United Arab Emirates: ADGM Leads The Way In UAE With Its New Employment Regulations

Last Updated: 22 June 2015
Article by Rebecca Ford and Sara Khoja

On 14 June 2015, the Abu Dhabi Global Market (ADGM) published the final version of its first raft of regulations, including the Employment Regulations (the Regulations). In this article, we examine the Regulations and contrast them to the employment provisions in operation in the Dubai International Financial Centre (DIFC) and the UAE Labour Law (the Labour Law).

In 2004, the UAE amended its constitution to enable each of its Emirates to establish financial free zones in which English common law would be the basis of the legal system and in which the UAE civil and commercial laws would not apply. Dubai was the first to use Federal Law No 8 of 2004 to establish the DIFC in 2005 and Abu Dhabi established the ADGM free zone in 2013.

Since 2013, the ADGM has been working on putting in place its legislative framework and in January this year the Board of Directors (the Board) of the ADGM published initial drafts of various key regulations as part of a formal public consultation. Clyde & Co has engaged with ADGM to discuss these regulations and has submitted detailed comments on the regulations to the Board. Many of Clyde & Co's comments are reflected in the final versions of the regulations, which are available here.

General

The first key point is that the ADGM have chosen to adopt the common law of England for all of its proposed regulations; subject to a number of caveats, including consideration of whether the common law "is applicable to the circumstances of the Global Market" and subject to any amendments to the provisions of the common law that are made "pursuant to any Abu Dhabi Law or Global Market Regulation". Like the DIFC, the ADGM will have its own Court and an Appeal Court. The decisions of the English Supreme Court will be binding on the ADGM courts and decisions made lower down the judicial ladder in England "shall be taken into account, but need not be followed, by the Court". In addition, a number of specified statutes (which are listed in the Application of English Law Regulations) "shall apply and have legal force in, and form part of the law of, the Global Market", subject to certain caveats and exceptions. However, none of the listed statutes are employment statutes.

The intention behind this wholescale adoption of English common law is to give increased certainty to parties who find themselves before the courts in the ADGM. However, this could give rise to a number of issues. For example where a judicial decision is made in the UK on public policy grounds; if a similar issue arises in the UAE, wholly different public policy decisions may apply. The English courts are also required to interpret UK legislation in accordance with European Union legislation and judicial decisions which could complicate matters further.

Employment Matters

The Regulations themselves are more detailed than the draft regulations published in January. They cover almost all aspects of the employment relationship from the recruitment phase through to termination and include provisions relating to:

  • Contracts of employment;
  • Protection of wages;
  • Working time and leave (including sick leave);
  • Maternity and paternity rights;
  • Employer and employee obligations; and
  • Discrimination.

Like in the DIFC Employment Law, there are no provisions specifically relating to post-termination restrictions. However, with the ADGM proposing to adopt English common law, it is likely that efforts to enforce any such restrictions will be made in front of the ADGM courts with reference to the principles and guidelines developed by the English courts.

Another notable omission from the Regulations is the lack of any provisions relating to how the Regulations will be enforced. It is understood that initially employment disputes will be brought in the ADGM court; however a dedicated employment tribunal system is likely to follow with its own set of procedural rules.

Key provisions

Some of the key points to note are as follows:

  • Settlement agreements (Regulation 1): Regulation 1(1) makes it clear that any agreement to waive or exclude the requirements set out in the Regulations will be void. Regulation 1(2) provides that employees and employers can waive any claims they may have against the other in an agreement provided that the agreement is in writing, is signed by both parties and "valid consideration" is provided to the party waiving their right to bring any such claim. This provision can be contrasted with the DIFC Employment Law and the Labour Law which prevent parties from contracting out of the minimum statutory requirements and do not provide for binding settlement agreements.
  • Written contracts (Regulation 5): employees are entitled to a written contract (in English) a signed version of which must be provided to the employee within 2 months. The contract must contain certain specified information, including confirmation of the start date, salary, working time, leave entitlement, notice provisions, job title, work location and applicable grievance/disciplinary rules.
  • Right to an itemised pay statement (Regulation 7): employees must be provided with an itemised pay statement (or electronic access to one), confirming the amount payable to them and the amount of any deductions.
  • Probation (Regulation 9): this provides for a probation period not exceeding six months. During the probationary period, either party can terminate the employment with or without cause on one week's notice.
  • Employees' duties (Regulation 10): employees are expected to be diligent and careful in the exercise of their duties, obey lawful and reasonable orders from their employer (in particular those relating to health and safety), take reasonable care of their employer's property, not to accept any gifts or other "advantage" in return for the performance of their duties, not to compete with the employer and not to disclose any confidential information. It is clearly stated that "to the extent practicable" these provisions will be interpreted in accordance with English common law.
  • Employment records (Regulation 11): employers are required to keep detailed records about their employees (in English) and are to maintain those records for two years after the employment terminates.
  • Maximum weekly working time (Regulation 16): employees' working time is not to exceed an average of 48 hours for each seven day period, unless prior consent (to work in excess of this) is obtained from the employee.
  • Reduced hours during Ramadan (Regulation 18): Muslim employees observing the fast shall be required to work no more than six hours a day (with normal remuneration to be maintained).
  • Rest breaks (Regulations 19-21): the Regulations provide breaks of 11 hours in each 24 hour period; 24 hours in each seven day period and a one hour break (for food and prayer) where daily working time is six hours or more.
  • Vacation leave (Regulations 22 & 23): paid vacation leave of 20 days (exclusive of national holidays) for any employee who has been employed for 90 days or more. A maximum of five days' accrued but untaken leave can be carried over into the next calendar year and an employee is entitled to a payment in lieu of accrued but untaken leave on termination. A carry forward of five days contrasts with the DIFC Employment Law, which allows 20 days to be carried forward, and the Labour Law, which prevents an employee from losing their entitlement.
  • Sick leave (Regulations 29 - 31): employees (with more than one month's service) are entitled to paid sick leave not exceeding 60 working days in any 12 month period, subject to their compliance with the notification requirements. Employees whose sick leave exceeds 60 working days can be dismissed immediately with written notice.
  • Pro-rata entitlements for part-time employees (Regulation 33): this provision expressly provides for the holiday leave, sick leave and maternity/paternity leave entitlements to be pro-rated for part-time employees. This is a significant development and provides employers and employees flexibility to agree varied work patterns. There are no similar provisions in the DIFC Employment Law or the Labour Law.
  • Maternity leave and pay (Regulations 33 & 34): maternity leave (or adoption leave where a child under 3 months' old is being adopted) of 65 days is provided for; if the employee has been employed for 12 months or more and complies with notification requirements the leave will be paid (in full for the first 33 days and at half pay for the remainder). Annual leave continues to be accrued during maternity leave.
  • Paternity leave and pay (Regulation 35): male employees are entitled to 5 days' paid paternity leave. This is an innovative statutory benefit in the UAE and does not appear in the DIFC Employment Law or the Labour Law.
  • Employers' Obligations (Regulations 37 – 46): employers have a duty to ensure the health and safety of their employees which includes protection against harassment. Employers must also ensure enclosed workplaces are well ventilated, of a reasonable temperature, well lit, clean, sufficiently large, properly equipped (reflecting the nature of the work) and that employees have access to bathroom facilities and clean drinking water.
  • Liability for work-related injuries (Regulations 48 and 49): employers are to take out medical insurance for any employees who suffer an injury sustained in the course of their employment and employers are also liable to pay compensation to employees who are injured or die in the course of their employment.
  • Health insurance (Regulation 50): employers are required to obtain and maintain health insurance for employees which must be in accordance with the Health Authority Abu Dhabi requirements
  • Data Protection (Regulation 51): there are some relatively comprehensive data protection provisions set out in the Regulations. Although the DIFC Employment Law does not contain data protection provisions, there is a stand-alone data protection law in the DIFC. In the absence of a stand-alone law in the DIFC, the Board has chosen to include comprehensive provisions in the Regulations.
  • Discrimination (Regulation 55): discrimination on grounds of sex, marital status, race, nationality, religion, age and/or mental or physical disability is prohibited. This applies to direct discrimination, indirect discrimination and harassment. There are also provisions relating to a "failure to make reasonable adjustments" in respect of disabled employees. Whilst the DIFC Employment Law also contains anti-discrimination provisions, the inclusion by the ADGM of protection from discrimination on the grounds of age is a new development and it will be interesting to see how this is managed by employers in the ADGM.
  • Termination (Regulations 56 – 58): the minimum notice to be given by either party where the employee has been employed for less than three months is seven days, 30 days if the employee has been employed between three months and five years and 90 days if the employee has been employed for more than five years. The parties cannot contract out of these minimum notice periods but are free to agree increased notice periods. Both parties are free to terminate "for cause" in specified circumstances. Employees are entitled to a written statement of reasons for dismissal (upon request and subject to a minimum service requirement of one year).
  • Pension and end of service gratuity (Regulations 59 & 60): employees are entitled to an end of service gratuity unless they are an UAE or GCC national who has been enrolled in an appropriate pension scheme (unless the employee has written approval from the applicable national pension authority not to participate in the pension scheme). Otherwise (i.e. for non-UAE or GCC nationals) an employer may establish a pension scheme for their employees and must give the employees a choice between participating in the pension scheme or receiving an end of service gratuity payment. No end of service gratuity is payable where the employee has been terminated for cause.

Conclusion

Although at first sight, the Regulations introduced by the ADGM appear to be similar to the DIFC Employment Law, the Board has taken the opportunity to make interesting and innovative alterations to the employment statutory regime. With its introduction of paternity leave, age discrimination and an ability to offer part-time roles (with adjusted statutory benefits), the ADGM may become the standard to aspire to in the UAE.

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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