The New UAE Labor Law: Implications For Employers – Employment and HR

The United Arab Emirates (UAE) has a new set of labor laws
governing private-sector employment relations. On February 2, 2022,
Federal Decree Law No. 33 of 2021 took effect,
repealing and replacing Federal Law No. 8 of 1980, as amended, in
its entirety.

The labor law changes are fairly substantial and necessitate
amendments to existing employment contracts, as well as
modifications to policies and procedures concerning future
agreements with new employees. Employers have until February 2023
to implement the new labor law changes. The UAE government is
planning to issue executive regulations to provide further
instruction on the new laws.

In addition to the labor law changes, the UAE government has
changed to a Monday-Friday work schedule (with a half day on
Fridays) for all government employees. While not required in the
private sector, many private sector companies are planning to
implement a Monday-Friday schedule to comport with the new
government schedule.

The following is an overview of key changes to the UAE’s
labor laws.

Fixed-Term Contract Requirements

This is the most substantive change and requires employers to
amend current employment agreements (to the extent that they are
not already fixed term). Employers must place all employees on
fixed-term employment contracts with a maximum term of three years.
Contract terms may be shorter if agreed upon. There is no maximum
number of fixed-term contracts that employers may enter into
successively.

Probationary Period

The maximum probationary period under the new labor law remains
unchanged at six months. The new law does, however, introduce
certain notification requirements during the probation period.
Specifically, if an employee is on probation, employers must now
provide a minimum of fourteen days’ written notice of the
intention to terminate the employment contract.

If an employee decides to resign during the probationary period,
the employee must:

  • give one month’s notice if resigning to join another
    employer in the UAE; or

  • give fourteen days’ notice if the employee plans to leave
    the UAE.

Flexible Working Arrangements

The new law expressly recognizes a flexible work arrangement as
a type of employment relationship to which parties may agree.

Overtime

Under the prior labor law, supervisors and managers were exempt
from overtime. The new law is silent on this exemption. It is
expected that the forthcoming executive regulations from the
Ministry of Human Resources and Emiratisation (MHRE) will detail
whether and how the exemption will apply under the new labor
law.

Rest Days

Under the new law, employers are not required to implement a
rest day on Fridays. It can be on any day of the week by agreement
of the parties.

Currency of Salary Payments

Employers may pay employees’ salaries in any currency agreed
upon by the parties in the employment contract. It is expected that
the forthcoming executive regulations will provide further detail
on how this provision under the new law works in practice for
employers that are required to pay employees through the current
Wages Protection System (WPS).

Annual Leave Rollover

Under the new law, employees must use their annual leave in the
same calendar year that it accrues, unless otherwise agreed by the
parties. The new law does not provide detail on how to handle
unused leave (i.e., whether it can be considered forfeited). It is
expected that the forthcoming executive regulations from the MHRE
will provide further information on this issue. Employees are
entitled to payment in lieu of unused leave upon the termination of
employment calculated on the basis of an employee’s basic
salary only.

Maternity Leave, Parental Leave, and Additional Leave

Maternity Leave

The new law increases maternity leave entitlements to sixty
calendar days; the first forty-five days are paid in full and the
remaining fifteen days at one-half pay. The new law prohibits
employers from reducing an employee’s maternity pay in the
event that an employee has not completed one full year of
employment at the time of availing of maternity leave. Employees
are now entitled to maternity leave and pay in circumstances where
the employee miscarries after six months of carrying, suffers a
stillbirth, or experiences the death of an infant after birth.
Employees who give birth to disabled or sick children whose health
conditions require “constant companion[ship]” are
entitled to an additional thirty calendar days of maternity leave
(with full pay), which can be further extended for an additional
thirty days (unpaid).

The law reduces employees’ entitlement to nursing breaks
from eighteen months to six months from the date of delivery.
Employees still have extended unpaid time off after exhausting
maternity leave for pregnancy related medical condition, but the
entitlement has been reduced to forty-five days from 100 days.

Compassionate Leave

In the event of the death of an employee’s husband or wife,
the law entitles the employee to five days’ paid leave. In the
event of the death of an employee’s parent, child, sibling or
grandparent, the law entitles the employee to three days’
leave.

Study leave

Employees with more than two years’ service who are
affiliated or regularly studying with an approved UAE educational
institution are entitled to ten working days of study leave per
year. The new law is silent as to whether this must be paid or may
be unpaid. It is expected that the forthcoming executive
regulations will provide further detail on this point.

Suspension

Employers may suspend employees for up to thirty days, with
one-half pay during a disciplinary investigation. An employee will
be entitled to reimbursement of all withheld pay if the employee is
ultimately cleared of wrongdoing.

Contract Termination

Notice periods

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 current unlimited-term contracts
prior to implementing the new fixed-term contracts. In this
instance, the employer must provide at least thirty days’
notice if the employee was employed for less than five years; at
least sixty days’ notice if the employee was employed for more
than five years but less than ten years; and ninety days’
notice if the employee employed for more than ten years.

Grounds for termination

Redundancy termination is considered a valid grounds for a
termination of an employment contract under the new law. Under the
prior law, redundancy was not recognized. There are additional
grounds for “for-cause” termination, including where an
employee: (i) abuses his or her position for profit or personal
gain; or (ii) commences work for another employer without complying
with the 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 new employment.

End-of-Service Gratuity

Under the prior law, an end-of-service gratuity (EOSG) for a
resigning employee was reduced based on how long the employee had
been employed (i.e., there was no 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’ service; two-thirds
EOSG if the employee had between three and five years’ service;
and 100 percent EOSG if the employee had completed more than five
years’ service). Under the new law, employees will be entitled
to full EOSG when they resign, provided they have completed at
least one year’s service.

Payment of End-of-Service Entitlements

All termination entitlements must be paid to employees within
fourteen days after the termination date. Prior to the new law,
there was no expressly stated deadline.

Restrictive Covenants

The maximum post-termination restricted period for noncompete
agreements under the new law is two years.

Provisions Concerning Workplace Policies

The new law also contains provisions that employers may want to
take into account, even if they are not covered in employment
agreements, including:

Discrimination and Equal Pay

The new labor law provides protection for employees from
discrimination in the workplace on the grounds of race, color, sex,
religion, national origin, social origin, and disability. Neither
pregnancy nor maternity is not listed as a protected
characteristic; however, employers are prohibited from terminating
the employment of an employee (or threatening to terminate the
employment of an employee) due to the fact that she is pregnant or
on maternity leave.

Additionally, the law provides that there should be equal pay
for men and women for the same work. This was first introduced by
Federal Decree By-Law No. 6 of 2020, but the new law reinforces
it.

Bullying and Sexual Harassment

The new law provides protection for employees against bullying
and sexual harassment in the workplace. Specifically, Article 14
prohibits “[s]exual harassment, bullying or any verbal,
physical or psychological violence” towards an employee.

Internal Work Rules (Handbook)

Article 13 of the new law sets forth a number of employer
obligations, including the requirement that employers execute
internal work rules. Beyond that, no further details are provided.
Therefore, it is anticipated that the forthcoming executive
regulations will set out the framework and provide additional
details on this requirement.

Retention of Employment Records

Under the new law, all employment records must be kept for at
least two years after a termination of employment.

The UAE’s new labor law brings about substantial changes for
affected employers. Employers may want to consider developing
strategies to implement these new changes during the next year.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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