United Arab Emirates: Employment Law – An Overview

Last Updated: 24 January 2019
Article by Asma Siddiqui

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 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.

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.

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.

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.

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.

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%.

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).

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.

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.

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.

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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