The New UAE Labor Law: Implications for Employers | Ogletree, Deakins, Nash, Smoak & Stewart, CP
The United Arab Emirates (UAE) has a new set of labor laws governing employment relationships in the private sector. On February 2, 2022, Federal Executive Order No. 33 of 2021 came into effect, repealing and replacing Federal Law No. 8 of 1980, as amended, in its entirety.
The labor law changes are quite substantial and require changes to existing employment contracts, as well as changes to policies and procedures regarding future agreements with new employees. Employers have until February 2023 to implement the new labor law changes. The UAE government plans to issue executive regulations to provide further guidance on the new laws.
In addition to changes to labor laws, the UAE government has adopted a Monday to Friday work schedule (with a half day on Fridays) for all government employees. Although not mandatory in the private sector, many private sector companies are planning to implement a Monday to Friday schedule to comply with the new government schedule.
The following is an overview of the main changes to the UAE Labor Laws.
Requirements for fixed-term contracts
This is the most significant change and requires employers to modify current employment contracts (insofar as they are not already fixed-term). Employers must place all their employees on fixed-term contracts for a maximum of three years. Contract terms can be shorter if agreed. There is no maximum number of fixed-term contracts that employers can conclude successively.
Employers have until February 2, 2023 to implement the new labor law changes.
The maximum trial period provided for by the new labor legislation remains unchanged at six months. However, the new law introduces certain notification obligations during the trial period. Specifically, if an employee is on probation, employers must now provide a minimum of fourteen days written notice of intent to terminate the employment contract.
If an employee decides to resign during the probationary period, they must:
- give one month’s notice of resignation to join another employer in the UAE; Where
- give fourteen days notice if the employee plans to leave the UAE.
Flexible working arrangements
The new law expressly recognizes a flexible working arrangement as a type of employment relationship on which the parties can agree.
Under the old labor law, supervisors and managers were exempt from overtime. The new law is silent on this exemption. It is expected that forthcoming Executive Regulations from the Ministry of Human Resources and Emiratization (MHRE) will clarify whether and how the exemption will apply under the new labor laws.
Under the new law, employers are not required to implement a day off on Fridays. It can take place any day of the week after agreement of the parties.
Salary payment currency
Employers can pay employees’ wages in any currency agreed by the parties in the employment contract. Upcoming executive regulations are expected to provide more detail on how this provision of the new law works in practice for employers who are required to pay employees through the Wage Protection System (WPS). ) current.
Rotation of annual leave
Under the new law, employees must use their annual leave in the same calendar year that it accrues, unless the parties agree otherwise. The new law does not provide details on how to deal with unused leave (ie whether it can be considered lost). It is expected that the next executive regulations of the MHRE will provide further information on this issue. Employees are entitled to compensation in lieu of unused leave upon termination calculated on the basis of the employee’s base salary only.
Maternity leave, parental leave and additional leave
The new law increases maternity leave rights to sixty calendar days; the first forty-five days are paid in full and the remaining fifteen days at half pay. The new law prohibits employers from reducing an employee’s maternity pay if she has not completed a full year of employment by the time she takes maternity leave. Employees are now entitled to maternity leave and pay in cases where the employee miscarries after six months of carrying, suffers a stillbirth or experiences the death of a child after birth. Employees who give birth to disabled or sick children whose state of health requires “constant companionship[ship]» are entitled to an additional thirty calendar days of maternity leave (with full pay), which can be extended for an additional thirty days (unpaid).
The law reduces the right of employees to breastfeeding breaks from eighteen months to six months from the date of delivery. Female employees still have extended leave without pay after exhausting their maternity leave for a pregnancy-related medical condition, but the entitlement has been reduced to forty-five days from 100 days.
In the event of the death of an employee’s husband or wife, the law entitles the employee to five days of paid leave. In the event of the death of a parent, child, brother, sister or grandparent, the law grants the employee three days off.
Employees with more than two years of service who are affiliated with or regularly studying at an accredited educational institution in the UAE are entitled to ten working days of study leave per year. The new law does not say whether this must be paid or can be unpaid. It is expected that the next executive regulations will provide more details on this point.
Employers can suspend employees for up to thirty days, with half pay during a disciplinary investigation. An employee will be entitled to reimbursement of any withheld wages if they are ultimately found to have wrongdoing.
The minimum notice period for the termination of an employment contract remains thirty days, but the maximum notice period is now capped at ninety days. The new labor law also imposes minimum notice periods for terminating open-ended contracts in progress before the implementation of new fixed-term contracts. In this case, the employer must give at least thirty days’ notice if the employee has been employed for less than five years; at least sixty days’ notice if the employee has been employed for more than five years but less than ten years; and ninety days’ notice if the employee has worked for more than ten years.
Grounds for Termination
Termination of an employment contract is considered a valid reason for termination of an employment contract under the new law. Under the previous law, dismissal was not recognised. There are other grounds for “just cause” termination, including where an employee: (i) abuses their position for profit or personal gain; or (ii) begins working for another employer without complying with applicable rules and procedures.
Job search leave
Employees are now entitled to one day of unpaid leave per week during the notice period to look for a new job.
Free end of service
Under the previous law, an end-of-service indemnity (EOSG) for a resigning employee was reduced based on the length of employment of the employee (i.e. there was no of EOSG if the employee had not completed at least one year of service; one-third EOSG if the employee had completed up to three years of seniority; two-thirds EOSG if the employee was between three and five years old of seniority; and 100% EOSG if the employee had completed more than five years of seniority). Under the new law, employees will be entitled to full EOSG when they resign, provided they have completed at least one year of service.
Payment of end-of-service fees
All severance pay must be paid to employees within fourteen days of the date of termination. Prior to the new law, there was no time limit expressly stated.
The maximum restriction period after termination for non-competition agreements under the new law is two years.
Workplace Policy Provisions
The new law also contains provisions that employers may wish to take into account, even if they are not covered by employment contracts, including:
Discrimination and equal pay
The new labor law protects employees from discrimination in the workplace based on race, color, sex, religion, national origin, social origin and disability. Neither pregnancy nor motherhood is on the list of protected characteristics; however, employers are prohibited from terminating an employee’s employment (or threatening to terminate an employee’s employment) because she is pregnant or on maternity leave.
In addition, the law provides that there must be equal pay for men and women for the same work. This was first introduced by Federal Decree No. 6 of 2020, but the new law strengthens it.
Bullying and sexual harassment
The new law protects employees against bullying and sexual harassment in the workplace. Specifically, Article 14 prohibits “[s]sexual harassment, intimidation or any verbal, physical or psychological violence” towards an employee.
Internal work rules (manual)
Article 13 of the new law sets out a number of obligations for employers, including the obligation for employers to enforce internal work rules. Beyond that, no other details are provided. Therefore, it is expected that the next Executive Regulations will define the framework and provide further details on this requirement.
Retention of employment records
Under the new law, all records of employment must be kept for at least two years after termination of employment.
The new UAE Labor Law brings substantial changes for affected employers. Employers may want to consider developing strategies to implement these new changes over the next year.