Federal Decree – Law No. 33 of 2021 on the regulation of labour relations in the private sector came into force on 2 Feb 2022. Private sector employers should review their policies and follow the procedures.
The law is designed to enhance employment rights and boost the competitiveness of the UAE as a place to live and work, helping the region to attract and retain world class talent.
Significant changes have been introduced to family leave entitlements, discrimination laws, termination of employment and ‘non-compete’ clauses in employment contracts. The new law also makes provision for businesses to put in place part-time and flexible working arrangements.
Here, we summarise some of the most significant changes to the legislative framework.
1. Employment contracts
All employees must be employed on a fixed term employment contract, not exceeding three years in length. Contracts can be renewed, and any renewal is included in total period of service. Transition to fixed term contracts must be completed by 1 February 2023.
Requirement for MoHRE/free zone contract remains. However, changes can now be made to MoHRE template contract and different forms exist depending on type of visa/work model.
Models of work
New models of work introduced, including:
● Full-time
● Part-time, for one or more employers
● Temporary
● Flexible
● Remote working
● Job sharing
All employees have the same entitlements, however some of these may be pro-rated.
Probationary period
The maximum six-month probationary period remains. However, employers must give 14 days’ notice to dismiss.
Employees must give:
● 14 days’ notice to resign if they are leaving the UAE
● One month notice required if they are leaving to join another employer in the UAE
Where an employee leaves during the probationary period to join another employer in the UAE (or returns to the UAE to work within three months), the old employer may claim the costs of recruitment from the new employer.
Non-competition restrictions
Non-compete clauses can be used and can last up to two years in length. The restriction must go no further than is necessary to protect a legitimate business interest requiring that it is limited in terms of geographical location, type of work and length.
The law sets out the circumstances in which post-termination restrictions will unenforceable including where, for example, the employer terminates the employment in breach of its legal obligations due to the employee.
Restrictive covenants can be set aside where any of the following occur:
● the parties’ written agreement;
● the new employer or the employee pays up to three months’ compensation to the old employer (subject to the old employer providing their written consent);
● the employee is terminated during their probationary period; or
● as may be deemed appropriate in light of labour market needs.
2. Employee benefits
Internal policies
Employers with 50+ employees must have in place:
● a grievances policy;
● a disciplinary sanctions policy.
Any other policies are at the discretion of the company.
Overtime
● A limit of two hours per day of overtime continues to apply. A further cap of 144 total working hours (including overtime hours) over a three-week period also applies.
● Rates of pay for overtime continue unaffected and are calculated on the rate of basic pay, except that the enhanced premium for night work now only applies for hours worked between 10pm and 4am.
● Limited exceptions apply to the overtime (and overtime pay) provisions. This list of exemptions has not been materially expanded and includes for members of the board and for employees with supervisory responsibilities.
Payment of salary
Employees may be paid in currencies other than AED by agreement between the employer and the employee.
Maternity leave and maternity pay
Maternity leave entitlement has been increased to:
● 45 days at 100% pay; plus
● 15 days at 50% pay.
There is now no minimum qualifying service requirement.
This maternity leave is now available to women who suffer from a miscarriage or still birth after six months of pregnancy.
An additional 45 days’ unpaid leave is available where the employee suffers from a pregnancy related illness, and an additional 30 days’ paid leave and 30 days’ unpaid leave is available where the employee’s child has a disability.
Annual leave
Basic annual leave entitlement remains the same.
Employees no longer have the automatic right to carry forward unused annual leave to the next holiday year. Any carry forward or payment in lieu can only be made with the agreement of the employer. Payment in lieu of holidays on termination is at the rate of basic salary only.
Study leave
Employees with more than two years’ service are entitled to ten days’ leave per year in order to sit exams. To be eligible, the employee must be studying at a government approved UAE educational institution.
Compassionate leave
All employees are entitled to compassionate leave in the event of a death of a family member:
● death of spouse – five days’ leave;
● death of parent, child, sibling, grandchild or grandparent – three days’ leave.
3. Termination of employment
Dismissal on notice
● Employees can be dismissed for any ‘legitimate reason’. Expiration of a fixed term contract is a valid reason for dismissal.
● Employees on fixed term contracts can now be dismissed on notice as normal, with no additional compensation being payable.
● Victimisation – where an employee is dismissed for filing a complaint against the employer – is unlawful.
Notice periods
Minimum notice period of 30 days continues. However, a maximum of 90 days’ notice period has been introduced.
● 30 days for employees with up to five years’ service
● 60 days for employees with between 5 and 10 years’ service
● 90 days for employees with 10 years’ service or more.
Summary dismissal
The exhaustive list set out under the Old Labour Law has been maintained, with two further additions:
● abusing position with the aim to obtain personal gains and profits; and
● joining another establishment without complying with controls and procedures in place.
Further limitation has been placed on summary dismissal for failure to carry out basic duties – a written investigation and written warnings must technically be provided before the employee is dismissed.
Employees summarily dismissed lose their entitlement to their notice period, however now retain their entitlement to an end of service gratuity payment.
End of service gratuity
● Employees with over one years’ service continue to be entitled to ESG, calculated on the same basis as before.
● Employees summarily dismissed now retain their entitlement to ESG, and no reductions apply where an employee resigns.
● Payment of ESG, together with all other termination payments, must be made within 14 days of the termination date.
4. Potential liability
Discrimination
Specific protections have been introduced for employees, meaning that they cannot be discriminated against on the basis of:
● race;
● skin colour;
● sex;
● religion;
● national origin;
● social origin; or
● disability.
Positive discrimination in favour of Emiratis is an exempted category.
Harassment
Express protections against sexual harassment, bullying and any verbal, physical or psychological violence against employees have been introduced.
Fines
The UAE courts are now able to levy fines against employers for breaches of the Labour Law. Fine ranges are:
● AED 20,000-100,000 for providing false information to recruit an expatriate employee;
● AED 50,000-200,000 for illegally employing an individual or recruiting an employee without having work to provide; and
● AED 5,000-1,000,000 for any violation of the UAE Labour Law.
Fines can be doubled by the court for repetition of violations.
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