On 15 November 2021, the Ministry of Human Resources and Emiratisation (“MORHE”) enacted Federal Decree No. 33, and it became effective on 2 February 2022 (“New Law”). This new employment law applies to the companies and employees in the private sector, including the free zones, excluding the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), which have their own laws. The New Law comes with an explanatory “Executive Regulations” no. 1 for 2022 that clarifies and interprets many of its provisions.
Below is a summary of the key modifications of the New Law and its Executive Regulations.
1. Cancellation of the Unlimited Employment Contracts
One of the New Law most significant changes is the cancellation of unlimited term contracts. The New Law recognizes only one type of employment contract; a fixed-term contract with a maximum of three (3) years. Employers have until 2 February 2023 to convert all their in-house employment contracts with undefined fixed-term employment contracts.
NB: In case the employer will not renew the unlimited contracts to a new limited one (for any specific employee), the end of service gratuity benefits would be calculated with the exact provisions of the previously undefined term employment contract and as per the old law
2. Working Models
The New Law introduces four new flexible working Models. The Executive Regulations further adds two working models and open the door for MOHRE to invent new working models as per the market demands. The table below gives a brief description of all the models newly introduced.
PS: The New Law obliges the employer to expressly determine the work model with an option to change it upon renewal in the new limited-term employment contract. Also the MOHRE published a standard form limited employment contract which can be found on https://www.mohre.gov.ae/ar/home.aspx
3. Individual Labour Disputes
The New Law has allowed the Ministry the right, during the labour office complaint phase, to oblige the employer to continuously pay the worker’s wages for a maximum of two (2) months if the dispute causes the suspension of the worker’s wages.
Regulation No. 47 of 2022 also obligates the employee to file for the labour dispute case in a competent court within fourteen (14) days of obtaining the Non-Objection Certificate from MOHRE.
4. Wage Equality
The new law addresses equality between men and women by assuring that a woman is granted a wage equal to a man’s wage if she performs the same work. This new clause proves the UAE development and awareness of gender equality principles.
5. Contract Termination
The New Law amended the probation period concept entirely to be:
Employer: Has the right to terminate the contract during the six (6) month probationary period with a fourteen (14) days notice period; and
The Employee: Unlike the employer, the employee has the right to terminate the contract with thirty (30) days notice period.
NB: If the employee, later on, wants to engage in new employment elsewhere during the probationary period, they must notify the original employer in writing, and the new employer must compensate the original employer of the expenses of recruitment unless otherwise agreed upon.
The New Law also stipulates a new entitlement for employees whose employer terminates their contract. The employee is entitled to have one day of unpaid absence per workweek to search for another job. The worker may specify the day of absence, provided that they notify the employer a minimum of three (3) days before the absence day.
6. Illegitimate Termination for Retaliation
Unlike the old law, the New Law has specified one case where the termination would be considered arbitrary. This case is when the employee’s termination is due to filing a complaint with the MOHRE or filing a lawsuit against the employer (i.e. retaliation). In this case, the employer shall pay fair compensation to the worker estimated by the competent court. However, the amount of the compensation shall not exceed the worker’s wage for a period of three (3) months, calculated according to the last wage he was obtaining.
7. Notice Periods (Unlimited Employment Contracts)
The employer or the employee are both entitled to terminate an unlimited employment contract that was signed prior to the issuance of the New Law if there is a legitimate reason. The required minimum notice periods for termination are detailed below.
8. End of Service Gratuity Calculations
The New law has introduced two major amends regarding the calculation of the employee end of service benefits:
❖ Unlike the old law, if the employee is terminated due to a reason of article 44 of the new law, the employers can not withhold the employee’s End of Service Gratuity. This key reform is similar to the DIFC approach adopted in 2019.
❖ The end of service gratuity is 21 days for the first five working years and 30 days for each year thereafter; and
❖ The end of service gratuity calculation is based on each contract’s working model (i.e. full time, part-time, flexible etc. ….)
9. New Work Leaves
Unlike the old law, the new law grants the employee the right to accrue the annual leave and carry it forward (subject to the employer prior approval for carry over) or receive a cash allowance in return. Also, the employer may not prevent the employee from benefiting from their annual leave accrued for more than two (2) years.
However, the Executive Regulation states that the employee can not accrue and carry forward more than half of the annual leave.
Furthermore, the New Law introduces new types of work leaves as follows:
NB: As per the New Law, if either party of the employment contract wishes to terminate the contract while the worker is on leave, the validity of the notice period agreed upon in the employment contract shall not begin until the day following the scheduled day of return from leave, unless both parties agree otherwise.
10. The Weekend
The old law stated that the worker should be granted a paid weekend of not less than one day and, it specified expressly that the weekend is Friday. However, the new law does not determine which day of the week is the weekend. This means that employers can give their employees a paid weekend of more than one day a week and that this weekend can be any day of the week, and not specifically Friday.
Considering that the new law addresses the non-compete in general and does not mention the non-poaching of employees or non-solicitation of clients or customers, we, therefore, anticipate that employers will add more descriptive and broader non-compete clauses in their contracts.
The Executive Regulation states that the non-compete clause shall be considered nullified in cases such as the
➢ If the employer terminates the contract, or if the employer breaches its legal or contractual obligations.
➢ A written agreement between the employee and the employer for the later waiver of the non-compete clause.
➢ Payment of a three-month compensation to the employer by either the employee or the new employer as agreed.
➢ The contract is terminated during the probation period.
NB: The New Law also limits the time to one year for an employer to file a non-compete violation claim from the date of discovering the violation
12. Paying Worker’s Entitlements at the End of the Contract Term
The New Law introduced an obligation on the employers that require the employer to pay the employee’s wage and all other entitlements within fourteen (14) days from the end date of the contract term.
It is not yet clear what ramifications the New Law/the court may impose in case of the employer breach of this obligation. We expect damages and legal interest to be applied as of that date until full settlement by the employer. However, this would be subject to future case law and precedent upon the practical application of the New Law.
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