Employment Law – An Overview – Employment and HR – United Arab Emirates – Mondaq News Alerts

When it come to UAE employment law, Federal Law No. 8/1980 (also
know as the UAE Labour Code) or the Law Regulating Labour Relations
the main law governing employee-employer relations in the private
sector in the UAE. This law outlines the key employment aspects
including working hours, annual leave and public holidays, sick
leave, the employment of young people, maternity leave, employee
health and safety, termination of employment and end of service
gratuity. According to Article 3 of Federal Law No. 8/1980, this
law applies to all employees working in the UAE, whether they are
UAE nationals or expatriates. However, there are certain categories
of employee who are exempt from it and may have to follow different
regulations.

FEDERAL LAW NO. 8/1980 EXCEPTIONS

Federal Law No. 8/1980 provisions do not apply to a number of
categories of employee including officials, employees and workers
of the Federal Government, Governmental Departments of UAE
Emirates, of the State, municipality officials, employees and
workers and other officials working in Federal and local public
Departments and organisations. Others exempt from this law include
officials, employees and workers appointed by Governmental Federal
and local projects; members of the Armed Forces, Police and
Security services and domestic servants working in private
residences (who are covered by Federal Law No. 10/ 2017 on support
service workers).

There are also exemptions for workers employed in the
agricultural or pastoral sectors, although not those employed in
agricultural corporations engaged in processing these products or
those permanently engaged in operating or repairing mechanical
machines used in agriculture.

The Ministry of Human Resources and Emiratisation previously
known as the Ministry of Labour is responsible for overseeing and
administering employer-employee relationships and labour rights for
the private sector.

FEDERAL DECREE LAW NO. 11/2008

In contrast, public sector employees are governed by the Federal
Decree Law No. 11 /2008, as amended. These laws apply to the civil
servants who earn their salaries from the Federal budget, and civil
employees working at Federal authorities and corporations. The UAE
government also introduced the Emiratisation programme in 2004 to
encourage employment of its citizens in both the public and private
sectors. This programme aims to reduce the UAE’s dependence on
foreign workers and ensure that UAE citizens benefit from the
country’s economic grow.

FREE ZONES

Workers employed in the UAE free zones are generally not governed
by Federal Law No. 8/1980. Each free zone authority may have its
own set of rules and regulations and their employees are subject to
these. Workers in these free zones are sponsored by the respective
free zone authority and not by their employer. In particular,
Federal Law No. 8/1980 does not apply in the DIFC where employment
is governed by the DIFC employment law, DIFC Law No. 3 /2012.

EMPLOYMENT CONTRACTS

Before starting work in the UAE, expatriates will need a work
permit and residency visa to enable them to live and work in the
country. These documents are obtained after signing the requisite
employment contract with the sponsor. All employment contracts and
any related amendments must be approved and registered with the
Ministry. The standard forms and templates for job offers and
employment contracts which comply with the basic requirements of
Federal Law No. 8/1980 can be found on the Ministry’s web
portal. Federal Law No. 8/1980 envisages two types of employment
contracts, limited/fixed-term and unlimited/open-ended (terminable
on notice) contracts.

Fixed-term contracts cannot exceed two years but can be renewed
by mutual consent for a similar period. Employment contracts
without a termination date are deemed an unlimited/open-ended
contract. In general, employment contracts must specify their date,
nature of the contract (fixed or open-ended), job designation, term
of contract (for fixed-term contracts), location of employment,
salary including the base salary (employee’s wage excluding all
allowances) as this is used to calculate end of services benefits,
holiday pay, overtime, compensation for employment-related death,
injury or disease and allowances for transportation and housing,
and any bonuses. If the position involves access to private or
confidential information, the employer may include a
confidentiality and non-compete clause in the employment
contract.

However, non-compete clauses are carefully scrutinized before
being enforced in the UAE and must be reasonable and limited in
terms of the duration (a maximum of three years) and geographical
scope as well as specific to the field or sub-field of employment
in order to be enforceable. Nevertheless, the judges in UAE courts
rarely enforce restrictive provisions for a period of more than one
year and prefer to award monetary compensations for any such breach
instead of granting injunctions.

They will also require evidence of the actual harm or damages
suffered by the employer. Ministerial Resolution No. 764/2015 which
came in effect on 1 January 2016 has also provided greater
protection for expatriate employees by ensuring their employment
contract is consistent with the terms originally offered to the
employee. The contract cannot be altered unless the employee has
agreed to such a change and even if changes are agreed they will be
subject to the Ministry’s approval to ensure they are not
detrimental to the employee.

Employees may also be subject to a probationary period of not
more than six months, during which employment may be terminated
without notice or severance benefits. For the purposes of
termination after the probationary period, a distinction is made
between contracts of employment for limited and unlimited periods.
A contract for a limited term terminates at the end of the
specified term unless the parties choose to renew it. A contract
without a specific term, however, may be terminated if both parties
agree to cancel it, or if one of the parties does so with 30 days
prior notice (or less if the employee is engaged on a daily basis),
or for reasons expressly permitted by Federal Law No. 8/1980.

MINIMUM WAGE

There is no minimum salary stipulated in Federal Law No. 8/1980,
but it broadly mentions that salaries must cover employee’s
basic needs. Article 63 of Federal Law No. 8/1980 mentions that the
minimum wage and cost of living index is determined either in
general or for a particular area or a particular profession by
virtue of a decree and consent of the Cabinet.

WORKING HOURS

Under Article 65 of Federal Law No. 8/1980, the normal working
hours for the private sector are eight hours a day or 48 hours per
week and no more than five consecutive work hours are allowed
without a rest period. Working hours for certain businesses,
including hotels and cafes may be increased after the necessary
approval from the Ministry. Governmental entities which are not
governed by Federal Law No. 8/1980 operate for seven hours a
day.

If the employee’s job demands working beyond normal working
hours as overtime, they are entitled to pay equal to their normal
working hours’ remuneration plus 25% but this can increase to
50% for overtime worked between 9:00 p.m. and 4:00am. It is
important to note that these working time and overtime provisions
do not apply to those with senior executive managerial supervisory
positions who have the power of an employer over employees.

The Ministry categorises these as chairpersons and members of
boards of directors, general managers, managers of departments, and
individuals working in supervisory posts who have dedicated powers
of authority over other employees. In addition, construction and
industrial workers are not permitted to work during the hottest
hours of the day during the summer.

Any employer found to have staff working during their designated
break time will also be fined 5,000 AED per worker up to a maximum
of 50,000 AED. Normal working hours are also reduced by two hours
daily during the holy month of Ramadan. As Friday is the official
weekend for all employees in the UAE, except daily wage workers, if
they have to work on a Friday, they are entitled to their regular
working hours’ pay, and an increase of not less than 50%.

LEAVE

Employees who have been employed for at least six months to one
year are entitled to annual leave of two days per month, and 30
days per year if they have been employed for more than one year.
The annual leave allowance is equal to the sum of the base salary
plus housing allowance (if any) for the complete duration of the
leave. Employees are also granted special leave without pay, of not
more than 30 days to perform the Hajj once in their complete term
of service. Employees are not entitled to any paid sick leave
during their probation period. However, after this they are
entitled to sick leave of up to 90 days per year subject to
conditions stipulated in the law.They will receive full pay for the
first 15 days, half pay for the next 30 days and no pay for the
remaining 45 days.

However, they must provide evidence of their illness with an
official medical certificate issued by the relevant governmental
institution. Women working in the private sector are also entitled
to 45 days maternity leave, inclusive of pre-natal and post-natal
periods. They will receive full pay during this if they have
completed at least one year of continuous service or half pay if
they have not. A woman can also take an additional 100 consecutive
or non-consecutive days of unpaid leave if they have an illness
that prohibits them returning to work even after the 45-day
period.

However, this illness must be certified by a physician to have
been related to the maternity. These benefits are in addition to
other benefits available under Federal Law No. 8/1980 such as the
two additional half-hour breaks during the day for nursing a baby
for 18 months from the birth of the child which are included in
their working hours and are paid. Employees in the UAE are also
entitled to paid leave on public holidays such as the Hijri New
Year (1 day), Gregorian New Year (1 day), Eid Al Fitr (2 days),
Arafat day and Eid Al Adha (3 days), Prophet Mohammed’s
birthday (1 day), Isra and Miraj or Ascension Day (1 day),
Commemoration or Martyr’s Day (1 day) and National Day (1
day).

WAGE PROTECTION

Under Ministerial Decree No. 739/2016 Concerning the Protection of
Wages, all establishments registered in the Ministry must pay their
employees’ wages on the due date through the Wages Protection
System (WPS). This is designed to protect workers’ rights as it
is administered by the Ministry and allows verification that wage
payments are in line with the terms initially offered. Under the
WPS system, employees’ salaries are transferred to their
accounts in banks or financial institutions, authorised by the UAE
Central Bank to provide this service. If there are any concerns or
complaints on salary, employees can contact the Ministry or lodge a
complaint through eNetwasal.

TERMINATION

Generally a limited contract can be terminated if the contract
expires and is not renewed if both, the employer and employee
mutually agree or if a worker commits a violation in Article 120 of
Federal Law No. 8/1980. If either party wishes to singly terminate
a fixed-term/limited employment contract for reasons other than
those in Article 121 of Federal Law No. 8/1980, it should comply
with the legal notice requirements. These cannot be less than one
month or more than three months, and the parties must continue to
honour their obligations during the notice period. As this sort of
termination qualifies as an arbitrary termination, the party
terminating the employment must under Article 116 of Federal Law
No. 8/198 compensate the other party to the extent agreed as long
as this does not exceed three months’ gross wages.

In the case of open-ended/unlimited contracts, employment can be
terminated if both parties mutually agree or either party decides,
at any time, to terminate the contract and abide by the legal
notice requirements in Article 117 of Federal Law No. 8/1980 and
continue to honour their obligations for the duration of the notice
period, which cannot be less than one month or more than three
months which means the employee will be entitled to full pay during
the notice period calculated on the basis of their last
remuneration and in return must perform their duties if the
employer requests or if either party unilaterally terminates the
contract, without complying with the legal notice and without
default reasons the terminating party bears the legal consequences
of early termination.

In addition, under Article 119 of Federal Law No. 8/1980 if an
employer fails to give the employee notice of the termination, or
reduces the notice period, they must pay the employee compensation
equal to their remuneration for the entire notice period or the
time it has been reduced. However, under Article 120 of Federal Law
No. 8/1980 an employer can terminate any type of employment
contract without notice if the employee adopts a false identity or
nationality or provides forged documents or certificates or if they
have a probation period and are dismissed before the end of it or
if they have committed an error causing substantial material loss
to the employer provided that they have advised the labour
department of the incident within 48 hours of knowing about it or
the employee has violated health and safety instructions involving
the business provided that these are displayed in writing in
conspicuous places or illiterate employees have been verbally
informed of them.

This can also be the case if an employee fails to perform their
basic duties under the employment contract and persists in
violating them despite a formal investigation with them on this and
if they have been warned of dismissal if this is repeated; or they
divulge company secrets or are convicted in a final judgment by a
competent court of an offence prejudicing honour, honesty or public
morals. Dismissal is also possible if an employee is drunk or under
the influence of prohibited drugs during work hours; assaults their
employer, manager or colleagues in the course of their work, or is
absent without lawful excuse for more than 20 intermittent days or
for more than seven successive days in one year.

There are also a number of valid reasons for termination under
Article 121 of Federal Law No. 8/1980 and under Article 2 of
Ministerial Resolution No. 765 /2015 an employment relationship
will be deemed to have been terminated if the employer breaches
their legal (statutory or contractual) obligations including
non-payment of wages for 60 days, if the employer or their legal
representative assaults the employee, or an employee files a
complaint that the employer has closed its business and is failing
to employ them or following a final judgment which has been issued
by the Courts in favour of an employee who has filed a labour
complaint.

ARBITRARY DISMISSAL

Article 122 of Federal Law No. 8/1980 describes arbitrary
termination as where an unlimited contract’s termination is
irrelevant to the work, particularly if the reason is that the
worker has submitted a serious complaint to the authorities or has
instituted legal proceedings against the employer that have been
proved to be valid. Grounds for termination based on business
restructuring and redundancy, for unlimited employment contracts,
may be held by UAE courts as being an action related to the
business environment, and as such not an arbitrary action against a
particular employee. As a result they may be found by a court to be
justified.

If termination by the employer is deemed abusive by the court,
the employer may be ordered to pay the employee additional
compensation, without prejudice to the employee’s right to
other post-termination entitlements. The court will assess this
based on the nature of the work, the amount of prejudice the
employee sustained and their period of service, after investigating
the circumstances of the employment.

Compensation will not exceed three months’ remuneration
calculated on the basis of the last remuneration the employee was
entitled to. With limited contracts Article 115 of Federal Law No.
8/1980 states arbitrary termination by an employer is termination
for reasons other than those specified in Article 120 and the
employer must compensate the worker for any prejudice they have
sustained but the compensation must not exceed the aggregate
remuneration due for three months or the residual period of the
contract whichever is less unless the contract contains a provision
to the contrary.

It should be noted that business restructuring or redundancy is
not included in the reasons in Article 120, and so termination of
an employment contract concluded for a specified term because of
this is likely to be deemed arbitrary.

END OF SERVICE DUES

An employee with an unlimited contract who has their employment
terminated will be eligible for pay in lieu of notice period, or
any amount due in lieu of the notice or to work their notice. They
may receive compensation for abusive dismissal if the contract was
terminated by the employer for grounds not recognised by Federal
Law No. 8/1980 as justifiable causes for termination but this will
not exceed three months’ remuneration calculated on the basis
of their last remuneration unless the contract so provides.

Those with a limited contract, can also receive compensation for
abusive dismissal if the contract was terminated for grounds other
than those in Article 120 and compensation will be either the
aggregate remuneration due for three months or the residual period
of the contract whichever is less, unless the contract provides to
the contrary.

Overtime, unpaid salary, holiday pay, and repatriation expenses
(either under Federal Law No. 8/1980 or the contract) will also be
due, as will an end of service gratuity calculated on the basis of
the period of service, if the employee has completed at least one
year’s continuous service and was not terminated under Article
120 of Federal Law No. 8/1980. However, if an employee with a
limited contract resigns before its expiry they will only be
entitled to severance pay if they have more than five years’
continuous service.

Asma Siddiqui, Associate at BSA article was
originally published in Emirates Law Magazine. See the published
article here

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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