UAE Labour Law Update – The five big changes to note…

Federal Decree Law No. 33 of 2021 on the regulation of Labour Relations (New Labour Law) is set to change the face of the employment market in the UAE. Now that it has come into effect, we wanted to provide a reminder of the key changes and the potential impact for employers in the UAE.

1.  Anti-Discrimination Provisions 

The New Labour Law further defines the existing protections of the previous labour law, prohibiting discrimination on the basis of race, colour, sex, religion, national origin, ethnic origin or disability. Women have also been given additional protections with an express prohibition on terminating a female employee’s employment on the basis that she is pregnant or on maternity leave.

The New Labour Law has also added an express prohibition against sexual harassment, bullying, verbal, physical or psychological violence of employees by their employer, manager or colleagues, and an employer cannot force an employee to work against his or her will, including by threatening with a penalty.

2. The Introduction of Models of Work and Abolishment of Unlimited Term Contracts 

The New Labour Law has introduced new models of work; full-time, part-time, temporary and flexible work, with the possibility of further models being introduced.

Whilst employers are under an obligation not to allow an employee to work for other employers (without the appropriate consents), the New Labour Law does formally introduce the concept of part-time work and working for more than one employer. The employee is under a similar obligation not to work for other employers unless with the appropriate consents.

The temporary work model contemplates the ‘project’ work scenario, where a working relationship relates to a specific period of time with specific tasks. Finally, the New Labour Law introduces a flexible working model, allowing for factors like workflow, economic, and operational changes to dictate the working hours under a contract.

One of the key changes of the New Labour Law is the abolishment of unlimited term contracts, meaning that every employment contract in the UAE must be limited to a maximum period of three years. Although employment contracts are renewable and extendable, this change aligns the contract terms with residency visas here in the UAE.  It is important to note that employers only have one year to amend all indefinite contracts to fixed term contracts. It is likely that many company contracts will remain unlimited to ensure the retaining of key employees, however, how such a conflict would be treated in the event of a dispute is yet to be seen. It is important to note that continuous employment does not restart upon extensions and renewals.

Further, where an employee leaves an employer during their probation period to commence work with another employer in the UAE, the new employer may be liable to compensate the employer for recruitment and contract costs.

3. Non-Compete

Where an employee will have access to an employer’s customers or business secrets, the employer has the right to include a non-compete provision in the employment contract for up to two years after expiration of the contract.  Such provision must, however, specify the place, time and type of work that is covered by the non-compete, and must be limited in nature to protect the legitimate business interests of the employer.

In addition, the employee owes the employer an obligation of confidentiality and a prohibition against keeping any hard or soft papers or documents in relation to the business secrets without the permission of the employer.  We note, however, that the issue of non-solicitation is not dealt with under the New Labour Law.

4. Obligations of the Employer 

The employer has a number of obligations under the New Labour Law, some of the key requirements being:

• maintaining appropriate records;
• not keeping official documents (e.g. passport) of the employee;
• provide appropriate accommodation or a housing allowance;
• develop the skills of the employee and provide appropriate training to allow such employee to carry out his/her job;
• provide a safe and appropriate working environment, health and safety training and bear the costs of medical insurance;
• ensure the employee is aware of his or her rights and obligations;
• bear the cost of repatriation where the employer terminates the employment contract;
• imposing maximum working hours of no more than 8 hours per day or 48 hours per week; and
• only deducting money from an employee’s salary for recovery of loans, correction of overpayments, schemes pursuant to UAE law (such as pensions and insurances), approved social projects, debts due by court order, reparation of harm caused by the employee as a result of error or violation of instructions and/or certain violations under the employer’s constitution (as agreed with the Ministry and subject to an overall cap of 5% of salary).

5. End of Service Benefit 

Whilst the calculation of end of service benefit/gratuity (EOSB) remains similar to its predecessor, the New Labour Law has implemented other protectionary measures such as:

• removing the right of the employer to terminate an employee’s employment without EOSB;
• removing the right of the employer to reduce the EOSB of an employee on an unlimited contract by up to two thirds based on an employee’s resignation; and
• removing the right of the employer to deduct the EOSB of an employee on a fixed term contract where such employee resigns prior to the end of the fixed term contract.

Whilst removal of such rights for the employer further protects the EOSB position for employees, there have been some additions to the reasons for termination permitted by the employers. Employees can be terminated without notice where they:

• abuse their position for profit or personal gain; or
• commence work for another employer without the appropriate consents.

Executive regulations are due to be published, which will give additional details, clarity and guidance on the new employment landscape in the UAE. We will provide an update once the executive regulations are published.