Employment 2020

Last Updated September 08, 2020

United Arab Emirates

Law and Practice

Authors



Addleshaw Goddard LLP is a premium international business law firm with offices in the UK, Europe, the Middle East and Asia. In the Middle East, it operates as one practice from three offices in the UAE, Qatar and Oman. A dedicated team of specialist employment lawyers, based across the Middle East region, have significant experience of advising businesses in the UAE, Oman, Saudi Arabia, Qatar and Bahrain. They provide clients with day-to-day support with the full range of employment issues, including complying with local labour and immigration laws; issues arising on recruitment; complying with nationalisation; day-to-day HR issues; drafting and implementing employment contracts and policies; handling disciplinary matters; local pension obligations; undertaking dismissals; protecting confidential information and trade secrets; complying with data protection obligations; workplace and regulatory investigations; employment issues arising out of restructurings; mergers and acquisitions, and divestitures; and handling employment disputes and local labour court litigation.

The authors' commentary in this practice guide addresses employment matters in the private sector in mainland (onshore) UAE and does not seek to cover the rules and regulations that apply in the UAE's two financial free zones, the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), where different legislative and regulatory regimes apply.

Employment Legislation in the United Arab Emirates

Employment matters in the private sector in mainland (onshore) UAE are regulated by UAE Federal Law No 8 of 1980, as amended (the UAE Labour Law).

The UAE Labour Law applies to all employees in the UAE, save for:

  • employees of the UAE federal government;
  • employees in the DIFC and the ADGM;
  • members of the UAE armed forces, police and security services;
  • domestic workers; and
  • workers in the agricultural sector.

Some other free zones in the UAE (eg, the Dubai Development Authority and Jebel Ali Free Zone) have enacted their own employment rules and regulations. To the extent that those rules and regulations confer more generous rights, benefits and entitlements on employees than the UAE Labour Law, those rules and regulations will apply to employees employed by a company in the relevant free zone. Any contractual provision or rule or regulation that seeks to exclude an employee's rights under the UAE Labour Law will be unenforceable.

Legislative Changes in the Last 12 months

On 31 August 2020, the UAE government announced that male employees in the private sector would be entitled to five days' paternity leave to be taken within six months of the birth of their child. The specific legislation containing the new entitlement to paternity leave had not been released at the time of publication.

UAE Federal Decree Law No 6 of 2019

Prohibition on discrimination

Article 7 BIS has been added to the UAE Labour Law, prohibiting discrimination that prejudices equal opportunities or access to jobs, continuity of employment and enjoyment of employment rights.

It remains unclear how the new prohibition on discrimination in the UAE Labour Law will be applied in practice (ie, in the event of a dispute). However, given the broad nature of the prohibition under Article 7 BIS of the UAE Labour Law, the amendment will give employees an opportunity to register discrimination claims in the UAE labour courts in a broad range of circumstances.

The UAE Labour Law does not address what compensation would or could be payable to an employee in the event of a finding of discrimination under Article 7 BIS of the UAE Labour Law. However, if an employee is able to present compelling evidence of discrimination contrary to Article 7 BIS of the UAE Labour Law, it is likely to increase the prospects of the employee being awarded arbitrary dismissal compensation (see 7 Termination of Employment for more information).

Enhanced protection for pregnant employees

Article 30 BIS has been added to the UAE Labour Law, stating that any dismissal of, or disciplinary sanction issued to, an employee for being pregnant will amount to arbitrary dismissal.

Removal of female working restrictions

The restrictions under Articles 27, 28 and 29 of the UAE Labour Law that regulated a woman's ability to work during night-time hours and to undertake "hazardous work" have been removed.

Ministerial Decision No 279 of 2020 (Regarding the Stability of Employment in Private Sector Companies during the Period of Applying Precautionary Measures to Contain the Spread of the Novel Coronavirus)

Ministerial Decision No 279 of 2020 ("Decision 279") was introduced on 26 March 2020, with the aim of protecting the employment of non-UAE nationals during the period in which the UAE government implements precautionary COVID-19 measures.

Decision 279 encourages employers to take alternative measures to reduce costs before reducing head count. These measures, which must be undertaken with employees' consent, are:

  • implementing remote working;
  • placing employees on annual leave:
  • placing employees on unpaid leave;
  • temporarily reducing salaries; and/or
  • permanently reducing salaries.

Decision 279 also confirms the establishment by the UAE Ministry of Human Resources and Emiratisation (MHRE) of a "Virtual Labour Market", which is an electronic database enabling companies to make available excess staff for temporary or permanent hire by other companies registered with the MHRE.

Ministerial Decision No 280 of 2020 (On the Creation of a Committee That Will Deal with Stabilisation/Organisation of Emirati Employees in the Private Sector)

Ministerial Decision No 280 of 2020 ("Decision 280") was introduced on 26 March 2020 to provide additional protections to UAE nationals employed in the private sector by companies registered with the MHRE.

Decision 280 confirms that a committee will be formed by the MHRE for the purposes of:

  • developing support packages to ensure the continuity of employment of UAE nationals in the private sector;
  • reviewing cases where UAE nationals have been dismissed; and
  • assessing the process for the recruitment and appointment of UAE nationals.

Ministerial Decision No 281 of 2020 (On Regulating Remote Work in Private Sector Enterprises during the Period of Implementing Precautionary Measures to Limit the Spread of COVID-19)

Ministerial Decision No 281 of 2020 ("Decision 281") was introduced on 29 March 2020 to regulate remote working.

Decision 281 restricted office working capacity to 30% of full capacity and stated that specific categories of employees should work remotely (eg, pregnant employees, people of determination, employees suffering from respiratory or chronic diseases and employees older than 55).

Decision 281 also specified that employers are required to implement protective measures for employees who continue to be based in offices (eg, the provision of screening devices to take temperatures and to check virus symptoms).

As at 8 September 2020, the permitted office working capacity in the Emirate of Dubai has returned to 100%, although other Emirates, such as Abu Dhabi and Sharjah, are currently limiting office capacity to 30% of full capacity.

Ministerial Decision No 223 of 2020 (Amending the List of Communicable Diseases)

Ministerial Decision No 223 of 2020 amended Federal Law No 14 of 2014 on the Control of Communicable Diseases to include COVID-19 on the list of communicable diseases. As a result, individuals are under a duty to report suspected or known cases of COVID-19 to the UAE authorities, failing which they will be liable to a fine of AED50,000 to AED100,000.

Employee Status

The UAE Labour Law does not distinguish between "blue-collar" and "white-collar" employees (although it does not apply to domestic or agricultural workers).

Federal Law No 10 of 2017, as amended, applies to domestic or agricultural workers individuals working at the temporary or permanent residence of their employer (including private farms) and specifically covers 19 occupations that are categorised as domestic work, including housemaids, cooks, gardeners and drivers.

As part of the UAE work permit application process (see 5 Foreign Workers for more information), all employees sponsored by a company registered with the MHRE are required to enter into a dual-language (Arabic/English) employment contract in a form prescribed by the MHRE (the "MHRE Employment Contract").

MHRE Employment Contracts can be for a limited (definite) or unlimited (indefinite) term.

The MHRE Employment Contract contains basic information only (eg, salary, notice period and annual leave) and cannot be materially amended. It is therefore common for UAE employers to also implement a company employment contract (the "Company Employment Contract") that contains additional and more sophisticated terms and conditions of employment (eg, provisions relating to duties, bonuses, confidentiality and non-competition provisions).

Whilst the MHRE Employment Contract is recognised by the UAE authorities and the UAE labour courts as the operative employment contract, the terms of a Company Employment Contract will be enforceable in so far as they do not seek to exclude rights or entitlements afforded by the UAE Labour Law.

Where there is a discrepancy between the terms of the MHRE Employment Contract and the Company Employment Contract, a UAE labour court will typically apply the term that is more beneficial to the employee.

Working Hours

Employees between 15 and 18 years of age may not work more than seven hours per day (inclusive of a one-hour rest break) and may not be required to work overtime.

The maximum normal working hours permitted by the UAE Labour Law for all other employees are eight hours per day (excluding a one-hour break for lunch); ie, 48 working hours over a six-day working week, or 40 working hours over a five-day working week.

Certain specified sectors, such as retail (restaurants, hotels, shops), are permitted to observe a nine-hour working day (excluding one hour for lunch) with the prior approval of the MHRE.

The periods spent by an employee travelling between his home and place of work should not be included in their hours of work.

Overtime

During Ramadan, an employee's normal working hours should be reduced by two hours (with no reduction in pay).

In addition to their normal working hours, employees are permitted to work up to two hours of overtime per day.

Daytime working

An employee is entitled to an uplift of 25% of their normal hourly rate (basic salary plus allowances) for overtime worked between 4am and 9pm.

Night-time working

An employee is entitled to an uplift of 50% of their normal hourly rate (basic salary plus allowances) for overtime worked between 9pm and 4am.

Fridays

If an employee works on a Friday, their employer may choose between:

  • providing the employee a day's holiday in lieu of the Friday worked; or
  • applying a 50% uplift for all hours worked by the employee on the Friday.

Employees are not permitted by the UAE Labour Law to work more than two successive Fridays in a row unless they are employed on a daily wage basis.

Public holidays

When an employee works on a public holiday, their employer may choose between:

  • providing the employee a day's holiday in lieu of the public holiday worked and applying a 50% uplift for all hours worked on the public holiday; or
  • applying a 150% uplift for all hours worked by the employee on the public holiday.

The overtime provisions in the UAE Labour Law do not apply to individuals holding senior or management positions.

Currently there is no national minimum wage in the UAE or mandatory salary increases.

However, an employee must earn a minimum of AED3,000 per month (if the employer provides accommodation) or AED4,000 per month (if the employer does not provide accommodation) in order to be able to sponsor their spouse or other dependant family members for UAE residency visa purposes.

Annual Leave

An employee is entitled to the following minimum annual leave entitlements:

  • two calendar days per month where an employee has completed more than six months but less than one year of service with the employer; and
  • 30 calendar days per year for employees who have completed more than one year of service with the employer.

The minimum entitlement of 30 calendar days' annual leave is generally accepted in the UAE as equating to 22 working days (which is now the more common method of expressing an individual's entitlement to annual leave by international employers).

Notwithstanding the provisions of the UAE Labour Law, most international employers in the UAE provide employees with annual leave in their first year of employment calculated on a pro rata basis according to their full entitlement.

Employees are not permitted to lose their entitlement to annual leave; ie, any accrued untaken annual leave must either be carried forward or paid out to the employee either:

  • at the end of an employer's holiday year; or
  • on the termination of their employment.

Public Holidays

All employees are entitled to leave on UAE public holidays announced by the UAE government. Where a public holiday falls on a weekend and/or an employee's normal day of rest, there is no obligation on their employer to provide the employee with a day's additional leave in lieu of that public holiday.

Maternity Leave

Female employees are entitled to receive:

  • 45 calendar days' maternity leave at full pay if they have been employed with the same employer for at least one year;
  • 45 calendar days' maternity leave at half pay if they have been employed for less than one year at the date she gives birth; and
  • 100 calendar days without pay if the employee is sick and unable to return to work as a consequence of her pregnancy/birth (and such sickness is certified by a UAE-registered doctor).

Many international employers in the UAE offer enhanced maternity leave and benefits, although there is no statutory obligation to do so.

For a period of 18 months following the date of delivery, employees are entitled to two breaks of 30 minutes each for breastfeeding. In practice, most employers provide this as one hour and permit the employee to either start work an hour later or leave work an hour earlier, or have a two-hour lunch break. These breastfeeding breaks (i) are considered part of the employee's working hours, (ii) must not involve any reduction in remuneration, and (iii) are on top of the employee's entitlement to a break every five hours of work of not less than one hour.

The UAE Labour Law provides that an employee's paid or unpaid maternity leave must not be deducted from any other leave entitlements. Therefore, during any period of maternity leave:

  • an employee will continue to accrue holiday and sick leave as usual; and
  • if a public holiday falls on a working day (or a weekend if the company's policy is to provide a day in lieu where public holidays fall on a weekend), the employee's maternity leave should be extended accordingly.

An employee's paid maternity leave must be calculated towards her period of service for the purposes of calculating the employee's end of service gratuity (see 7.2 Notice Periods/Severance for more information regarding end of service gratuity).

Sick Leave and Pay

On completion of (i) their probationary period and (ii) a further three consecutive months of employment, an employee is entitled to 90 calendar days' sick leave per year of service. The employee will be entitled to sick pay as follows:

  • full pay for the first 15 days;
  • half pay for the next 30 days; and
  • no pay for the remaining 45 days.

An employee will not be entitled to receive any sick pay if their illness arises out of using narcotics or alcohol.

An employer is permitted to terminate the employment of any employee who has exhausted their statutory sick leave (ie, 90 calendar days per year of service).

Hajj Leave

Muslim employees are entitled, once during the course of their employment with an employer, to special unpaid leave of up to 30 calendar days in order to conduct the Hajj (Pilgrimage). This leave must not count as part of any other leave.

Other Types of Leave

The UAE Labour Law does not provide for bereavement leave (although it is market practice for international employers in the UAE to operate a separate bereavement leave policy).

The UAE Labour Law recognises a company's need to protect its business secrets and clients, and expressly refers to non-compete restrictions.

To be enforceable, the UAE Labour Law requires that non-compete restrictions apply to employees older than 21 and are no wider than necessary to protect the legitimate interests of the employer and are reasonable in terms of:

  • geographical scope;
  • duration; and
  • the type of work restricted.

There is no specific guidance as to the reasonableness of the geographical scope, duration and type of work restricted. This will depend on the specific circumstances of each case, including the nature and scope of the employee's role and, in particular, the employee's seniority. In the event of a dispute, it would be for the employer to demonstrate that the scope of the restriction was no wider than necessary to protect its legitimate business interests, having regard to the specific circumstances.

However, broadly speaking, the UAE labour courts tend to be reluctant to enforce post-termination restrictions that are longer than six months. Twelve-month restrictions are normally only accepted in relation to the most senior employees (eg, chief executive officers) who have significant access to their employer's confidential information and influence over clients/customers.

UAE labour courts normally expect the geographical scope of non-compete restrictions to be limited by Emirate (eg, to Dubai).

It is not possible to obtain injunctive relief in the UAE courts to prevent an employee from joining a competitor and so an employer's recourse against an ex-employee for breaching a non-compete restriction is limited to a claim for damages. In order to be successful with a claim for damages, the company would need to show that:

  • the ex-employee had breached the non-compete restriction;
  • the non-compete restriction complies with the UAE Labour Law (as set out above); and
  • the company has suffered a quantifiable financial loss as a result of the ex-employee's breach.

Ministerial Resolution No 297 of 2016 states that where a final UAE court decision is awarded confirming the enforceability of a contractual agreement not to join a competitor, the MHRE is entitled to refuse to grant a new work permit to the individual for the duration of the non-compete restriction. However, given the length of time it typically takes to obtain a court judgment, it remains unclear how this mechanism would operate in practice.

The UAE Labour Law does not expressly address non-solicitation provisions; however, the authors anticipate that a UAE labour court would assess such provisions according to the same principles applied to non-compete clauses, as set out above.

There is no single piece of data protection legislation in the UAE governing the processing, transfer and/or storage of personal data by employers located outside the DIFC and ADGM.

There are, however, a variety of UAE laws that seek to protect an individual's privacy that will have data protection-related implications for employers and the way in which they deal with an employee's sensitive personal data. In summary, these are:

  • UAE Federal Law No 3 of 1987, as amended (the "UAE Penal Code"), which prohibits an individual from disclosing confidential information that they received during their employment (which could include another employee's sensitive personal data);
  • UAE Federal Law No 5 of 2020, as amended (the "UAE Cybercrimes Law"), which governs the use of information technology and prohibits its use to "assault the privacy of a person"; and
  • UAE Federal Law No 15 of 1980, as amended (the "UAE Publishing Law"), which prohibits the publication of secrets relating to an individual's private or family life.

In light of (i) the emphasis placed on protecting an individual's privacy in the UAE, (ii) the broad nature of the offences in the legislation referred to above, and (iii) the potential sanctions that can be imposed for breaching the relevant legislation (fines, imprisonment and deportation), it is advisable for employers to seek specific written consent from employees before obtaining, processing and transferring an employee's personal information.

The UAE Labour Law states that employment is the right of UAE nationals and employers are under a duty to consider UAE nationals before employing a foreign national.

A programme of Emiratisation, which is intended to increase the number of Emiratis employed in the private sector, has been in place for over a decade and is set out in a variety of UAE Ministerial decrees, and Cabinet and Ministerial resolutions.

Most recently, the MHRE, in collaboration with the UAE government, launched a labour market testing platform, which requires employers in the private sector to advertise any new vacancies to UAE nationals. Selected employers are required to comply with this process before they can obtain approval from the MHRE for MHRE work permits for foreign nationals (see 5.2 Registration Requirements).

As part of the labour market testing process, selected employers who are registered with the MHRE are required to attend an open day to interview UAE national candidates who have expressed interest in the role advertised. Companies will learn if they are subject to the labour market programme when they initiate a work permit application and prepare a job offer application on the MHRE database.

The labour market testing process does not impose an obligation on employers to offer roles to UAE nationals. However, the employer is required to record the reason for rejecting a candidate after interview.

All employees working in the private sector in the UAE must hold an MHRE work permit (or free zone ID card) issued in the name of their UAE employing entity.

If an employee is not a citizen of the UAE or a country in the Gulf Cooperation Council (GCC), they must also have a UAE residence visa to be able to work lawfully in the UAE. Most individuals will be sponsored for UAE residence visa purposes by their employing entity, although it is possible for an individual to be sponsored by their spouse or parent and to obtain a work permit for the UAE.

As a result of being issued with an MHRE work permit (or free zone ID card) in the name of a UAE entity, the individual will be considered an employee of the UAE entity for the purposes of the UAE Labour Law and will be entitled to receive all the rights and benefits afforded by the UAE Labour Law.

Under UAE immigration regulations, an individual must:

  • only work for, and carry out the types of activities listed in the trade licence of, the UAE entity named on their MHRE work permit (or free zone ID card), unless specific approval is obtained from the MHRE (or free zone authority); and
  • be based at the registered premises of the UAE entity named on their UAE residence visa and MHRE work permit or free zone ID card (although, more recently, working from home has been widespread and indeed encouraged by the UAE authorities in order to combat the spread of COVID-19).

Any deviation from these arrangements would amount to a breach of the UAE immigration regulations that could result in:

  • fines of up to AED50,000 for each of the parties in breach (including, in the case of the companies involved, their respective general managers);
  • imprisonment for up to 12 months of the relevant employee and the general managers of the respective companies in breach; and/or
  • deportation of the relevant employee.

The UAE Labour Law states that an employee may be temporarily suspended from work if he is accused of committing an offence associated with striking.

Ministerial Resolution No 707 of 2006 (Regarding the Rules and Procedures of Conducting Business in the State for Non-Citizens) states that the MHRE will not issue a new work permit to an employee for one year in circumstances where the employee's employment has been terminated for taking part in illegal strike action.

The UAE Penal Code refers to employees in the public sector being subject to fines and/or imprisonment if they participate in strike action.

The unauthorised organisation of representative bodies/trade unions is not permitted in the UAE.

The concept of collective bargaining agreements is not recognised in the UAE.

The UAE is an International Labour Organization member country, although it has not yet signed the core Convention 87 on Freedom of Association and Protection of the Right to Organise, and Convention 98 on the Right to Organise and Collective Bargaining.

Termination of Unlimited-Term Employment Contracts

A company may terminate the employment of an employee employed on an unlimited-term employment contract as follows:

  • by mutual agreement with the employee;
  • for a "valid reason" by giving the employee a minimum of 30 days' notice of termination or any greater notice period contained in the employee's employment contract (whether in a Company Employment Contract or the MHRE Employment Contract); or
  • without notice under Article 120 of the UAE Labour Law.

The UAE labour courts have repeatedly held that a valid reason for dismissal must be related to either an employee's poor performance or conduct.

Prior to any dismissal for a "valid reason", a company is required to undertake a disciplinary process in accordance with Article 110 of the UAE Labour Law. This process envisages an employee being:

  • put on written notice of the concerns regarding their conduct/performance;
  • invited to attend a meeting to discuss their conduct/performance;
  • given an opportunity at a meeting to explain their conduct/performance; and
  • issued with a written decision regarding their conduct/performance.

Each of these steps must be recorded in writing.

If a company's internal disciplinary/performance policy requires steps in addition to those set out above, those steps must be complied with as well.

If a company fails to follow a disciplinary process or does not have a valid reason for dismissal, a UAE labour court will typically make a finding of arbitrary dismissal and award the employee arbitrary dismissal compensation of up to three months' remuneration (in addition to the employee's other outstanding statutory and contractual entitlements).

Termination of Fixed-Term Employment Contracts

If the employee is employed on a fixed-term employment contract, terminating their employment prior to the expiry of the employment contract for any reason, save for a reason set out in Article 120 of the UAE Labour Law, will likely result in the employee being entitled to "early termination compensation" equal to the lesser of:

  • three months' remuneration; or
  • the remuneration the employee would have received during the remainder of their fixed-term employment contract.

An employee may be entitled to receive either arbitrary dismissal compensation or early termination compensation, but not both.

Similarly, if an employee resigns before the expiry of their fixed-term employment contract, they will be obliged to pay their employer early termination compensation equal to the lesser of:

  • half their remuneration for three months; or
  • the remuneration the employee would have received during the remainder of their fixed-term employment contract.

Redundancy (Unlimited-Term Employment Contracts)

Given that unlimited-term employment contracts can only be terminated for a valid reason (ie, a performance or conduct-related reason), any termination by reason of redundancy will likely be considered arbitrary by a UAE labour court. However, in recent years the authors are aware of companies successfully justifying redundancies in circumstances where they are closing down either their entire business in the UAE or a distinct, identifiable part of their business.

Redundancy (Limited-Term Employment Contracts)

Terminating an employee's limited-term employment contract prior to the expiry of the employment contract (by reason of redundancy or otherwise) will result in the employee being entitled to "early termination compensation" equal to the lesser of:

  • three months' remuneration; or
  • the remuneration the employee would have received during the remainder of their fixed-term employment contract.

Redundancy Process

Given that the UAE Labour Law does not formally recognise the concept of redundancy, it does not impose any specific obligations on companies when undertaking redundancy exercises.

However, as a matter of best practice, international companies in the UAE will typically follow a redundancy process that reflects the disciplinary process set out in the UAE Labour Law. This would involve:

  • informing the employee, in writing, of their potential redundancy;
  • meeting with the employee to discuss their potential redundancy and to identify whether there are any ways in which their redundancy could be avoided (and taking minutes of this meeting); and
  • informing the employee of their redundancy in writing.

Given that the UAE Labour Law does not formally recognise the concept of redundancy, it does not impose any specific obligations on companies when making "redundancy" payments (in addition to the minimum statutory entitlements).

Notice During Probation

The UAE Labour Law permits employers to implement a maximum probationary period of six months. During the probationary period, the employer is permitted to terminate an employee's employment immediately on written notice and without payment of any end of service gratuity.

In practice, it is common for international employers in the UAE to incorporate a minimum notice period in an employee's probationary period (eg, 1-2 weeks), in order to provide sufficient time for a handover of the employee's duties.

Notice Periods

Once an employee employed under an unlimited employment contract has successfully completed their probationary period, they will be entitled to receive a minimum of 30 calendar days' written notice of termination (or any greater notice period contained in the employee's MHRE Employment Contract or Company Employment Contract).

End of Service Gratuity

All foreign nationals who are not citizens of a GCC country and who have more than one year's service are entitled to receive an end of service gratuity payment (ESG) on the termination of their employment (save for if the employee's employment is terminated "for cause" under Article 120 of the UAE Labour Law).

ESG is calculated according to the following statutory formula:

  • 21 days' basic pay for each year of service for the first five years of the employee's employment; and
  • 30 days' basic pay for each year of service thereafter.

"Basic pay" means an employee's basic pay, excluding allowances, at the time of the termination of the employee's employment.

ESG is capped at two years' basic pay and should be calculated on a pro rata basis in respect of the employee's final year of employment.

If an employee employed on an unlimited-term employment contract resigns from their employment with less than five years' service, their entitlement to ESG will be reduced as follows:

  • by ⅔ where the employee has between one and three years' service; and
  • by ⅓ where the employee has between three and five years' service.

An employee employed on an unlimited-term employment contract who resigns after five years' service will be entitled to receive their full ESG. An employee employed on a fixed-term employment contract with less than five years' service who resigns prior to the expiry of their fixed-term employment contract will not be entitled to receive any ESG.

The UAE Labour Law permits an employer to deduct from an employee's ESG any sums owed by the employee to the employer.

Article 120 of the UAE Labour Law sets out an exhaustive list of reasons that permit a company to terminate an employee's employment without notice pay and without payment of end of service gratuity. These include the following circumstances where the employee:

  • assumes a false identity or nationality, or submits false certificates or documents;
  • is dismissed during the probation period;
  • commits an error resulting in material losses to the employer, provided that the MHRE is notified of the incident within 48 hours of being made aware of the incident;
  • violates the instructions relating to safety at work or in the workplace, provided that such instructions are written and posted in a prominent location;
  • fails to perform his main duties in accordance with his employment contract, and fails to remedy such failure despite a written investigation into the matter and a warning that he will be dismissed in the case of recidivism;
  • discloses any secret of the establishment where he works;
  • is convicted in a final manner by the competent court in a crime of honour, honesty or public ethics;
  • is found in a state of drunkenness or under the influence of a narcotic during working hours;
  • if he assaults (during work) the employer, responsible manager or a co-worker; or
  • is absent without valid cause for more than 20 non-consecutive days in one year, or for more than seven consecutive days.

However, in practice, a UAE labour court will rarely uphold a dismissal under Article 120 of the UAE Labour Law in the absence of a criminal conviction (save for when an individual's employment is terminated during their probationary period or as a result of their unauthorised absence from work).

Prior to any dismissal under Article 120 of the UAE Labour Law, a company is required to undertake a disciplinary process in accordance with Article 110 of the UAE Labour Law. This process envisages an employee being:

  • put on written notice of the concerns regarding their conduct;
  • invited to attend a meeting to discuss their conduct;
  • given an opportunity at the meeting to explain their conduct; and
  • issued with a written decision regarding their conduct.

Each of these steps must be recorded in writing.

If the company's internal disciplinary policy requires steps in addition to those set out above, those steps must be complied with as well.

If a company fails to follow a disciplinary process or is unable to justify a dismissal under Article 120 of the UAE Labour Law, a UAE labour court will normally make a finding of arbitrary dismissal and award the employee:

  • arbitrary dismissal compensation of up to three months' remuneration; and
  • the employee's other outstanding contractual and statutory entitlements (including any unpaid end of service gratuity and notice pay).

In the absence of either a valid reason for dismissal or a fair disciplinary process, it is reasonably common for companies to enter into a settlement with an employee by paying an "ex gratia" payment in excess of the employee's statutory and contractual entitlements to deter the employee from filing a labour complaint.

The amount of the ex gratia payment can vary, up to a maximum of three months' remuneration (reflecting that this is the maximum award for arbitrary dismissal compensation that would be made to an employee by a UAE labour court).

Any offer of an ex gratia payment should be made conditional upon the employee:

  • signing a settlement agreement; and
  • cancelling their UAE residence visa.

Whilst it is not permitted to contract out of the UAE Labour Law (and so a settlement agreement does not preclude an ex-employee from bringing a claim), in the authors' experience it is rare for an ex-employee to bring a claim having entered into a settlement agreement. If an ex-employee was to do so, the employer could produce the settlement agreement as evidence that the ex-employee has already received a sum in excess of their statutory and contractual entitlements and therefore no further arbitrary dismissal compensation should be awarded. There are also other mechanisms that can be included in the settlement agreement to deter an employee from commencing legal proceedings.

Restrictions on Terminating the Employment of UAE Nationals

Ministerial Decision No 212 of 2018 (On the Regulation of Employing Nationals in the Private Sector) ("Decision 212/2018") was introduced to control the circumstances in which UAE nationals may be dismissed.

Employers are required to undertake exit interviews with UAE nationals and to submit details of the interview to the MHRE, confirming the reasons for the termination of their employment.

The dismissal of a UAE national will be regarded as unlawful if:

  • the termination of employment is not for a reason falling under Article 120 of the UAE Labour Law (ie, for cause/gross misconduct);
  • if a non-UAE national is performing the same role and duties as the UAE national, or if it can be evidenced that the reason for the termination of employment was to replace the UAE national with a non-UAE national;
  • the reason for termination is not related to the employee's work (ie, their performance);
  • the reason for termination is due to the UAE national filing a complaint with the UAE authorities; or
  • the employer fails to submit details of an exit interview.

If the MHRE determines the dismissal of a UAE national to be unlawful, Decision 212/2018 provides that it may:

  • refer the matter to the UAE labour court;
  • suspend the employer's ability to issue new work permits for a period of six months;
  • impose a fine of AED20,000; and/or
  • direct the employer to reinstate the UAE national (following a successful judgment being obtained).

As set out in 7 Termination of Employment, if an employee engaged under an unlimited-term employment contract (i) is not terminated for a valid reason, and/or (ii) the employer fails to follow the appropriate disciplinary process prior to terminating the employee's employment, the employee may be entitled to claim compensation for arbitrary dismissal in the UAE labour courts.

Article 121 of the UAE Labour Law also permits an employee to resign from their employment and claim arbitrary dismissal compensation in circumstances where their employer has breached their contractual or legal obligations to the employee.

Prohibition on Discrimination under the UAE Labour Law

As mentioned under 1.1 Main Changes in the Past Year, the UAE Labour Law has introduced a new prohibition on employment-related discrimination.

The employee will be required to adduce evidence to support any allegation of discrimination.

UAE Federal Law No 2 of 2015 On Combating Discrimination and Hatred

UAE Federal Law No 2 of 2015, as amended (the "Discrimination Law") prohibits discrimination based on religion, creed, doctrine, sect, caste, race, colour or ethnic origin.

The Discrimination Law is potentially significant in an employment context in that it provides for the representative, director or agent of a legal entity to be subject to criminal penalties (as if they had the committed the crime themselves) if a crime prohibited under the Discrimination Law is committed by any personnel of the company in its name and on its behalf, provided the company representative is aware of the act that has taken place.

Penalties under the Discrimination Law are severe and include five years' imprisonment and/or a fine of between AED500,000 and AED1,000,000.

UAE Penal Code

The UAE Penal Code was amended by Law No 4 of 2019 (Amending Certain Provisions of the Penal Code) to (i) prohibit females being assaulted by words, acts, electronic means and/or any other methods and males disguising themselves in female clothing; and (ii) expressly prohibit sexual harassment.

Filing a Labour Complaint

To file a labour complaint, an employee must first:

  • register a complaint with the MHRE; or
  • register a complaint with the free zone authority.

The MHRE (or free zone authority) will attempt to mediate the dispute. The MHRE/free zone authority may also provide recommendations as to how the matter should be resolved.

If the matter cannot be resolved amicably, the MHRE or free zone authority will refer the matter to the UAE labour court.

UAE Labour Court Proceedings

The key features of UAE labour court proceedings are as follows:

  • all proceedings are conducted in Arabic;
  • all documents submitted to support a claim or defence must be legally translated into Arabic;
  • only advocates who are registered with the UAE courts have rights of audience;
  • a power of attorney must be issued by a party to proceedings to their legal representatives and filed with the UAE labour court to enable legal representatives to participate in the proceedings; and
  • there is no duty of full disclosure (ie, in the absence of a court order, a party is not required to disclose documents that do not support their case).

The UAE labour courts rely heavily on the parties' written submissions and there will be very limited opportunity for oral evidence (if any).

Once a claim is registered with the Court of First Instance, the matter will be progressed by a series of hearings, whereby each party submits a written memorandum with supporting evidence. The parties will be given the opportunity to reply to the other party's memorandum. Once the court is satisfied that it has a complete picture of the case, it will then reserve the matter for judgment.

If the court considers that the claim or a particular issue requires further investigation or analysis, it has absolute discretion to appoint an "expert" to investigate certain aspects of the claim. The expert can have a broad remit, which may include visiting the parties' premises, requesting certain documentation for review and interviewing party representatives. Written submissions can also be made to the expert. The expert will then prepare a report of his findings, which will be submitted to the court and the parties will have the opportunity to reply to the report prior to the matter being reserved for judgment.

Following a Court of First Instance judgment, a party will have 30 days (from the date of the oral Court of First Instance judgment) to appeal the decision to the Court of Appeal.

The Court of Appeal decision may be further appealed to the Court of Cassation (within 60 days of the oral Court of Appeal judgment). The Court of Cassation's decision will be final.

The UAE labour courts have jurisdiction to hear disputes relating to the UAE Labour Law involving employees and companies registered with the MHRE and/or UAE free zones (excluding the ADGM/DIFC). Any arbitration agreement that seeks to override the jurisdiction of the UAE labour courts to hear these cases will not be enforceable.

However, an arbitration agreement governing an employment-related matter that does not fall under the UAE Labour Law (for example, a dispute connected with an employee share option plan) is potentially enforceable.

In the UAE, each party is responsible for their own legal costs and disbursements. The UAE labour courts can (and often do) award a nominal sum in respect of a party's legal costs. This would typically be in the region of AED2,000–AED5,000.

Addleshaw Goddard (Middle East) LLP

Level 6, Burj Daman
DIFC
Dubai
UAE

+971 56 425 8071

b.brown@aglaw.com www.addleshawgoddard.com
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Law and Practice

Authors



Addleshaw Goddard LLP is a premium international business law firm with offices in the UK, Europe, the Middle East and Asia. In the Middle East, it operates as one practice from three offices in the UAE, Qatar and Oman. A dedicated team of specialist employment lawyers, based across the Middle East region, have significant experience of advising businesses in the UAE, Oman, Saudi Arabia, Qatar and Bahrain. They provide clients with day-to-day support with the full range of employment issues, including complying with local labour and immigration laws; issues arising on recruitment; complying with nationalisation; day-to-day HR issues; drafting and implementing employment contracts and policies; handling disciplinary matters; local pension obligations; undertaking dismissals; protecting confidential information and trade secrets; complying with data protection obligations; workplace and regulatory investigations; employment issues arising out of restructurings; mergers and acquisitions, and divestitures; and handling employment disputes and local labour court litigation.

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