Reed Smith In-Depth

The United Arab Emirates (UAE) recently enacted Federal Decree No. 33 of 2021 regulating labour relations (New Labour Law) to govern employment and employment relationships in the private sector in the UAE. This is particularly exciting as it is the first piece of major legislative change in employment law in the UAE in a long time, and it brings substantial changes in the employment landscape of the UAE. The New Labour Law will come into effect on 2 February 2022.

This legislation replaces Federal Labour Law No. 8 of 1980 (as amended), which has governed employment relationships in the UAE for the last 41 years. The New Labour Law is groundbreaking in that a lot of the concepts introduced are not common in this area of the world and that it is the first law of its kind in the region.

The New Labour Law will not apply in the free zone areas – the Dubai International Financial Centre and the Abu Dhabi Global Market – that form separate jurisdictions from the rest of the UAE (and have their own employment laws). It will, however, apply in all other free zones in the UAE, and it is likely to cause the free zone areas to update their own labour and employment regulations.

Executive Regulations further detailing the new law’s provisions are still to be issued.

What are the features of the New Labour Law?

Key changes in the New Labour Law include:

  • Introduction of equality and non-discrimination. The New Labour Law introduces the concepts of equality and non-discrimination rights. Discrimination on the grounds of race, colour, sex, religion, nationality, social origin or disability is prohibited. Equal opportunities and equal pay (in particular, a woman’s right to be paid the same wage as a man if she performs the same work or work of equal value) are protected under the New Labour Law.
  • New categories of employees. The New Labour Law caters for different categories of employees, such as full-time employees, part-time employees and employees who work on a temporary or flexible basis. It provides for specific protections and obligations for each such category. This is a welcome development in a diversified economy such as that of the UAE.
  • No more unlimited employment contracts. The concept of fixed-term vs. unlimited term contracts is removed and the new law provides that all employment contracts must be for a specific period not exceeding three years. This is extendable or renewable and these extensions (which can also be implied if the parties continue with the employment arrangement without explicitly renewing the employment) count towards the period of continuous employment. This change aligns the duration of employment contracts with that of standard employment-based residence visas.
  • No forced labour, sexual harassment, bullying and violence. Forced labour is prohibited, as are sexual harassment, bullying or any verbal, physical or psychological violence against employees. These kinds of provisions have not been specifically dealt with before, and it is encouraging to see that the UAE is taking these situations seriously and the law is protecting these basic human rights.
  • Enhanced maternity leave. Maternity leave has been increased from 45 days to 60 days (with the first 45 days being on full pay and the next 15 days on half pay). Female workers can also be absent from work after maternity leave for up to 45 consecutive or intermittent days for medically certified illness (the employee or her child) resulting from pregnancy or childbirth. Breastfeeding mothers can also take two 30-minute breaks during the workday for up to six months.
  • Introduction of parental leave. In addition to maternity leave, the law also provides (for the first time) for five working days’ parental leave (which can be taken by the father or the mother).
  • Change to the statutory notice period. The statutory notice period (minimum 30 days) for termination of contracts now has a maximum length of 90 days. This is likely to impact existing senior management contracts that provide for longer notice periods, sometimes as a way of securing non-competition protection for employees. Given the refinement of express permission of non-competition restrictive covenants in the new law, it is likely that negotiations will be in order to amend contracts with longer notice periods to provide for a combination of shorter notice periods and non-competition restrictions.
  • Faster payment of end of services benefits. Under the New Labour Law, employers have to pay employees’ end of service payments within 14 days of the termination date. This is a welcome change for employees who, in certain circumstances, have seen their end of service gratuity payments partly or entirely delayed. Employers should ensure they make appropriate accounting provisions to have sufficient funds available to make payments when due.
  • Exemption from legal fees for small employment claims. In the event of labour cases brought by employees, no judicial fees are payable (at all stages of litigation) where the value of the case is less than AED 100,000. This change eliminates a barrier to legal proceedings for employees with reduced financial means.
  • Additional leave of absence rights for employees. New leave rights have been introduced. They include mourning (bereavement) leave of three days in the event of the death of a father, mother, grandfather, grandmother, son, brother, sister or grandchild, starting from the date of death. The new leave rights also include study leave of ten days for any employee taking exams (subject to the employee having completed at least two years of employment with the relevant employer, and for UAE national employees, leave to perform national and reserve service.

The New Labour Law extensively refers to Executive Regulations that are yet to be issued. It is expected that, when published, they will provide further clarification on a number of the new changes, including their interpretation and implementation.