an employee comes back to
the UAE and acquires new employment within 3 months of having left the company due to reason
(b) unless there has been an agreement between the employee and the former employer stating
otherwise.
As per Article 9(5) of the New Law, if any of the parties fail to serve their notice periods or fulfil
their obligations under reasons (a) and (b), the breaching party will be obligated to compensate
the other party with a fee equivalent to the employee’s wage for the remaining notice period.
Additionally, if an employee terminates the employment contract and fails to observe the
provisions under Article 9, the employee may not be granted a work permit for a period of one
year as stated by Article 9(6).
Notice Period (After Probation)
After an employee completes their probation, the minimum notice period remains to be 30 days.
However, under Article 43(1) of the New Law, the new maximum cap shall be 90 days.
Reasons for Employment Termination
Under the New Law, new reasons for terminating an employment contract were added:
- In case of the employing establishment’s permanent closure;
- In case the employer becomes bankrupt, insolvent or is unable to continue the business
for any economical or extraordinary reasons; or - In case an employee is unable to renew his/her work permit due to reasons out of the
employer’s control.
Termination without Notice
Under Article 44 of the New Law, new cases which would entitle employers to terminate an
employee without notice were added: - If an employee commits an error resulting to gross material loss to the employer and the
employer notified the MOHRE within 7 working days from becoming aware of such
incident; - If an employee receives two written warnings prior to their dismissal for failure to perform
their main duties; or - If an employee discloses trade secrets causing loss to the employer or the employee gains some personal benefit.
Unlawful Termination Compensation
According to Article 47 of the New Law, if an employee’s termination was deemed unlawful, the
employee shall be entitled to compensation. It should be noted that an employee’s termination.
shall be deemed “unlawful” if the termination was due to a serious complaint submitted to the
MOHRE or a lawsuit resulting from a filed claim was proven to be valid.
The competent court shall determine the compensation, which, similar to the Current Law, shall
be based on the type of work, the severity of the damage sustained by the employee and the
employee’s term of service. Moreover, the compensation shall not exceed three months’
remuneration and shall be calculated based on the most recent wage the employee received.
Protection Against Bullying, Harassment and Discrimination
Under Article 14 of the New Law, employers are prohibited from threatening (including with
penalties) and/or forcing employees in providing a service against their will. Express prohibition
has also been made against sexual harassment, bullying and violence (verbal, physical or
psychological). Any employee who becomes subject to such harassment shall be entitled to
terminate their employment without notice. Such violation by the employer may also result to fines.
The New Law also provides protection under Article 4 against any form of discrimination under
the basis of race, colour, gender, religion, nationality or disability. Moreover, the New Law
prohibits the termination of a woman or the provision of a warning due to a working woman’s
pregnancy or using their maternity leave.
Equal Pay
Under Article 4 of the New Law, which is titled ‘Equality & Non-discrimination’, women have the
right to equal treatment and must be granted a wage that is equal to men that perform the same
work or work of equal value.
Salary Deductions
Article 25 of the New Law sets out a list of cases where an employee’s wage may be deducted.
It includes recovery of loans or any amounts paid to the employee in addition to his dues,
deduction of any amount necessary to remedy any damages caused by the employee’s breach,
debts due for settlement due to a court judgment and many more. Article 25(2) expressly permits
total deductions of up to 50% of the employee’s wage.
Disciplinary Sanctions
Under Article 39, the New Law permits the following disciplinary sanctions:
- Non-disciplinary written notice;
- Written warning letter;
- Deduction worth 5 days of the employee’s wage;
- 14 days suspension without pay (initially 10 days);
- Denial of salary increase for a year;
- Denial of promotion up to 2 years; or
- Termination of employment.
Non-Competition Clause
According to Article 127 of the Current Law, regardless of not having a Non-Compete Agreement,
employers may still enforce non-compete clauses against employees. However, as per Article 10
of the New Law, for employers to protect their business, it is mandatory that they execute NonCompete Agreements.
The Non-Compete Agreement shall specify the following:
• Time: the duration of the restriction on an employee from working for a direct competitor;
• Geography: the geographic restrictions; and
• Type of work: the type of role/work the employee is restricted in taking up for the specified
period and in the specified geography.
Recruitment Costs
With the New Law, employers shall cover all costs and expenses of recruitment and employment
and shall be prohibited from recovering such costs and expenses either directly or indirectly from
the employee.
Minimum Wage
In coordination with MOHRE and other authorities, the UAE Cabinet may issue resolutions
specifying the minimum wages of employees or of any category thereof according to Article 27 of
the New Law.
Repatriation Costs
Under Article 15 of the New Law, in the event of an employee’s death, employers will be obligated
to cover repatriation costs upon the family’s request. The employer shall also hand to the
employee’s family any wages or other monetary dues, including the worker’s wages, entitlements
and severance pay, which shall be paid within 10 days of the employee’s death or from the date
on which the employer becomes aware of the employee’s death.
Right to Remain in Country
According to Article 13(2) of the New Law, after the termination of an employment contract or
after the end of the work relationship, employers are prohibited from forcing employees to leave
the UAE. This prohibition also includes prohibition on employers from confiscating employees’
official documents including, but is not limited to, passports and Emirates IDs.
Judicial Fee Exemptions
According to Article 55 of the New Law, where an employee or their heir makes a labour claim,
they shall be exempted from judicial fees incurred in all stages of litigation provided the value
does not exceed 100,000 AED.
Group Claims
Under Article 56 of the new Law, employees who work for the same employer may now bring a
group claim to the MOHRE who shall adjudicate the dispute. Procedure on how to lodge group
claims shall be governed by regulations that will be later issued.
Impact
The New Law will become effective by February 2 2022, which by then the Current Law will be
abolished. With the New Law, new employment contracts would need to be drafted while current
employment contracts will need to be amended. Although the abolishing of unlimited contracts
restrict the flexibility of employment contracts, this move is anticipated to offer more financial and
employment protection to not just the employee but the employer as well. As such, all private
sector employers are given a grace period of one Gregorian year from the New Law’s
implementation (i.e. February 1 2023) to convert unlimited contracts into fixed term contracts.
How We Can Help
It is vital that companies review their contracts and ensure they are aligned with the new
provisions set out by the New Law. This should also include the companies’ employee handbooks,
policies and procedures.
With AM Legal Consultancy’s in-depth knowledge of the region, we are well placed to provide
tailored advice for any legal inquiries you may have. If you require legal assistance in drafting,
reviewing or amending your company’s employment contracts, policies and procedures, you can
reach out to us by emailing corporate@amlegalconsultancy.com.
Disclaimer
This article is for informational purposes only and shall not be considered as legal advice or
opinion.