loader image

THE NEW UAE LABOR LAW

Chapter Thirty-Five: The New UAE Labor Law

The United Arab Emirates recently published its new Federal Labor Law No. 33 of 2021, which repeals Federal Labor Law No. 8 of 1980 (Previous Law). The New Law comes into effect on 2 February 2022 and introduces changes, some of which are likely to have a significant impact on existing employment arrangements. Below is an overview of some of the key changes, their impact and next steps that employers should consider.

APPLICATION

The New Law applies to all existing and future employment relations in the private sector onshore in the UAE, and in free zones that do not have their own labor laws. The New Law will not apply to employment relations in the Dubai International Financial Centre or the Abu Dhabi Global Market as they have their own labor law regime.

WORK MODELS

The New Law sets out the different “models” that parties may agree to, which include:

  • Full-time – Working for one employer on a full-time basis.
  • Part-time – Working for one or more employers for a specific number of hours or days.
  • Temporary work – Work done in a specific period and that involves a specific task and ends with its completion.
  • Flexible working – Work that involves changing working hours or days depending on the workflow and operational and business needs of the employer.

The Executive Regulations will shed some light on the applicable conditions and requirements for each work model and the respective obligations of the employer and employee.

EMPLOYMENT CONTRACTS

A key change introduced by the New Law is the requirement to have employment contracts with fixed terms. It states that the term of fixed employment contracts must not exceed three years. The term can be renewed any number of times, for similar or shorter terms.

Employers will have until 1 February 2023 to make the necessary changes to their employment contracts and employment policies, including converting any unlimited term employment contracts to fixed term contracts with the relevant authority.

TERMINATION DURING PROBATION

The New Law unlike the old introduces a notice period of 14 days prior written notice for terminating an employment contract by the employer during the probation period.

An employee, on the other hand, must provide at least a month prior written notice to the employer if they intend to terminate the employment contract during the probation period to work for another employer in the UAE. In this case, the new employer must compensate the first employer for any incurred recruitment costs, unless agreed otherwise.

Where an employee wants to terminate the employment contract during probation with the intention of leaving the UAE, the employee must provide the employer with at least 14 days’ prior written notice. If such an employee returns to the UAE and obtains a work permit from another employer within three months from the date of leaving the UAE, the new employer must compensate the original employer for the recruitment costs incurred when they hired the employee unless agreed otherwise.

If either party terminates the employment contract without complying with the provisions of the New Law, the terminating party must pay the other party compensation equal to the employee’s basic salary and allowances due under the relevant notice period or the remainder thereof.

NON-COMPETE CLAUSES

Non-compete clauses are only enforceable for a maximum of two years after the expiry or termination of an employment contract. Non-compete clauses must also specify the place and type of work, to the extent necessary, to protect the legitimate business’ interests of the employer.

CASES OF END OF EMPLOYMENT CONTRACTS

The New Law provides a list of events that would terminate an employment contract. These include:

  • The mutual written agreement of the parties.
  • Expiration of the term of the contract (unless it is renewed or extended).
  • Upon the decision of either party subject to the requirements relating to termination and notice periods.
  • If the employee is convicted by a final order to a custodial penalty for a term of not less than three months.
  • The permanent closure of the establishment or if the employer becomes bankrupt, insolvent or unable to continue the business for any economic or exceptional reasons.

TERMINATION WITH NOTICE

Either party may terminate the employment contract for a legitimate reason by giving the other a 30 days prior written notice.

The New Law also provides that parties to an unlimited term employment contract that was before the New Law comes into effect may terminate such contract for a legitimate reason by giving the other:

  • 30 day written notice if the period of services is less than five years;
  • 60 day written notice if the period of service exceeds five years; and
  • 90 day written, notice if the period of service exceeds 10 years.

TERMINATION WITHOUT NOTICE

An employer may terminate an employee without notice:

  • After the employer notifies the Ministry of Human Resources and Emiratization within seven working days from when the employer becomes aware that the employee caused a material loss to the employer. The notice period was 48 hours under the Previous Law.
  • If the employee fails to perform their duties in accordance with their employment contract, and they fail to remedy.
  • If an employee abuses their position with the aim to obtain personal gain.
  • If an employee becomes employed by another employer without complying with the relevant processes and regulations.

DISCIPLINARY SANCTIONS

The New Law also changes some of the disciplinary sanctions and procedures that an employer may take against an employee if found in breach of the New Law or the Executive Regulations. These include:

  • A written notice drawing their attention to any breach,
  • A written warning, deducting up to a five day salary in one month,
  • Suspension from work for up to 14 days without pay,
  • Denying any salary increase for one year if the employer has a periodic salary
  • Increase policy in place and the employee is entitled to such increase under their contract or the company’s bylaws,
  • Denying an employee a promotion for a maximum of two years, and finally
  • Dismissing the employee with payment of severance pay.

SEVERANCE PAY

The New Law clarifies that a foreign employee who completes at least one year of continuous service will be entitled to severance pay based on their basic salary. The New Law expressly provides that the basic salary exclude any other allowances or benefits. Where an employer terminates the employment contract, for every year of service, the employee is entitled to 21 working days’ basic salary for the first five years of service and 30 working days’ pay for each additional year of service. The total severance pay must not exceed two years’ salary, which includes the basic salary plus any allowances or benefits.

The New Law removes any reduction to severance pay where an employee terminates the employment contract. For comparison, under the Previous Law, where the employee terminates the contract, the employee will be entitled to one-third of the severance pay for services between one to three years and two-thirds of the severance pay for service between three to five years, and the full amount of severance pay for more than five years of service.

SPECIAL LEAVE

The New Law introduces five days of paid bereavement leave for the death of a spouse and three days for the death of a parent, child, sibling, grandchild or grandparent, commencing from the date of death.

Parental leave is applicable for both parents for five days for childcare. This is in addition to the mother’s maternity leave, which now includes 45 days with full pay and 15 days with half pay. The New Law also states that a female employee will be entitled to her maternity leave as stipulated if delivery takes place six months or more after pregnancy, even if the child is stillborn or is born alive but dies.

The New Law does not make provisions for Hajj leave. This may, however, be provided for in the Executive Regulations, along with any set public holidays.

OTHER CHANGES

  • Unless agreed otherwise, if an employer outsources one or more of its main activities, the entitlements of any outsourced employees will remain the responsibility of their main employer.
  • The New Law expressly prohibits sexual harassment, bullying or any verbal, physical or mental abuse against employees by their employer, manager or colleagues.
  • The calculation of overtime bases on basic salary. This excludes any allowances or benefits. The New Law also caps the number of overtime hours at 144 hours in any three-week period.

NEXT STEPS

Employers and employees should carefully consider and revisit changes introduced by the New Law once the Ministry of Human Resources and Emiratization publishes the Executive Regulations.

 

You can reach out to us through WhatsApp to freely discuss your needs.

Share:


Related Posts

WHAT NEXT AFTER DUBAI EXPO 2020

Chapter Thirty-Nine: WHAT NEXT AFTER DUBAI EXPO 2020 March 31, 2022, marked the...

ENTRY VISAS FOR VISITORS AND TOURISTS TO UAE

Chapter Forty-Three: Here are 11 types of entry visas for visitors and tourists...

Contact us for more information

    Ask directly your questions to a representative.

    X