LawFlash

United Arab Emirates Updates Federal Labour Law

December 29, 2021

The United Arab Emirates has issued a new labour law, which makes changes to employment-related issues such as leave, termination, overtime, and employment contracts, among others. This LawFlash includes a summary of these changes.

Beginning 2 February 2022, the entirety of the United Arab Emirates’ existing labour law (Federal Law No. 8 of 1980) and any subordinate regulation will be repealed and replaced with the new Federal Decree-Law No. 33 of 2021 (the Labour Law Decree).

Private sector employers should take note of the contents of this new legislative regime as it will (among several amendments) require immediate changes to the calculation of end of service gratuity payments for expat workers and will require over the next 12 months all employment contracts to revert to fixed-term contracts (not exceeding three years). For employees based in the Dubai International Financial Centre and the Abu Dhabi Global Markets, the regulations governing employment contracts remain unchanged. Although the legislation has been issued, there are—of yet—no published implementing regulations regarding additional measures for the implementation of the Labour Law Decree; however, a summary of the key amendments is set out as follows:

 

Article

Federal Decree Law No. (33) of 2021

Additional Leave

Article 32

Bereavement - five days; parental leave - five days (each parent)

Annual Leave

Article 29

30 calendar days

Arbitrary Dismissal

Article 47

Where an employer has terminated the employee unlawfully, the employee may be entitled to compensation, not exceeding three months’ salary.

Breaks

Article 18

An employee cannot work more than five hours without a break.

Category of Contract

Article 8

All employment contracts will revert to fixed-term contracts (not exceeding three years) with no unlimited contracts permissible. All current employment contracts will need to be transferred over to a fixed-term employment contract before 2 February 2023.

Disciplinary Penalties

Article 39

An employer may impose the following penalties to an employee who violates a provision of the Labour Law Decree: written warnings, deduction in wages, suspension from work, and/or termination of contract. Where an employee has been dismissed for cause, the employer is no longer entitled to withhold their end of service gratuity.

End of Service Gratuity

Article 51

End of service gratuity is still calculated on an employee’s basic salary for calendar days, however the new decree no longer has a reduction for “resignation.” Each employee will be entitled to their basic salary for 21 calendar days against each of the first five years of service and 30 calendar days against each subsequent year of service. The end of service gratuity is payable to the employee within 14 days of termination of the contract.

Harassment

Article 14

Sexual, physical, verbal, or psychological harassment is prohibited.

Maternity Leave

Article 30

45 days paid leave; 15 days half-paid leave; 45 days unpaid leave

Non-Compete Clause

Article 10

Not previously in labour law, and now maximum time enforceable is two years

Non-Discrimination

Article 4

Discrimination based on race, colour, sex, religion, national or ethnic origin, or disability is prohibited.

Notice Periods

Article 43

Minimum 30 days and a maximum of 90 days

Overtime

Article 19

Total overtime hours are restricted to 144 hours every three weeks and calculated on basic salary (not calculated to include allowances).

Occupational Health and Safety

Article 36

Employers must now abide by Federal Law (13) of 2020 with respect to the obligations to ensure that occupational health and safety standards are met for their employees, and those standards are now implemented by the Ministry of Health and Prevention. Compensation for workplace accidents has now been increased to 200,000 UAE dirham ($54,459), along with an obligation by the employer to pay for all medical treatment.

Permitted Working Arrangements

Article 7

Full time; part time; flexible/Freelance; temporary work

Penalties

Articles 59 – 64

Penalties for employees and employers range from 20,000 to 10 million UAE dirham ($5,446 to $2.7 million) for noncompliance with various obligations under the Federal Labour Decree.

Probation

Article 9

The maximum probationary period remains at six months; however, now employees are entitled to a minimum of 14 days’ notice of termination during the probationary period. While in probation, an employee terminating their employment must give one month’s notice, and their new employer is to reimburse the previous employer’s recruitment costs.

Rest Days

Article 21

Each employee is to be granted at least one paid weekly rest day. However, this no longer needs to fall on a Friday.

Salary Deductions

Article 25

20% deductions to recover advances on employees’ entitlements and 50% overall maximum deduction

Sick Leave

Article 31

After the completion of a 90-day probation period per year, an employee’s sick leave is broken down as follows: 15 days full pay, 30 days half pay, and 45 days without pay.

Termination

Article(s) 42 – 47

Termination of the new fixed-term contracts can occur at the conclusion of the contract or earlier for the following reasons:

  • Article 42: Contractual and mutual termination provisions; termination for the closure of the employer’s business or due to bankruptcy; and termination-for-cause provisions where the employer no longer meets the residency requirements to remain in the United Arab Emirates.
  • Article 43: An employer and employee can terminate the employment contract with notice for any legitimate reason as long as notice periods are honored. Where the employer terminates the employment contract, the employee is permitted one day a week off work during their notice period to look for alternative employment.
  • Article 44: An employer can terminate an employee without notice if the employee has impersonated another person, committed a mistake that led to serious material loss of the employer, not adhered to safety bylaws, disclosed trade secrets, is drunk during work hours, is unable to perform the basic duties of the role, or is absent without reason for a period of 20 days throughout the year. If an employee is otherwise under investigation for failing to perform their role, the employer must give the employee written notice twice prior to termination.
  • Article 45: An employee can terminate without notice if the employer breaches an obligation owed to the employee under the Labour Law Decree, the employee has been assaulted while at work, the workplace places the employee in serious danger, or the work is fundamentally different to what is advertised.
  • Article 46: An employer may not terminate for lack of health fitness unless all other leave entitlements have been exhausted.
  • Article 47: A dismissal will be unlawful if it is due to the filing of a serious complaint with the Ministry of Human Resources and Emiratisation which is found to be valid.

Working Hours

Article 17

The maximum working hours will remain at 48 hours per week (eight hours a day/six times per week). The reduced hours for Ramadan will be prescribed in the implementing regulations (when issued).

Next Steps for United Arab Emirate Employers

To help ensure compliance with the Labour Law Decree, employers should adhere to the following checklist:

  • Review all internal human resources policies for compliance—in particular, leave policies.
  • Provide training, guidance, and notifications to employees on the significant changes to their rights and obligations under the Labour Law Decree.
  • Review and update all internal end of service gratuity calculators
  • Make steps over the next 12 months to update all existing standard form employment contracts to change from unlimited to fixed-term contracts, no later than 2 February 2023.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

United Arab Emirates
Rebecca Kelly
Mark J. Gilligan
Laura Jane Shortall
Christopher Brinley