The 2nd February 2022 saw the introduction of the new UAE Labour Law (Federal Law No 33 of 2021) (New Law), replacing the previous 1980 legislation. The New Law was supplemented by a corresponding set of executive regulations dated the 3rd February 2022. CHRIS WILLIAMS and AMELIA BOWRING write.
The New Law brings with it several significant changes, albeit the law itself is more of an evolution rather than a revolution. While the New Law is now in full force and effect, employers are provided with a 12-month grace period to ensure that their contractual arrangements are in full compliance.
The New Law applies to all private sector employers who are based onshore and to all free zones except for the Dubai International Financial Centre and Abu Dhabi Global Market, both of which have their own stand-alone laws.
Key changes for all employers and employees, including those in the Islamic finance sector, to be aware of include:
1. The recognition of working arrangements outside of full-time working, to include part-time, temporary and flexible working.
2. The concept of unlimited term contracts has been abolished. All contracts will be fixed term, of up to three years. Our understanding is that onshore contracts (in Dubai at least) will be restricted to two years corresponding to the duration in which a Dubai onshore visa is currently issued. While contracts are fixed, the same can still be terminated for a “legitimate reason” (which is undefined).
3. Notice periods are now capped at three months. The minimum (outside of the probationary period or termination without notice scenarios, ie summary dismissal) notice period remains 30 days. This will give rise to considerations for how C-suite contracts are dealt with that have typically provided for notice periods well in excess of three months.
4. Where an employee remains employed on an unlimited term contract, the New Law provides that either party can terminate such an arrangement for a legitimate reason subject to the following minimum notice periods: 30 days where service is under five years; 60 days where service is more than five years but less than 10 years; and 90 days where service is more than 10 years. Employers and employees should be mindful of this ahead of new fixed term contracts being finalized.
5. An employee’s entitlement to end-of-service gratuity is no longer subject to a discount where the employee terminates their employment inside the first five years of service. End-of-service gratuity must be paid within 14 days of the employment termination date.
6. The concept of “arbitrary dismissal” has been removed from the New Law. Instead, an employee’s termination will be unlawful where the termination relates to: a) the employee having filed a serious complaint against the employer; or b) a complaint against the employer is upheld. Compensation in such circumstances (which will be subject to the decision of a court) is capped at three months’ total remuneration. This is far narrower than “arbitrary dismissal” which allowed for compensatory claims where the dismissal was “unrelated to work”.
7. The New Law provides protection for employees from discrimination in the workplace based on the ground of race, color, sex, religion, nationality, social origin and disability. Neither pregnancy nor maternity leave are protected characteristics, albeit employers are prohibited from terminating or threatening to terminate an employee who is pregnant or on maternity leave. Furthermore, there are now specific protections against bullying and sexual harassment.
8. The New Law enshrines the concept of equal pay for men and women undertaking the same work, a principle first introduced by Federal Decree By-Law No 6 of 2020.
9. Maternity leave has been increased to 60 days (45 days full pay and 15 days half pay). There is no longer a qualifying service requirement.
10. Parental leave of up to five days in the six months following the birth of their child is permitted. Additional leave entitlements relating to compassionate leave and study leave are also permitted.
11. Unless agreed with an employer, an employee’s leave entitlement is on a “use it or lose it basis”. Where it is agreed that an employee is entitled to carry over, this is capped to half of their leave entitlement.
12. Non-compete provisions are recognized if they are limited in time and geographical scope and to the extent necessary to protect an employer’s legitimate interests. The New Law now puts a cap of two years on such non-competes. Where an employer terminates otherwise than in accordance with the provisions of the New Law, such covenants are non-enforceable.
All Islamic finance employers subject to the New Law should be reviewing their employment contracts, employee handbooks and all other policies and procedures to ensure full compliance with the New Law well in advance of the 2nd February 2023, the date by which employers must ensure that their contracts are fully compliant.
Chris Williams is the managing partner (Dubai) and Amelia Bowring is the associate at Bracewell Dubai. They can be contacted at [email protected] and [email protected] respectively.