The United Arab Emirates (UAE) recently passed Federal Law No. 33 of 2021 (the New Labor Law). It will affect February 2, 2022, and repeal the UAE Federal Law No. 8 of 1980 (the Current Labor Law).
According to the new law, all companies and employees of the private sector in the UAE will be covered by it, including those in the free zones, except for the Dubai International Financial Center and Abu Dhabi Global Market, which have their employment laws.
The New Labor Law introduces several unexpected changes. While some of the changes in the New Labor Law seem rational, it’s hard to see how they’ll be implemented in practice, not least since much of the detail will be in executive regulations. This executive order is intended to clear up existing areas of uncertainty.
Nevertheless, affected employers must bear several significant issues in mind and adjust employment contracts, policies, and practices.
The New Labour Law’s critical points and the main actions employers need to take are summarized below.
The New 2022 Labor Law applies to all the organizations “specifically the ones in conjunction with the local government or federal,” unless the organization’s documents state otherwise.
Protections Against Discrimination
In the UAE, discrimination based on race, colour, sex, religion, nationality, ethnicity, or disability is prohibited by law. We still need to see how it will enforce this protection in practice and what remedies will be available to individuals who have been victims of discriminatory conduct.
Protection Against Harassment of Employees
It is illegal for employees to be harassed, bullied or injured verbally, physically or mentally. The enforcement and remedy for individuals subjected to harassment in this act remain to be seen, as does the enforcement of the anti-discrimination provisions.
Equal Pay for Women
Article 27- Article 34 states all the Rights and provisions for women laws. There has been tremendous development in recent years, although the concept of equal pay isn’t new. Organizations must pay women the same as men undertaking work of equal value, as was introduced in the Current Labor Law.
Employment contracts for a fixed period
The fixed-term contracts of all employees must not exceed three years and can be extended for the same or more extended period. Employers will have 12 months from February 2, 2022, for the process of changing all of their employees’ contracts.
Developing flexible working models
Full-time, part-time, temporary or flexible employment is available to employees. As a result, New Labor Law refers to the “models” that many employers implement in the UAE. There is no reason for us to believe that their references in this legislation will have a material impact on employers or employees.
Flexible Working Models Employment Contract Templates
Templates for new flexible working arrangements will be included in executive regulations. We predict that MHRE will issue these contract templates in a relatively simple dual-language format. Still, we also expect that companies will continue to publish their employment contracts that include more sophisticated terms and conditions alongside the new template contracts.
Probationary period termination by the employer
An Employer/Boss can discontinue an employee’s employment by giving them a 14-days written notice in their probationary period.
Employee Terminated During Probationary Period
Termination by an employee at the probationary period
Employees who wish to change their jobs during the probationary period may leave their employment with the company in UAE by providing a notice period of at least one month. According to the new labour law, in this case, the employee’s new employer should compensate the old employer for the hiring( Overall process of identifying, sourcing, screening, shortlisting, and interviewing candidates for jobs within an organization) costs.
Those who want to leave the country during their probationary period may terminate their employment contract before 14 days notice period.
Termination on Notice Period
Either one can cancel the contract for “good cause” by giving written notice.
The minimum notice period is 30 days, but the notice periods are extended nowadays.
This mainly goes for those working on management, replacement, and recruitment of senior managers level positions who have to give a notice period of up to 6-12 months.
Look for Work
When the employer gives notice, the employee is entitled to one unpaid day of absence every week to hunt for new work during the notice period.
Current Unlimited Employment Contracts’ Notice Periods
Although unlimited contracts are to be replaced by fixed-term employment contracts, the New Labor Law imposes minimum notice periods for the termination of existing tentative agreements, which vary depending on the length of service:
(I) 30 days if the employee’s period of service is less than five years;
(ii) 60 days if the employee’s period of service is more than five years; and
(iii) 90 days if the service period is more than ten years.
Reasons for Dismissal
The list of instances in which an employee’s employment could be terminated has been broadened to include the employer’s permanent closure, insolvency, and the employee’s failure to meet the required immigration criteria.
Unfortunately, the list of reasons for immediate or summary dismissal has not been significantly expanded, even though the New Labor Law requires a written investigation and two written warnings explicitly before dismissing an employee for failure to perform the employee’s primary responsibilities.
The Disciplinary Procedure
A disciplinary procedure is expected to be included in the executive regulations.
To allow an employer to conduct a disciplinary action, a suspension of up to 30 days with half pay will be granted. If an employee is finally acquitted of any misconduct, he or she will be entitled to be compensated for any wages withheld. As a result, we expect most firms to continue suspending workers on full pay and benefits.
Internal Procedures and Policies
According to the upcoming executive directives, employers will be expected to “put in place internal work norms.”
Calculation of Gratuity at the End of Service
The end-of-service gratuity is claimed to be computed using working days, which would be a significant change.
This, in our opinion, is most likely an oversight that will remedy administrative rules. If this were modified purpose, the employer’s responsibility for end-of-service gratuity would significantly increase.
Gratuity for Resignation at the End of Service
If an employee resigns, the end-of-service gratuity is not reduced.
Gratuity at the End of Service in the Event of a Summary Dismissal
Employers cannot refuse to pay an employee’s end-of-service gratuity if the person is fired without cause (if employment is terminated immediately without notice). This significant milestone symbolized the Dubai International Financial Centre’s attitude in 2019.
Pay and Leave for Maternity
Maternity pay has been extended to 60 days (45 full days and 15 partial days). There is no criterion for qualifying service.
In the event of stillborn infants and newborn deaths, employees will subsequently be entitled to maternity leave and compensation.
If an employee is diagnosed with a pregnancy-related ailment, they will be entitled to an extra 45 days of unpaid leave. When computing the employee’s end-of-service gratuity, this time of absence will be excluded.
In the six months after their kid’s birth, employees will be entitled to five days of paid leave. This leave is in addition to an employee’s right to maternity leave, and there is no need for qualifying service. In 2020, the Current Labor Law was amended to include parental leave.
Employees who have infants with impairments may be eligible for an extra 60 days of paid leave.
Leave of Compassion
Employees will be entitled to five days of paid leave if their spouse passes away and three days if a parent, child, sibling, grandchild, or grandparent passes away. There is no criterion for qualifying service.
So the new law states that you can take ten working days of study leave if you have completed more than two years in your service. However, it’s not yet decided whether the leave would be paid or unpaid.
Probation Period Sick Leave Pay
Employees can’t take any paid leave when they are sick during the probation period.
Employees can take their vacation the year in which it is due. However, it is unclear what would happen if not.
Pay for vacations
Payment instead of holiday pay is computed only based on basic income at the time of termination.
Wages will be subject to 50% of the monthly salary deductions.
Non-compete agreements must be no more than two years in duration, albeit, in most situations, an employer will struggle to justify such a prolonged limitation.
Certain occupations will be excluded from non-compete duties; however, administrative rules will handle this.
Regrettably, the New Labor Law does not cover other sorts of restrictive covenants, such as the non-poaching of workers or the non-solicitation of clients and consumers.
The retention of an employee’s passport is strictly forbidden by law.
Overtime will be limited to 144 hours every three weeks and computed only based on base wage.
Exemption for Overtime
The Current Labor Law’s overtime exemption for workers in supervisory or management positions is no longer valid, and administrative rules will determine new exemptions.
Days of Rest
Fridays are no longer required weekly rest days.
Employee Benefits in the Event of Death
Employers shall pay any outstanding earnings and end-of-service benefits to a dead employee’s spouse or children (as selected by the employee) within ten days of the employee’s death. It’s unclear how this provision will relate to existing inheritance regulations in the UAE.
Without Prior Notice Resignation
Employees will only be entitled to quit without providing notice if the employee tells the MHRE 14 days before leaving and the employer fails to address the situation; and (ii) the employee notifies the MHRE within five working days of being able to do so in the event of harassment or violence.
Payments in Salary Currency
Employees may be paid in currencies other than the UAE dirham if agreed upon in the employment contract. However, it is unclear how this would function for firms that must pay their employees via the Wages Protection System.
Final Entitlements Payment
Employers must pay all final entitlements to their workers within 14 days after they terminate employment.
Employment Records Retention
Employers must keep employment records for two years after leaving the company.
For violations of the New Labor Law, fines of up to 1,000,000 UAE dirham (about 272,257 USD) may be issued, which may be compounded in circumstances where many workers are impacted.
Points to Consider
All concerned employers should consider the following steps:
1. Ensure staff understand how the new labour law will affect them.
2. Update the template employment contracts to reflect the need to give all workers three-year fixed-term contracts.
3. By February 2, 2023, ensure that all current workers on indefinite employment contracts are transferred to fixed-term employment contracts.
4. Modify or replace current employment contracts or policy papers related to individual statutory rights (45 days of maternity leave).
5. Change the existing sick leave policy to indicate that workers are not eligible for paid sick leave during their probationary term.
6. Make changes to current maternity and paternity leave policies to reflect the new rights.
7. To reflect the new anti-discrimination/bullying/harassment regulations, consider creating equal opportunity and anti-bullying and harassment policies.
8. Consider implementing a grievance procedure to make it easier for employees to report discrimination, bullying, and harassment.
9. Update disciplinary rules to reflect the vast number of grounds for termination; (ii) the restriction on discrimination, bullying, and harassment; and (iii) the fact that an employee’s end-of-service gratuity may no longer be withheld in any circumstances.
10. Update working time regulations to reflect the overtime hour limit and modifications to overtime compensation computation.
11. Create a policy for compassionate leave.