The United Arab Emirates (UAE) has passed Federal Law No. 33 of 2021 (the New Labor Law), which will replace UAE Federal Law No. 8 of 1980 and take effect on February 2, 2022. (the Current Labor Law).
The New Labor Law, like the Current Labor Law, will apply to all private sector enterprises and employees in the UAE, including free zones, with the exception of the Dubai International Financial Centre and the Abu Dhabi Global Market, which have their own employment rules. A majority of UAE labor law consultants have adopted these new laws and are advising clients on how they could affect or impact them.
A lot of unanticipated changes are introduced by the New Labor Law. Some of the changes are not always apparent, and it’s difficult to see how some sections will work in practice, not least because much of the substance in the New Labor Law has been delegated to future executive regulations. It is believed that these executive regulations would provide clarity in areas where there is no ambiguity.
Nonetheless, there are a number of important considerations for concerned firms, and modifications to employment contracts, rules, and practices will be required.
The important components of the New Labor Law in Dubai, as well as the main action points for businesses, are listed below.
Unless the entity’s constituent documents specify otherwise, the New Labor Law applies to any entities owned “in collaboration with the federal or municipal government.”
Discrimination on the basis of race, color, sex, religion, national origin, ethnic origin, or disability is prohibited under the law. It needs to be seen how this protection will be implemented in practice, as well as what recourse will be available to victims of discrimination.
Measures against Harassment
Harassment, bullying, and any form of verbal, physical, or mental abuse towards employees are all strictly prohibited under the law. It’s unclear how this protection will be enforced in practice, or what the recourse would be for people who are harassed, as it is with the anti-discrimination rules.
Women’s Equal Pay
Despite the fact that it has been portrayed as a fresh development, the notion of equal pay in the UAE is not new—provisions mandating women to be paid equally to men for work of comparable value were included in the Current Labor Law in 2020.
Employment Contracts with a Fixed Duration
All personnel must be hired on fixed-term contracts that last no more than three years and can be renewed for the same amount of time. From February 2, 2022, employers will have 12 months to migrate all of their employees to new contracts.
Models of Work That Are Flexible
Full-time, part-time, temporary, and flexible work options are available to employees. In actuality, these “models” represent the ordinary working patterns already used by many UAE firms, and we do not expect that their inclusion in the New Labor Law will have a significant impact on employers, employees, or how they function.
Employment Contract Templates for Flexible Working Models
For each of the new flexible working models, executive regulations will be issued with template employment contracts. These templates are likely to be in the Ministry of Human Resources and Emiratization’s (MHRE) relatively simple dual-language format, and we expect that businesses with the assistance and guidance of the best law firms in Dubai will continue to issue their own employment contracts with more complex terms and conditions in addition to the new template contracts.
Employer Termination During the Probationary Period
Employers may give 14 days written notice to terminate employment during the probationary period.
Employee Termination During the Probationary Period
Employees who desire to shift to another employer in the UAE during their probationary period must give at least one month’s written notice to terminate their job. According to the New Labor Law, the employee’s new employer must compensate the old employer for recruitment expenditures in this scenario.
Employees who desire to leave the UAE during their probationary period must give at least 14 days of written notice to terminate their employment. According to the New Labor Law, if an employee returns to the UAE and obtains a work permit from the MHRE with another employee within three months of their departure, the new employer must compensate the employee’s prior employer for recruitment fees.
It’s difficult to see how these new rules governing probationary period termination will be implemented in practice.
Notice of Termination
By giving written notice, either party may end the employment relationship for “good reason.”
Periods of Notice
The minimum notice time is still 30 days, but the maximum notice period is now 90 days. This is likely to be an uncomfortable development for firms dealing with the departure, replacement, and recruiting of senior executives, who generally have six to twelve months’ notice periods.
When the employer gives notice, the employee is entitled to one unpaid day of absence every week to hunt for new work during the notice period.
Current Unlimited Employment Contracts’ Notice Periods
Despite the fact that unlimited contracts are being phased out in favor of fixed-term employment contracts, the New Labor Law mandates minimum notice periods for the termination of current unlimited contracts, which vary depending on the length of service:
- (I) 30 days if the employee has been with the company for less than five years;
- (ii) 60 days if the employee has been with the company for more than five years; and
- (iii) 90 days if the employee has been with the company for more than ten years.
Grounds for Termination
The list of instances in which an employee’s employment could be terminated has been broadened to include the employer’s permanent closure, insolvency, and the employee’s failure to meet the required immigration criteria.
Unfortunately, the list of reasons for immediate or summary dismissal has not been significantly expanded, despite the fact that the New Labor Law specifically requires a written investigation and two written warnings before dismissing an employee for failure to perform the employee’s primary responsibilities.
The Disciplinary Procedure
A disciplinary procedure is expected to be included in the executive regulations.
Matters concerning Suspension
To allow an employer to conduct a disciplinary investigation, a suspension of up to 30 days with half pay will be granted. If an employee is finally exonerated of any misconduct, he or she will be entitled to be reimbursed for all wages withheld. As a result, we expect most firms to continue suspending employees on full pay and benefits.
Internal Procedures and Policies
According to the upcoming executive directives, employers will be expected to “put in place internal work norms.”
Calculation of Gratuity at the End of Service
The end-of-service gratuity for an employee is stated to be computed using working days, which would be a big change.
This, in our opinion, is most likely an oversight that will be remedied in executive rules. If the modification was made on purpose, the employer’s liability for end-of-service gratuity will be significantly increased.
Gratuity for Resignation at the End of Service
If an employee resigns, the end-of-service gratuity is not reduced.
Gratuity at the End of Service in the Event of a Summary Dismissal
Employers cannot refuse to pay an employee’s end-of-service gratuity if the employee is fired without cause (that is if employment is terminated immediately without notice). If you’re an employee and encounter a misunderstanding with your employer, we recommend reaching out to labor law firms in Dubai. This is a significant milestone that symbolizes the Dubai International Financial Centre’s strategy for 2019.
Pay and Leave for Maternity
Maternity pay has been extended to 60 days (45 full days and 15 half days). There is no criterion for qualifying service.
In the case of stillborn babies and newborn deaths, employees will henceforth be entitled to maternity leave and pay.
If an employee is diagnosed with a pregnancy-related ailment, they will be entitled to an additional 45 days of unpaid leave. When computing the employee’s end-of-service gratuity, this time of absence will be excluded.
Parental Leave is a period of time when a parent
In the six months following the birth of their kid, employees will be entitled to five days of paid leave. This leave is in addition to an employee’s right to maternity leave, and there is no requirement for qualifying service. In 2020, the Current Labor Law was amended to include parental leave.
Leave for Disability
Employees who have babies with impairments may be eligible for an additional 60 days of paid leave.
Employees will be entitled to five days of paid leave if their spouse passes away, and three days if a parent, child, sibling, grandchild, or grandparent passes away. There is no criterion for qualifying service.
Employees taking study leave
Employees with more than two years of service may be entitled to ten days of paid or unpaid study leave, while the New Labor Law does not specify whether this leave will be paid or unpaid.
Sick Pay During Employee Probation
During their probationary period, employees will not be eligible for any paid sick leave.
Employees will be expected to take their vacation in the year in which it is due, however, it is unclear what will happen if they do not.
Pay for vacations
Payment in lieu of holiday pay is computed only on the basis of basic pay at the time of termination.
Wages will be subject to deductions of up to 50% of the monthly salary.
Non-compete agreements must be no more than two years in length, albeit, in most situations, an employer will struggle to justify such a lengthy restriction.
Certain positions will be exempt from non-compete obligations, while executive rules will handle this.
Regrettably, the New Labor Law does not cover other sorts of restrictive covenants, such as non-poaching of employees or non-solicitation of clients and consumers.
The retention of an employee’s passport is expressly forbidden by law.
Overtime will be limited to 144 hours every three-week period and computed only on the basis of base salary.
Exemption for Overtime
The Current Labor Law’s overtime exemption for employees in supervisory or management positions is no longer valid, and new exemptions will be determined by executive rules.
Days of Rest
Fridays are no longer required weekly rest days.
Employee Benefits in the Event of Death
Employers should pay any outstanding earnings and end-of-service benefits to a deceased employee’s spouse or children (as selected by the employee) within 10 days of the employee’s death. It’s unclear how this provision will relate to existing inheritance regulations in the UAE.
Resignation without Prior Notice
Employees will only be entitled to resign without giving notice if I the employee tells the MHRE 14 days before leaving and the employer fails to address the situation; and (ii) the employee notifies the MHRE within five working days of being able to do so in the case of harassment or violence.
Payments in Salary Currency
Employees may be paid in currencies other than the UAE dirham if agreed to in the employment contract, though it is unclear how this will function in practice for firms who must pay their employees through the Wages Protection System.
Final Entitlements Payment
Employers must pay all final entitlements to their employees within 14 days after their termination of employment.
Employment Records Retention
Employers must keep employment records for two years after the employee has left the company.
For violations of the New Labor Law, fines of up to 1,000,000 UAE dirham (about 272,257 USD) may be issued, which may be compounded in circumstances where multiple employees are affected.
Points to Consider
The following actions should be considered by all concerned employers:
- Make sure staff understand how the new labor law will affect them.
- Update the template employment contracts to reflect the need that all employees be given three-year fixed-term contracts.
- By February 2, 2023, ensure that all existing employees on indefinite employment contracts are transferred to fixed-term employment contracts.
- Modify or replace current employment contracts or policy papers that refer to specific statutory entitlements (such as 45 days of maternity leave).
- Change the existing sick leave policy to indicate that employees are not eligible for paid sick leave during their probationary period.
- Make changes to existing maternity and paternity leave policies to reflect the new rights.
- To reflect the new anti-discrimination/bullying/harassment regulations, consider creating equal opportunity and anti-bullying and harassment policies.
- Consider putting in place a grievance policy to make it easier for employees to report discrimination, bullying, and harassment.
- Revise disciplinary policies to reflect the extended number of reasons for termination; (ii) the restriction on discrimination, bullying, and harassment; and (iii) the fact that an employee’s end-of-service gratuity can no longer be withheld under any circumstances.
- Update working time policies to reflect the overtime hour cap and changes in overtime pay computation.
- Create a policy for compassionate leave.
If you’re an employee who wants to know how the new rules will affect your stay in the UAE, or if you’re an entrepreneur or a business owner who isn’t sure what laws and rights your employees have in the UAE. Reach out to Ms Law, where we have a team of the best lawyers in Dubai that have extensive understanding and experience with the UAE’s labor regulations.