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The Employment Law Guide in UAE

Published on : March 2016
Author(s):Margarida Narciso

UAE Labour Law 2016

Law Firms in Dubai

The first five days after the weekend are always the hardest!

This New Year kick-started on a Friday with every eye focusing on the blazing night sky filled with Dubai's world famous firework show. The Ministry of Labour(the Ministry) gifted employees of the country with a renewed interest in UAE’s employment market as well.The Ministry enforced three new decrees (collectively, the New Law) that is set to provide the employees with a more secure work environment in combat to safeguard their interests.The New Law paves the way for transparency and clarity, provides for mobility and flexibility of labor and introduces new unified labour contracts. These are some of the values and vectors that the Ministry of Labour intended to encourage and boost through the new law.
 
The New Approved Standard Employment Contracts
 
The amendments brought into effect by Ministerial Decree (764) of 2015 on Ministry of Labour approved a standard employment contract wherein employers can no longer continue to give preposterous offers to employees as a signed employment offer would now have to fall in line with the standard employment contract that has been issued by the Ministry. The employee should execute these standard employment contracts before presenting it to the Ministry for its registration. The tentative approval of the foreign workers' employment will not receive acceptance if it is not in conformity with the standard contract terms which means that the prospective employees cannot be lured by bogus offers which are later not laid down in the contract. The employers are not allowed to change any of the terms of the standard employment contracts. However, if the proposed alteration or change is in favour of the employee, then such modification or change can be brought about after receiving approval from the worker and the Ministry. 
 
New clauses can be added to the standard employment contract only if they are in compliance with the law and do not contradict any of the other provisions set out in the agreement. Then what about the existing employment contracts which are already in force but not in conformity with the new standard employment contract? Such contracts would continue to be effective until the term of the contract expires, and then the renewal of the old employment contracts must be made per the standard employment contract as per Article 3. In essence, this means that the standard employment contract would not affect any existing employment contract instead aims at reforming the employment contracts that are yet to come into force.
 
We have an example, Mr. T, a Chinese national who was approached by a company in the UAE that promised him a specific salary plus a benefits package. Tempted by this offer, Mr. Tdecided to resign from his job in Singapore, and travel to the UAE. Upon reaching UAE, Mr. T was shocked to hear that the employer in the UAE had changed its mind and unilaterally decided to turn the offer previously communicated to Mr. T. Although shocked, Mr. T saddened by the entire saga felt helpless in the situation and agreed to accept employment under the notion that he will spend his few years in the UAE. The new Law aims at preventing cases such as one faced by Mr. T and now requires employers to submit a copy of the contract signed by the employee while applying for an employment visa. 
 
New Rules for Termination
There is a multitude of reasons that could affect the ongoing relationship between employer and employee during employment. The nature of employment contract (limited or unlimited), conditions of circumstances whereby either party may invoke termination are some of the critical considerations. For instance, employers can terminate an employee without notice who commits any of the offenses described under Article 120 of the UAE Labour Law (Federal Law No. 8 of 1980). For instance,  failure of the employee to perform his primary duties mentioned in his employment contract, the disclosure of the trade secrets of the employer, etc. Article 1 of Ministerial Decree 765 of 2015 has laid down various contexts under which an employer and an employee could part ways when the underlying employment contract is either a Limited Term Employment Contract (Limited Contract) or an Unlimited Term Employment Contract (Unlimited Contract).
 
Limited Term and Unlimited Term Employment Contracts
 
It is palpable to say that a Limited employment contract would stand terminated when the period of the employment specified in the employment contract has expired, and the agreement renewal does not take place. But what about an employee who is working on an Unlimited Contract?
 
An essential overhaul in the New Law is that both the employer and the employee can now mutually consent to terminate the contract during its period and such a termination would stand to be valid.Mutual consent of both the parties to the employment contract is of the essence in termination of the employment contract. The burden of legal obligations would only stumble upon a party who terminates the employment contract without the prior consent of the other party.
 
Though, this does not forbid a person from unilaterally terminating an employment contract, be it a new contract or a renewed contract (in case of Limited Contracts). The mandatory procedure set out below as stated under Ministerial Decree (765) of 2015 as also reiterated under Ministerial Decree (766) of 2015 will have to be followed by the party who wishes to terminate the employment contract without the consent of the other party.
 
 An employment contract would be considered de facto terminated when an employer neglects and does not fulfill his obligations towards the employee. The New Law also goes on to pronounce that an employment contract would have ended when if an employee has lodged a complaint against his employer due to the closing down of the business for more than two months and a court has ruled that an employee is entitled to more than two months wages or damages for irrational dismissal of the employee.
 
But what would happen if an employee ‘X’ terminates his employment contract with his employer ‘Y’ without following the procedure mentioned above? Obvious! ‘X’ would be liable towards all the legal repercussions and might even have to indemnify ‘Y’ for his losses, and therefore, would have to hire a law firm that provides bespoke legal advice in employment matters.
 

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Permitted or Banned?
 
According to the old legislation in place, not all employees who quit their previous job would be eligible for a new work permit. Now, under Ministerial Decree (766) of 2015, there are several circumstances in which an employee can get a new work permit. Though these circumstances could vary depending upon the type of employment contract that exists between the parties.
 
The most prominent twist to the old panorama are the new rules set for the issuance of a new employment permit to all the employees. The new rules require that employees qualify for skill levels 1, 2 and 3 as per the ministry’s classification. These points refer to any employee who holds a university degree, postsecondary diploma or high school diploma, respectively, waving off the six months rule.
Accordingly, either for term fixed and unlimited contracts on the situations described on article 1 of the decree, the employee having skill levels 1, 2 and 3, upon the termination of the employment contract will be granted with a new working permit, if he had not completed six months with the former employer. 
 
Limited Term Employment Contracts
 
In cases where employment contract expires and does not get renewed, new work permits can be issued to such employees.  A new work permit could also be granted to an employee when either the employer or the employee has independently terminated the renewed contract on the condition that he:
  • Provided the other party with a written notice per the subsisting agreed notice period which should be between one and three months. If a subsisting period does not exist, then a minimum notice period of three months should be given;
  • Continues to heed his obligations during the notice period;
  • Indemnifies the other party to the amount agreed between the parties and this indemnification amount should not exceed the limit of three months gross wages of the employee. In case the parties had not decided on an amount beforehand, then he would be liable to pay three months gross wage(s).
 
Unlimited Term Employment Contracts
 
A new work permit cannot be denied if the party intending to cancel the employment contract has informed the other party and given notice in advance and continues to fulfill all his obligations under his employment contract. This permit would only be provided to an employee who has worked for at least six months with his previous employer unless the employee has 1, 2 and 3 skill levels of the Ministry’s classification. 
 
Conclusion:
Despite appointment and termination being a regular feature for employers, labor matters are often a bit more complicated than they seem. What may seem like getting settled (or; perhaps more comfortable to closure) could often reach out to lawyers or even courts! Obtaining right advice from your counsel is the key. Litigation can be cumbersome and expensive, and either party should not undermine settlement avenues.
The New Law is expected to facilitate the free flow of labor within the UAE– a country that has witnessed unprecedented growth in employment and continued to attract people from across the globe.