Davidson & Co Updates
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Nov 2021
The Dubai International Financial Centre (the DIFC) has pioneered changes to the employment law by introducing concepts such as anti-discrimination, secondments, and DEWS. In tandem with the recent DIFC modernization, there has been a radical overhaul of the Federal Law No.8 of 1980 by the introduction of the Federal Decree Law No.33 of 2021 (the New Law) effective as of 2 February 2022 (the Effective Date). The New Law seeks to develop employment practices to ensure that the UAE is in line with international standard for employees. Key changes that the New Law will implement are considered below.
The New UAE Labour Law alters the type of employment contracts entered into. Under the current law, employees can enter into either limited or unlimited employment contracts. As of the Effective Date, unlimited term employment contracts shall cease to exist and all employees shall enter into fixed term employment contracts. The New Law defines fixed term contract as one not exceeding three years, with the ability for it to be renewed on similar or lesser duration. Similarly, in line with the current law, should the contract not be renewed upon its expiry, the parties will continue to operate as though the contract is still in effect under the same terms and conditions. Importantly, the New Law stipulates that unlimited term employment contracts can be converted into fixed term employment contracts within one year from the Effective Date, e.g. 1 February 2023.
In light of Covid-19, many companies introduced alternative working arrangements which were not expressly addressed within the law. The New Law expressly introduces new working arrangements by including provisions for part-time, temporary and flexible working arrangements. The New Law acknowledges that employees may work remotely, whether within or outside of the UAE, providing that the employee has obtained the employer’s consent. It will be interesting to see how, if at all, this affects end of service entitlements.
Under the New Law, an employment contract can be terminated for a legitimate reason, provided that written notice is provided. The New Law provides that written notice must be issued and the statutory minimum is 30 days’ and maximum is 90 days’ notice. While the term “legitimate reason” has not been defined within the New Law, it does now recognise the concept of redundancy with the exception that there are business reasons for the redundancy. Importantly, end of service entitlements shall be payable to an employee even if they are summarily dismissed.
The New Law provides the criteria for which an employee’s termination may be deemed as being unlawful. If successful, the Labour Courts may order an employer to pay up to three months’ salary as compensation along with the statutory entitlements. It is unclear how the Labour Courts will consider a claim for unlawful termination which falls out with the new criteria.
Under the New Uae Labour Law 2022, there is no provision for end of service gratuity reductions in the event that an employee resigns following one year of continuous service. Termination without notice, regardless of the reason for termination, shall not impact the employee’s end of service entitlement.
In addition, end of service shall now be calculated based on working days as opposed to calendar days.
The New Law introduces provisions to combat discrimination and protect employees against inequality of treatment based on characteristics which include race, gender, religion, national origin, ethnic origin or disability. The New Law also provides for protection against sexual harassment, bullying and any form of abuse (verbal, physical or psychological). There are no exact penalties under the New Law in the event an employer is found to have contravened this provision. However, employers may be liable to fines between AED 5,000 to AED 1,000,000 for contraventions of the New Law.
The New Law provides 60 calendar days’ maternity leave paid as follows: the first 45 days at full pay; and the remaining 15 days at half pay. Furthermore, where the employee delivers a child who is sick or a child with special needs, and whose health condition requires continuous support, the female employee shall be entitled to an additional 30 days leave at full pay which shall commence at the expiry of maternity leave.
Parental Leave remains in the New Law whereby both male and female employees receive five days leave, to be taken within six months of the child’s birth.
The New Law introduces the ability for employers to have the flexibility to pay salaries in any currency denomination. The current law provides that an employee’s salary must be paid in Arab Emirates Dirhams and into a UAE bank account. However, the mechanics of how employers opt to pay their employees in foreign currencies is yet to be determined, given that salary payments are made through the Wage Protection System.
The New Law introduces a range of measures aimed to modernise the UAE Labour Law. Employers and employees should consider the impact that these changes will have to their contracts, handbooks and policies. We can assist both employers and employees to ensure compliance with the new rules.
For further information in relation to the new Labour Law, please contact Joanna Stewart (jstewart@davidsoncolaw.com)December 2021
