The United Arab Emirates (“UAE”) has revamped its  labour laws with the introduction of Federal Decree Law No. 33 of 2021, referred to as the “New Labor Law”, effectively replacing the old Federal Law No. 8 of 1980.

In effect from February 2, 2022, the New Labor Law has ushered in a shift in private-sector employment relations within the UAE. In tandem, the Executive Regulations, established through Cabinet Resolution No. 1 of 2022, provide much-needed clarity and implementation guidelines. It’s important to note that, the New Labor Law and its Executive Regulations do not extend their jurisdiction to employment relations within the Dubai International Financial Centre or the Abu Dhabi Global Market, both of which maintain their unique labor law regimes. Consequently, businesses operating in the UAE must proactively adapt to the amended  or additional provisions outlined in the New Labor Law to ensure full compliance.

This article delves into the implications of the New Labor Law for both employees and employers, emphasizing the shared interests in adapting to these transformative changes.THE NEW LABOR LAW: SCOPE AND CATEGORIES

1 THE NEW LABOR LAW: SCOPE AND CATEGORIES

The New Labor Law applies to all establishments, employers, and workers in the UAE private sector. However, specific categories, such as employees of federal and local government entities, the armed forces, police, security personnel, and domestic workers, are excluded from its provisions. It’s worth noting that the Cabinet has the authority,  to exclude certain categories from specific or all provisions of the law based on the Minister’s proposal

2 WORKING REGULATIONS IN THE NEW LABOR LAW

The New Labor Law introduces significant changes that have a notable impact on working regulations in the UAE. These changes encompass the introduction of various work models, the establishment of work permits, revisions to employment contracts, and enhanced protections for employees.

3. WORK PATTERNS

The New Labor Law has introduced a variety of work patterns designed to accommodate the evolving needs of the labor market in the UAE. These work patterns provide  employers and employees with increased flexibility and adaptability in structuring employment relationships. Here are the distinct work patterns established by the New Labor Law:

• Full-time: This pattern involves an employee working for a single employer during regular daily working hours across typical working days. It represents the conventional employment model where an individual dedicates their time exclusively to one employer.
• Part-time: Part-time work encompasses employment with one or more employers for a specified number of working hours or designated workdays. It is ideal for individuals seeking supplementary income or those who wish to balance multiple work commitments.
• Temporary work: Temporary work patterns involve employment with a defined duration or task, concluding upon task completion. Temporary workers are engaged for specific projects, seasonal work, or other short-term needs.
• Flexible work: Flexible work arrangements entail employment with variable working hours or days, allowing employers to adapt to fluctuating workloads and operational variables. This flexibility benefits both employers and employees by accommodating changing business demands.
• Other patterns: The Implementing Regulation, which supplements the New Labor Law, will define additional work patterns. These  patterns will delineate the responsibilities of both workers and employers for each work type. The introduction of various work patterns reflects the New Labor Law’s commitment to accommodating a range of work arrangements within the UAE labor market.

Moreover, Article (5) of the Executive Regulations further defines additional work types:

• Remote work: Remote work involves performing all or part of one’s duties outside the physical workplace, with electronic communication between the worker and the employer replacing the need for a physical presence. Remote work arrangements can apply to both part-time and full-time positions.
• Job sharing: Job sharing occurs when the tasks and duties of a role are divided among multiple workers, as agreed upon in advance.  Each worker’s wages are based on their individual responsibilities, and those involved in in job sharing typically adhere to the rules governing part-time work.
• Additional work types: The Ministry reserves the right to introduce other work types based on the evolving needs of the labor market.

4 VISA CATEGORIES: TYPES OF WORK PERMITS

The New Labor Law introduces an extensive array of 12 distinct work permit categories, each designed for various sponsorship and employment scenarios. These categories aim to address to diverse staffing needs and requirements in the labor market, offering  flexibility, to employers and employees in adapting to different work situations in an changing job market. Here are the key visa categories and types of work permits outlined by the New Labor Law:

• Recruiting Workers from Abroad: This permit category facilitates the hiring of foreign workers to meet specific skill demands within the UAE.
• Transfer of Non-National Workers: This category streamlines the transfer of non-national workers between registered facilities within the UAE. It benefits companies with multiple locations or divisions.
• Part-Time and Juvenile Employment: This category creates opportunities for various groups, including young individuals and those seeking supplementary income through part-time employment.
• Student Training and Employment: Students are allowed to engage in training and employment while pursuing their education under this category.
• Self-Employment: This category supports entrepreneurs and freelancers in establishing their businesses within the UAE.
• UAE / GCC National Permit: This permit allows establishments registered with the Ministry to employ UAE or GCC nationals.
• Golden Visa Holders Permit: Issued upon the request of an establishment registered with the Ministry, this permit allows the employment of workers holding a golden visa in the UAE.
• National Trainee Permit: This permit is issued upon the request of establishments registered with the Ministry that wish to train UAE nationals based on their approved academic qualifications.
• Freelance Permit: The freelance permit is issued to individuals who want to engage in independent self-employment without the need for sponsorship by a specific organization or employer in the country. Freelancers provide services for a specific duration or performing tasks or services for individuals or establishments.
• Work Permit for Residents Sponsored by Their Families: This permit is issued to residents who are sponsored by their families and are employed to work in an establishment registered with the Ministry.
• Temporary Work Permit: A temporary work permit is issued to a worker employed for a job with a specific period of execution or completion at an establishment registered with the Ministry.
• One-Mission Permit: This permit allows an establishment registered with the Ministry to recruit a worker from abroad to complete a temporary job or a particular project for a specific period.

5 EMPLOYMENT CONTRACTS

The New Labor Law introduces several pivotal changes to employment contracts:

• Exclusively Fixed-Term Contracts: Unlimited-term employment contracts are no longer valid under the New Labor Law. Employers are required to convert existing unlimited contracts into limited contracts in accordance with the New Labor Law’s enactment. This transition is expected to have an impact on the calculation of end-of-service dues, as unlimited-term contracts are no longer eligible.
• Employee Retention and Incentives: The New Labor Law is anticipated to promote employee retention, prompting employers to provide additional incentives, benefits, and improved working conditions to attract and retain skilled professionals.

• Increased Employment Security: For employees, the shift toward limited contracts can enhance job security, providing clarity on employment duration and potential contract renewals.

6 PROBATIONARY PERIOD

Under the New Labor Law, employers can appoint workers under a probationary period not exceeding six months from the commencement of work. During this period, employers can terminate the worker’s service by providing at least 14 days written notice before the specified termination date. The New Labor Law limits the appointment of a worker under a probationary period to once per employer. If the worker successfully completes the probationary period, the employment contract becomes valid per agreed-upon terms, with the period spent in probation counted within the overall term of service.

7 PROTECTION AGAINST ALTERED SCOPE OF WORK

The New Labor Law expressly forbids expanding an employee’s scope of work or assigning fundamentally different responsibilities not outlined in their employment contract. This prohibition stands unless specific conditions are met:

• The employee consents in writing to the additional or revised scope of work.
• The expanded responsibility or revised scope of work is limited to a 90-day period. This provision safeguards employees from being coerced into accepting additional or undesirable responsibilities not originally agreed upon in their employment contract.

8 NON-COMPETE COVENANT

If the worker’s role involves gaining knowledge of an employer’s clients or accessing sensitive information, the employer may require the worker, under the employment contract, not to compete with the employer or engage in any competing project in the same sector after the contract’s expiry. The non-competition period cannot exceed two years from the contract’s expiration date. The New Labor Law nullifies the non-competition requirement if the employer terminates the  contract in violation of its provisions. Claims filed by the employer for the worker’s violation of this provision are not entertained if one year has passed from the date of discovering the violation.

9 NON-DISCRIMINATION COVENANT

The New Labor Law opposes discrimination based on various factors such as race, colour, sex, religion, national or social origin, or disability provided that such discrimination  nullifies equality of opportunity, prejudices equal treatment in employment, or affects job benefits. The law also prohibits discrimination against workers with similar job responsibilities.. Additionally, rules and regulations aimed at enhancing the participation of UAE citizens in the labor market are not considered discriminatory. All provisions prohibiting discrimination apply to working women, who are granted equal wages for the same work or work of equal value.

10 ANTI-DISCRIMINATION AND HARASSMENT PROTECTIONS

The New Labor Law in the UAE represents a significant step forward in labor regulations. It expressly prohibits coercive practices by employers to force workers into employment, including threatening them with penalties, or compelling them to work against their will. Additionally, it establishes strong safeguards against workplace misconduct such as, sexual harassment, bullying, and any verbal, physical, or psychological violence in the workplace, whether by the employer, superiors, colleagues, or associates. Employers must take proactive measures to prevent discrimination and harassment, including implementing policies and procedures, providing training, and addressing complaints promptly. These provisions bring the UAE in harmony with global best practices for promoting diversity and inclusion in the workplace.

11 LEAVE AND WORKER WELFARE

Worker welfare is at the forefront of the 2022 amendments to the UAE Labor Law. These amendments introduce provisions aimed at enhancing worker welfare, setting out health and safety measures for all private sector workers. Here are the key provisions concerning employee welfare:

11.1 Leave and Rest Days Defined:

In accordance with the 2022 labor laws and regulations, all employees are entitled to the following leaves:

1. Bereavement Leave:

• Five days of leave in the event of the death of a spouse.
• Three days of leave for the death of a close family members, which includes parent, sibling, child, and grandparents.

2. Paternity Leaves:

• Up to 5 days of paternity leave, this can be taken intermittently or concurrently over six months after childbirth.

3. Maternity Leaves:

• A fully paid 45-day maternity leave which is standard duration of maternity leave
• An additional 15-day half-paid leave extending the period for maternity leave with partial pay
• An extra 45-day unpaid leave in case of illness applicable to both mother and child, provided that  supporting documents are submitted
• Special provisions for mothers with babies born with disabilities  including a fully paid 30-day leave, with the possibility of extending it to 30 more days without pay, contingent upon a medical certificate from a relevant authority confirming the disability or illness.

4. Examination Leaves:

• A 10-day study leave for employees attending state-approved educational institutions, contingent on their service tenure with the current employer exceeding two years.

5. National Duty Leaves:

• UAE nationals employed in private companies are entitled to full-time leave for national service, contingent on providing proof of service.

6. Religious Holidays:

• The New Labor Law grants employees one or two days off with full pay for religious holidays, the determination of which is entrusted to  the relevant authority. These holidays encompasses significant Islamic events such as the Holy Month of Ramadan, Eid al-Fitr, Eid al-Adha, Islamic New Year, and the Prophet Muhammad’s Birthday.
• Sick Leave: The New Labor Law introduces significant changes to sick leave provisions:
• Employees are entitled to fully paid sick leave for 90 calendar days, followed by partially paid sick leave for an additional 90 calendar days.
• During the first 45 calendar days, employees receive their full salary.
• During the next 45 calendar days, employees receive 50% of their salary.
• Beyond 90 calendar days, employees are not entitled to salary, but their employment remains protected during this period.
• In the event od new illness  with a  after returning to work, employes are entitled to another 90 days of sick leave. Employers should ensure strict adherence to these new provisions and grant sick leave as needed. They may need to adjust their leave policies and procedures to align with the New Labor Law.

12  PAYMENT OF WAGES AND SALARIES

The amount or type of wage shall be specified in the employment contract and  if it is not specified, the competent court will determine it in case of a labor dispute.

Employers are obligated to pay salaries or wages to their workers on their due dates in accordance with the regulations approved by the Ministry, as well as the conditions, rules, and procedures specified by the Implementing Regulation. Salaries shall be paid in UAE Dirham by default but another currency can be used if both parties agree in the employment contract.

12.1  Salaries (Ministerial Resolution No. 598 of 2022)

Ministerial Resolution No. 598 of 2022 outlines rules and procedures for the punctual and correct payment of employees’ wages by their employers. Here’s a simplified breakdown of the key points:

1. Payment of Wages

• Employers must pay their employees’ salaries on time, typically at the beginning of each month. If the employment contract doesn’t specify a date, it should be paid at least once a month.
• If employers don’t pay within 15 days of the due date, it’s considered late, unless the contract states otherwise.
• Employers must provide proof of payment.

2.  Consequences for Employers Who Don’t Pay on Time

•  Electronic monitoring, reminders, and notifications, for employers who fails to pay on time
• After 17 days of non-payment, employers may not receive new work permits, and inspections may be initiated
• Employers with over 50 employees who persistently delay payment may face additional scrutiny.

3.  Employee Rights to Get Paid

• Employees have the right to receive their wages.
• If 80% or more of their wages are paid correctly, it’s considered acceptable.
• Legal deductions, like taxes, are allowed if employees receive 80% or more of their wages after the deduction.

4. Leave without Pay

• Employers must inform the Ministry if they grant employees unpaid leave and specify the duration.

5. Exemptions

• Some employees and situations are exempt from these rules, including those with wage-related court complaints, absconding employees, new employees within 30 days of their due date, and more.

6. Exemptions from Wage Protection

• Certain types of businesses, such as fishing boats owned by UAE nationals, public taxis, banks, and religious institutions, are exempt from these wage protection rules.

13 WORKPLACE REGULATIONS

Internal Policies for Entities with Over 50 Employees: Under  Regulation 14 of the Executive Regulations of the New Labor Law, entities with more than 50 employees are mandated to develop internal policies and procedures dealing with various work-related issues such as working hours, promotions, rewards, disciplinary sanctions, and health and safety. Employers should also review their existing policies and procedures to ensure compliance with these requirements. Additionally, they should also organize training sessions to familiarize employees on their newfound rights and responsibilities as defined by the law

14   WORKING DAYS AND HOURS

The standard maximum  working hours for workers are eight hours per day or forty-eight hours per week. The Cabinet, in coordination with relevant authorities, may adjust daily working hours, breaks, and prohibited working hours for specific economic sectors or worker categories.

Typically, the time spent commuting between a worker’s residence and their workplace is not considered part of their working hours, nonetheless there are exceptions for specific worker categories defined in the Implementing Regulation, where this time might be counted as part of their working hours

In case where a worker works under a non-full-time work arrangements, the employer cannot require them to work beyond the  hours in the employment contract without the worker’s written consent. If a worker chooses to work remotely, the employer can specify working hours with the worker’s approval.

15 CASES OF DEDUCTION OR WITHHOLD FROM THE WORKER’S WAGE

Deductions or withholdings from a worker’s wage are only permissible in certain cases, including:

• Redemption of loans granted to the worker (with written consent and without interest).
• Redemption of amounts paid to the worker in excess of their entitlements (not exceeding 20% of the wage).
• Deductions for contributions to bonuses, retirement pensions, and insurances.
• Worker’s contributions to the Savings Fund or approved loans.
• Instalments for social projects or other benefits or services approved by the employer (with worker’s written agreement).
• Deductions for worker violations (not exceeding 5% of the wage).
• Debts due to a court judgment (not exceeding a quarter of the wage, except for alimony).
• Amounts necessary to rectify damage caused by the worker due to their mistake or violation of the employer’s instructions (not exceeding 5 days’ wage per month, with court approval if exceeding). In all cases, the total percentage of deduction and withholding may not exceed 50% of the wage.

16 DISCIPLINARY SANCTIONS

Employers and their representatives are authorized to impose a range of disciplinary sanctions on workers who breach the provisions outlined in the  New Labor Law, its Implementing Regulation, and associated resolutions. These sanctions encompass a series of written notices, written warnings, salary deductions (not less than 5 days per month), temporary suspension from work (up to 14 days without pay), exclusion from periodic bonuses (for a period of up to one year), denial of promotion (up to two years), and, in more severe cases termination of employment is terminated while preserving the worker’s end-of-service benefits.

The Implementing Regulation further specifies the conditions, rules, and procedures for imposing these penalties and the grievance mechanism.

17  TEMPORARY SUSPENSION FROM WORK

Employers in the UAE have the authority to temporarily suspend workers from work for up to 30 days when it is deemed necessary to conduct a disciplinary investigation when necessary. During this suspension, workers are entitled to receive half of their regular wage. If the investigation concludes that the worker isinnocent or a warning, the suspended portion of their wage is then paid.

Temporary suspension from work is also allowed when a worker is accused of specific crimes, and their wage is suspended for the suspension period. If the worker is acquitted or the case is dismissed, they are reinstated, and their suspended wage is paid.

18 TERMINATION OF EMPLOYMENT

The termination of an employment contract can occur under the following circumstances:

• Mutual Agreement: Both parties agree in writing to terminate the contract.
• Contract Expiry: The contract terminates upon reaching the specified term, unless extended or renewed as per the law.
• Party’s Will: Either party can initiate termination, provided they adhere to the notice period agreed upon in the contract and the termination provisions in the law.
• Employer’s Death: If the contract is related to the employer’s entity, it terminates upon the employer’s death.
• Worker’s Death or Permanent Inability to Work: When certified by a medical entity, the contract terminates due to the worker’s death or full permanent inability to work.
• Freedom-Restricting Penalty: If a worker is sentenced to a freedom-restricting penalty for at least three months by a final judgment, the contract terminates.
• Permanent Establishment Closure: The contract ends if the establishment permanently closes, following the state’s legislation.
• Bankruptcy, Insolvency, or Economic Reasons: The contract can be terminated due to the employer’s bankruptcy, insolvency, or exceptional economic reasons as per the Implementing Regulation and state laws.
• Failure to Renew Work Permit Conditions: If the worker fails to meet conditions for renewing the work permit beyond the employer’s control, the contract can be terminated.

18.1  Employment Contract Termination Notice

• Either party can terminate the contract for a legitimate reason, with the requirement of written notification.
• The notice period should be at least 30 days but not more than 90 days as specified in the contract.
• The contract remains in force during the notice period and ends upon its expiry.
• The worker receives their full wage during the notice period based on their last wage received.
• Parties can agree to exempt or reduce the notice period while preserving worker rights unless it serves the worker’s interests.
• If a party fails to adhere to the notice period, they are obligated to pay compensation, known as the notice period allowance, equivalent to the worker’s wage for the full or remaining part of the notice period.

18.2  Cases of Workers’ Dismissal without Notice

The employer can dismiss a worker without notice after conducting a written investigation in certain cases, including:

• Impersonation, submission of forged certificates, or document forgery by the worker.
• Worker-caused gross physical losses or deliberate damage to employer property, reported to the Ministry within seven days.
• Violation of workplace safety instructions in a written, visible form provided the worker is informed.
• Persistent failure to perform basic duties despite prior warnings and investigations.
• Disclosure of work secrets leading to employer losses or personal gain.
• Worker’s intoxication, influence of narcotics, breach of public morals at the workplace.
• Assault on the employer, manager, superiors, or colleagues punishable under state law.
• Unexplained absence for over 20 intermittent days in a year or more than seven consecutive days.
• Unlawful exploitation of position for personal gain.
• Unauthorized joining of another establishment.

18.3  Cases Where Worker Quits Work without Notice

The worker can quit work without notice under specific conditions:

• Employer breaches obligations stipulated in the contract, Decree-Law, or implementing resolutions. The worker may quit by notifying the Ministry 14 working days in advance unless the employer rectifies the breach.
• Employer’s assault, violence, or harassment against the worker, which should be reported to competent authorities and the Ministry within 5 working days.
• Grave danger to worker safety or health at the workplace, that is known to the employer but not addressed.
• Employer instructs the worker to perform work that is fundamentally different from the contract, without the worker’s written consent (except for necessity cases).

18.4  Termination of Service for Lack of Health Fitness

The employer can’t terminate a worker’s service due to health issues before the worker uses legally accrued leaves. Any agreement contrary to this provision is null and void.

18.5  Illegitimate Termination of Worker’s Service

Termination of a worker’s service by the employer is unlawful if it results from the worker filing a legitimate complaint or lawsuit against the employer. In such cases, the law requires theemployer to provide fair compensation, not exceeding three months’ wage, based on the worker’s service term and damage caused. This compensation doesn’t affect the worker’s right to notice period allowance and end-of-service benefits.

18.6  Continuity of Employment Contracts

Employment contracts retain their validity in cases of changes to the establishment’s form or legal status. The new employer is obligated to the contract’s provisions and comply with the Decree-Law, its implementing regulation, and associated resolutions.

18.7  Transfer of Worker after Contract Expiry

After the contract expires according to the law, the worker can move to work for another employer based on conditions and procedures specified in the implementing regulation.

18.8  Unlawful Absence from Work

Foreign workers in the UAE who prematurely terminate their employment  for illegitimate reasons before the contract term ends cannot get another work permit in the UAE for one year from the date of absence. No employer who is aware of this can employ them. The Ministry can exclude specific job categories or skill levels from this provision. Employers must notify the Ministry of worker absences per specified procedures.

19  INTRODUCTION OF AN UNEMPLOYMENT INSURANCE SCHEME

The UAE has introduced an unemployment insurance scheme (Federal Decree-Law No. 13 of 2022, Concerning Unemployment Insurance Scheme), set to take effect from 2023, extending coverage to both private and public sector workers. This innovative scheme offers essential valuable financial support, equivalent to 60% of a worker’s basic salary, with a maximum cash compensation of AED 20,000 in the event of unemployment.

However, it’s important to note thatcertain groups, such as investors, domestic workers, and employees on temporary contracts, are exempt from these benefits. To access unemployment insurance, workers will need to purchase coverage by making nominal annual contributions.

This scheme is expected to have a significant impact on the UAE’s labor market, making it more attractive to global talent and providing firms with access to a wider pool of skilled workers. Detailed guidelines are forthcoming.In addition to this progressive initiative, the New Labor Law ensures that employees are entitled to their end-of-service gratuity regardless of their length of service or contract type. The gratuity is calculated based on the final wage, which includes basic salary, allowances, and other regular payments.

20 KEY TAKEAWAYS

The UAE’s New Labor Law, which came in to effect on February 2, 2022, along with its Executive Regulations, indeed introduced sweeping changes to the private sector labor landscape in the country. These changes span various aspects of employment, from work patterns and permits to employment contracts, leave entitlements, and worker welfare. Key takeaways for both employers and employees include:

• Diverse Work Patterns: The New Labor Law introduces various work patterns, catering to the evolving needs of the labor market, including full-time, part-time, temporary, flexible, and self-employment.
• Visa Categories and Work Permits: The  establishement of a range of work permit categories, enhances flexibility for employers and workers alike. This includes permits for hiring foreign workers, transferring non-national workers, employing students, and more.
• Limited-Term Contracts: Unlimited-term contracts are phased out, replaced by limited-term contracts with a maximum duration of three years. This change allows employers to assess employee performance before making long-term contracts.
• Enhanced Employee Protections: The New Labor Law includes provisions to protect employees from unfair treatment, discrimination, and harassment. It prohibits the expansion of job scopes without employee consent and enforcing non-compete agreements under specific conditions.
• Worker Welfare: Introducing provisions for maternity and paternity leaves, bereavement leave, study leave, and religious holidays is a significant enhancement to employee benefits and well-being. Improved sick leaves protections are also important for worker welfare
• Timely Wage Payments: Ministerial Resolution No. 598 of 2022, which sets rules and procedures for the timely payment of employee wages, imposing penalties on employers who fail to meet their obligations.
• Internal Policies: Requiring entities with over 50 employees  to establish internal policies addressing work-related matters to enhance transparency and governance.
• Unemployment Insurance Scheme: The introduction of an unemployment insurance scheme from 2023 is a forward thinking move that will provide financial support to workers in the event of unemployment, making the UAE labor market more attractive for both local and foreign talent

In light of these transformative changes, it is imperative that employers, employees, and legal experts alike adapt swiftly to ensure full compliance and capitalize on the opportunities arising from this labor law reform. Economic Law Partners uniquely positioned to offer expert guidance and unwavering support during this transitional period. With their profound knowledge and extensive experience in UAE labor law, Economic Law Partners is committed to facilitating a seamless transition for both businesses and employees.

The New Labor Law stands as a testament to the UAE’s unwavering dedication to nurturing a thriving and dynamic labor market, aligning perfectly with its vision of sustainable economic growth and global competitiveness. By embracing these amendments and staying informed, both employers and employees in the UAE can actively contribute in fostering a more prosperous and inclusive future.

For all your legal inquiries and assistance in navigating the intricacies of the New Labor Law, please do not hesitate to reach out to Economic Law Partners in Sharjah, spearheaded by the leading labor lawyer in Dubai, renowned for offering top-tier  legal expertise in labor related matters.

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