The New UAE Labor Law: Implications for Employers
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. 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. Employers have until February 2023 to move all employees to fixed-term agreements.
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.
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.
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
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.
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.
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.
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.
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.
Employees are now entitled to one day of unpaid leave per week during the notice period to look for new employment.
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.
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.