an alliance of employers counsel worldwide United Arab Emirates

Transcription

1 Employment Law Overview 2017 United Arab Emirates

2 Table of contents I. General 01 II. hiring practices 02 III. employment contracts 03 IV. working conditions 05 V. Anti-Discrimination Laws 07 VI. Social Media and Data Privacy 08 VII. Authorizations for Foreign Employees 09 VIII. Termination of Employment contracts 10 IX. Restrictive Covenants 13 X. RIGHTS OF EMPLOYEES IN CASE OF A TRANSFER OF UNDERTAKING 14 XI. TRADE UNIONS AND EMPLOYERS associations 15 XII. Social Security / Healthcare / Other Required Benefits 16

3 I. General The United Arab Emirates or UAE, as it is commonly referred to, is a federation of seven emirates or states: Abu Dhabi, Dubai, Fujairah, Um al Quwain, Ajman, Ras Al Khaimah, and Sharjah. Abu Dhabi is the capital and the second largest city; the largest city being Dubai. The ruler of the Emirate of Abu Dhabi holds the presidency of the UAE, and the ruler of the Emirate of Dubai acts as prime minister. The UAE has a population of approximately six million; two million UAE nationals and the rest expatriates drawn from over 168 nationalities, with Indian nationals forming the largest expatriate community. Other significant expatriate communities include British and Iranian nationals. Employment relationships in the private sector in the UAE are subject to UAE Federal Law No 8 of 1980 on the Regulation of Labour Relations in the Private Sector (as amended) (UAE Labour Law), save that employees working in the Dubai International Financial Centre (DIFC) are subject to the DIFC Law No 4 of 2005 (DIFC Employment Law) and employees working in the Abu Dhabi Global Market (ADGM) are subject to ADGM Employment Regulation 2015, as amended (ADGM Employment Regulation). In addition to the DIFC and ADGM, other free trade zones have been established in the UAE in order to encourage direct foreign investment. These other free zones have issued their own employment regulations in some cases, although (unlike the position in the DIFC and ADGM) these must be read in conjunction with the UAE Labour Law. owned entities, the regulatory regime in terms of enforcement and applicable legislation has become increasingly complex. This coupled with a drive to promote the employment of nationals in the private sector, means that employment is set to be increasingly regulated. As noted above, employees working in the DIFC and ADGM are subject to separate employment laws. Both the DIFC and ADGM were established through a constitutional amendment to create free zones in which no UAE federal commercial or civil laws apply. The DIFC and ADGM are common law jurisdictions with their own set of commercial laws and court system. The Minister of Labour introduced some important changes to the UAE labour regulations by means of three decrees issued on 27 September These changes, which came into effect on 1 January 2016, aim to provide for a more flexible work environment for employees. 01 The UAE Labour Law has been supplemented over the years by Cabinet Resolutions and Ministerial Resolutions issued by the Ministry of Human Resources and Emiratisation (Ministry). In addition, individual emirates have also issued emirate-wide regulations on a limited basis (for example, there is a pension law for UAE nationals which is unique to the Emirate of Abu Dhabi). To date, the legislation has provided a broad, nominal framework for the employment relationship with labour courts adopting an employee friendly approach to enforcement. However, with the establishment of free trade zones and the government drive to diversify the economy through its establishment of government

4 II. Hiring Practices 02 All expatriate employees working in the private sector must be sponsored by their employer (or free zone authority on behalf of the employer) and registered with the Ministry or applicable free zone authority (for work permit purposes) and Department of Immigration within the Ministry of Interior (for residence visa purposes). UAE nationals working in the private sector must also be registered with the Ministry, although they will not require registration with the Department of Immigration.

5 III. Employment Contracts Minimum Requirements Employees based onshore in the UAE (i.e. not in a free zone) are required to enter into a prescribed form, duallanguage employment contract that is registered with the Ministry. Prior to the prescribed form employment contract being issued, employers are required to issue prospective employees with a standard offer letter containing clear and enforceable terms and conditions of employment. Once this is executed employers must obtain the Ministry s preliminary approval for employment. The signed offer must be filed with the Ministry prior to the employee coming to the UAE to take up employment or starting the visa status change if the employee is already employed in the UAE. The Ministry Contract subsequently issued to the employee, must reflect the terms of the offer letter unless the proposed alterations are to the employee s advantage and are accepted by the employee and the Ministry. This contract sets out both the employer s and employee s rights and obligations under the Labour Law and forms the operative employment contract for UAE law. Other free zones (such as the Jebel Ali and Dubai Airport free zones) have specific dual-language employment contracts similar to the Ministry contract. Employers in the DIFC and ADGM need not enter into a prescribed form employment contract, but must submit a written employment contract to the authority for every employee. As a general rule, both the UAE Labour Law, the DIFC Employment Law and the ADGM Employment Regulations set out a set of minimum employment entitlements and standards which can be exceeded to the employee s benefit by agreement between the parties, but cannot be reduced or excluded to the employee s disadvantage. 2. Fixed-term/Open-ended Contracts Contracts may be for either fixed or unlimited terms in accordance with the UAE Labour Law. The maximum duration for a limited term contract is two years, after which the employment is automatically converted into an unlimited term contract with minimum notice provisions unless renewed. Contracts in the DIFC and ADGM may be for limited or unlimited terms. 3. Trial Period The maximum probationary period is six months and this may be applied only once during employment. An employee s contract can be terminated without notice and/ or severance pay during this period. There is no maximum probationary period under DIFC Employment Law but where an employee has been employed for more than one month he will be entitled to at least seven days notice or 30 days if employed for more than three months unless the parties agree to a shorter (or longer) period. The maximum probationary period is six months under the ADGM Employment Regulation. During this period either party may terminate the contract without cause on one week s notice (or without notice if the termination is for cause ). 4. Notice Period Where the contract is of unlimited duration and one of the parties wishes to terminate the contract, it must give to the other party a minimum of 30 days written notice, or a longer period as may be stated in the contract, subject to a maximum of three months. In all other cases (for example, workers that work on a daily basis), the minimum notice requirements are as follows: One week if the employee has been employed for more than six months but less than one year Two weeks if the employee has been employed for more than one year but less than five years One month if the employee has been employed for five years or more Under DIFC Employment Law, no notice is required for either party to terminate where the employee has been employed for less than one month. Where the employee has been employed for more than one month, the minimum notice requirements are as follows:

6 04 Seven days (one week) if the employee has been employed for less than three months 30 days (one month) if the employee has been employed for three or more months but less than five years 90 days (three months) if the employee has been employed for five or more years Similarly, under the ADGM Employment Regulations no notice is required for either party where the employee has been employed for less than one month. The minimum notice requirements thereafter are the same as in the DIFC Employment Law (as set out above). Payment in lieu of notice is permitted under the Labour Law, the DIFC Employment Law and the ADGM Employment Regulations.

7 IV. Working Conditions Minimum Working Conditions Under the Labour Law, employees are entitled to at least a 1 hour break once every five hours. Employers are obliged to provide warnings, protective equipment and training on the specific health and safety dangers applicable at their work premises. Employers are obliged to maintain workplaces with adequate lighting, drinking water, ventilation and toilets. Under DIFC Employment law, employees are entitled to a rest break of one hour at least once every six hours, to uninterrupted rest of 11 hours in every 24 hour period, and to rest of not less than 24 hours once every seven day period. The DIFC Employment Law similarly requires employers to have in place adequate systems and procedures to minimize risk to employee health and safety, and to provide adequate working conditions. In addition, the DIFC Employment Law includes an express obligation on the employer to provide and maintain a workplace that is free from harassment, and is safe and without risks to the employee s health. The standard rest breaks provided for in the DIFC Employment Law are replicated in the ADGM Employment Regulations. 2. Salary There is no minimum wage in the UAE. However, there are minimum earnings requirements for a foreign employee who wishes to sponsor his family to reside with him in the UAE. In 2009, the Ministry introduced the Wages Protection System pursuant to which all employees registered by the Ministry must be paid in UAE Dirhams by direct electronic transfer through an institution regulated by the UAE Central Bank. The Wage Protection System initially only applied to employees working outside of a free zone, although most recently, the Jebel Ali Free Zone has adopted the system, and others may follow suit. Some free zones have a self-reporting mechanism whereby the General Manager of the employing entity confirms in writing each month that wages have been paid. 3. Maximum Working Week The UAE Labour Law provides for a maximum working week of 48 hours, 8 hours a day; with Friday being the weekly day of rest. The DIFC Employment Law does not set out the maximum normal working hours per day, although the maximum weekly working hours must not exceed 48 hours in any seven day period, unless the employer had first obtained the employee s consent in writing. The working time provisions in the ADGM Employment Regulations are similar to the DIFC Employment Law. Working time is not to exceed an average of 48 hours for each 7 day period, unless prior consent is obtained from the employee. 4. Overtime If the nature of the job requires an employee to work over time, the employee is entitled to overtime pay equivalent to the wage paid during ordinary working hours plus an additional amount of not less than 25% of the total remuneration (i.e. basic salary plus allowances) for the overtime period. However, if the overtime falls between the hours of 9 pm and 4 am, he will be entitled to overtime pay equivalent to the salary payable during normal working hours plus an increase of not less than 50% of his total remuneration for the overtime period worked. If circumstances require the employee to work on a Friday, he must be granted either another day off (in lieu) or receive his basic remuneration plus an additional 50% of his wage. However, employees cannot be asked to work two consecutive Fridays unless they are employed on a daily wage basis. Where an employee works on UAE public holidays declared for the private sector, the employer can elect one of the following payment structures:

8 06 Option A 100% of normal daily remuneration (basic salary plus allowances) + one day s leave in lieu plus 50% of remuneration Option B 100% of normal daily remuneration (basic salary plus allowances) + 150% of basic salary In any case overtime should not exceed two hours per day, unless it is necessary to prevent substantial loss, a serious accident or to eliminate its consequences. Only those employees who are either the Chairman of the Board of Directors, the General Manager, the Department Managers or supervisory staff, acting with the authority of the company, can be excluded from the overtime provisions. This is likely to be extremely senior staff, and therefore most staff will be entitled to overtime pay in accordance with the Labour Law. The DIFC Employment Law contains no exemptions for certain categories of employees or workers from its provisions and applies to all employees who wholly or usually work in the DIFC. It does not provide for statutory overtime rates, as there are no specific provisions relating to overtime. Employees can opt out of the maximum 48 hour working week. Under the ADGM Employment Regulations employees can opt out of the maximum 48 hour working week however there is a requirement on employers to ensure that they do not require or allow directly or indirectly employees to work excessive hours or hours detrimental to their health. There are no specific provisions relating to overtime pay. 5. Holidays The minimum entitlement to paid annual leave is 30 calendar days a year, with an employee only becoming entitled to accrue leave once he or she has completed the probationary period. Under the DIFC Employment Law, the minimum holiday entitlement is 20 working days for an employee employed for 3 months or more and the ADGM Employment Regulations provide for 20 working days of paid annual leave.

9 V. Anti-Discrimination Laws 07 There are no anti-discrimination provisions in the UAE Labour Law. However Law No. 2 of 2015 creates a number of criminal offences against discrimination and hatred, and in particular religious hatred, which may have potential consequences in an employment context. Article 32 of the UAE Labour Law provides that a woman is entitled to receive the same wage as a man performing the same work. Further, although Article 114 of the UAE Labour Law states that an employer should try to reassign an employee, who becomes disabled, to a suitable alternative role, there is no requirement to adjust roles in order to employ or accommodate disabled employees. Federal Law No. 3 of 1987, as amended, (the Penal Code) provides that it is a criminal offence to obstruct a female in such a manner as to violate her honour by work or deed. Further, sexual harassment is a criminal offence under the Penal Code. In such circumstances, the employee would need to make a formal complaint to the police. The police are obliged to follow up on any criminal complaint. If the police believe a complaint is groundless, they can dismiss it out of hand. If, however, the police believe a complaint bears further investigating, the matter may be referred to the Public Prosecutor s Office. The matter will then be investigated and, if the Public Prosecutor determines that there is a case to answer, the matter is then referred to the criminal courts. There are provisions in the UAE providing for positive discrimination with regard to UAE nationals (see section VII). The DIFC Labour Law prohibits discrimination on the basis of sex; marital status; race; nationality, or religion; mental or physical disability that has the effect of imposing burdens, obligations, or disadvantages on a person not imposed on other persons or that withholds or limits access to opportunities, benefits, and advantages available to other persons under this Law. The DIFC Labour Law makes it unlawful for an employer to refuse to employ or continue to employ, or to discriminate regarding employment or any term or condition of employment on the basis of the employee being a member of one of the protected classes set out above. An employer may also be held vicariously liable for the actions of its employees (e.g. for bullying or harassment) committed in the course of employment. It does permit discrimination based on a bona fide occupational requirement. The ADGM Employment Regulations prohibit an employer from discriminating against an employee on the grounds of sex, marital status, race, nationality, religion, age and disability. There is no obligation in the UAE not to discriminate in recruitment, terms of employment, promotion, and training with regard to employees or applicants. It should always be kept in mind that the UAE is an Islamic country and, while the UAE in general is considered to be one of the more liberal countries in the region, statements or acts that are deemed to be anti-islamic could still ultimately result in criminal complaints being made. It is a criminal offence to dishonour Islam or to eat, drink or smoke in public during the month of Ramadan.

10 VI. Social Media and Data Privacy Can the employer restrict the employee s use of Internet and social media during working hours? There is no enshrined right to use social media in the work place. In the UAE permitted use of social media would be regulated by an employer s internal policies and practices, and an employer is free to impose disciplinary sanctions where an employee acts in breach of such internal policies. Employers are well advised to set clear expectations with regard to acceptable behaviour in the virtual world, covering issues such as the posting of inappropriate material online and the use of links to the employer s business. Internal policies should also require employees to clearly state in any blogs or postings that their comments and opinions do not reflect those of their employer. Employees should be aware that defamation and slander are potentially criminal offences in the UAE. 2. Employee s use of social media to disparage the employer or divulge confidential information As stated above, there is no specific regulation of the use of social media in general. However, employees owe certain duties both in the employment context and generally with respect to confidentiality. Their actions and/or activities on social media sites may expose them to both criminal and civil liabilities. Federal law No. 5 of 1985 (Civil Code) and the Penal Code contain provisions pertaining to circumstances where industrial or trade secrets of the employer or another third party are disclosed without consent. Article 905 of the UAE Civil Code states that the employee must keep the industrial or trade secrets of the employer, including after the termination of the contract, as required by the agreement or by custom. Article 282 of the Civil Code provides that an individual or an entity will be responsible for any act by him causing harm to others and that such an act shall be compensated. The broad terms of this Article could well extend to the disclosure of a third party s confidential information, be it negligent or careless disclosure. Article 293 of the Civil Code requires the offender to make good the damage sustained. Article 379 of the Penal Code provides that a person will commit a criminal offence if, by reason of his profession, craft, situation or art (e.g. by virtue of his employment), he is entrusted with a secret and he: (i) discloses that secret in cases other than those permitted by law; or (ii) uses that secret for his own or another person s advantage, unless the individual to whom the secret relates has consented to it being disclosed or used. Defamatory content under the Penal Code can potentially include posting information about others without their consent (even if such information is true). The number of defamation cases in the UAE is increasing substantially within the region. In addition, Article 120 of the UAE Labour Law provides for immediate dismissal, without notice or payment of end of service gratuity, where an employee divulges confidential information to a third party for his or that party s own advantage. The individual may also face potential consequences under UAE Cybercrime Law No 5 of 2012, and Copyright Law No 7 of In the DIFC free zone, the DIFC Law No. 5 of 2004 (DIFC Law of Obligations) imposes fiduciary duties on an employee to his employer, consisting of an obligation of loyalty, which includes an obligation of confidentiality. The DIFC Employment Law permits immediate termination in circumstances where the conduct of [the employee] warrants termination and where a reasonable employer [...] would have terminated the employment.

11 VII. Authorizations for Foreign Employees Requirement for foreign employees to work All expatriate employees working in the private sector must be sponsored by their employer. In order to obtain sponsorship, employees must submit attested educational and professional qualifications, as well as undergo medical examinations for communicable diseases. Until recently there were tighter restrictions on an employee s ability to move from one sponsor to another (i.e. to effectively move jobs); however a new ministerial resolution was implemented at the start of 2016 which reduces the circumstances in which a ban may be imposed on employees, taking into consideration the skills level of the employee and length of service. 2. Emiratisation: Employment of UAE nationals Ministry s consent before dismissing a UAE national employee. 3. Recruitment agencies and employment businesses The sourcing and supply of labour is extremely regulated with the trade licence for such commercial activities being restricted to UAE nationals, with an additional requirement for the General Manager of the business to be a UAE national with a university degree. The engagement of individuals from a manpower supplier without the required trade licence can render an employer liable to penalties for engaging individuals without proper sponsorship and also have personal repercussions for the individual. An employer is under a duty to consider UAE nationals for all vacancies prior to engaging a foreign national. However, there is no labour market test as such providing for minimum advertising periods or interviewing requirements. Certain roles, including HR managers, secretaries and Government Liaison Officers are reserved for UAE nationals. Specific sectors including retail, insurance and banking are subject to quota requirements to employ UAE nationals of 2%, 5% and 4% of their workforces year on year, respectively. The UAE government is increasingly offering subsidies and funds to private sector employees to employ UAE nationals and subjecting public tendering and contracts to the company s achievement of percentage targets for the employment of UAE nationals as a total part of the workforce. These emiratisation requirements do not apply in the free zones. The DIFC Employment Law permits positive discrimination in favour of UAE nationals. UAE nationals are protected from termination of employment in the private sector and employers who fall under the Ministry jurisdiction must obtain the

12 VIII. Termination of Employment contracts Individual dismissals and severance payment The UAE Labour Law sets out the circumstances in which a contract of employment may be terminated by either party and the circumstances in which an employer may dismiss an employee without notice. An employment contract can be terminated in any of the following circumstances: If the parties agree to terminate the contract, provided that the employee consents to this in writing If the contract term has come to an end (unless the contract has been explicitly or implicitly amended) By one of the parties where the contract is for an unspecified term, provided that the parties observe the provisions of the Labour Law regarding notice and the acceptable reasons to cancel the contract without prejudice An employer may dismiss an employee at any time during the employment by serving contractual notice of termination. There is no list of permitted reasons for termination with notice. However, the Labour Law gives an employee the right to claim arbitrary termination if he is terminated for a reason unconnected to his work with the implication being that an employer should only terminate employment for poor performance or misconduct. An employee loses the entitlement to notice and to statutory severance pay if he or she is terminated for cause. The exhaustive list of circumstances in which cause will exist justify summary dismissal is as follows: If the employee adopts a false identity or nationality or submits forged certificates or documents If the employee is engaged on probation and is dismissed during or upon the expiry of that probation If the employee makes a mistake that causes the employer to suffer substantial material loss If the employee violates instructions for workplace safety If the employee fails to carry out basic duties, as provided in the employment contract, after receiving written warnings from the employer If the employee reveals any secret of the establishment in which he or she is employed If the employee is sentenced by a competent court for an offence involving honour, honesty, or public morals If the employee is found in a state of drunkenness or under the influence of a drug during working hours If, while working, the employee assaults the employer, the responsible manager, or any of his or her work mates If the employee is absent from work without a valid reason for more than 20 non-consecutive days or more than 7 consecutive days An employee may terminate his contract of employment without notice if: The employer has not fulfilled his obligations under the contract He is assaulted by the employer or legal representative There is no equivalent list of reasons for termination under the DIFC Employment Law. Either party may terminate employment without notice where there is cause. Although, cause is not expressly defined, the DIFC Employment Law provides that cause to dismiss an employee without notice exists in circumstances where the employee s conduct warrants termination and where a reasonable employer would have terminated the employee (for example, gross misconduct in the workplace). An employee who is dismissed for cause also forfeits his or her entitlement to end of service gratuity. Termination for cause does not apply where an employee has been terminated for having exhausted his (or her) annual maximum sick leave entitlement. Under the ADGM Employment Regulations employment can be terminated by the issuing of notice, there

13 11 are statutory minimum notice periods provided for in the ADGM Employment Regulations which must be observed unless the contract of employment contains longer notice periods. An employer may also terminate the employment without notice for cause. Termination for cause is said to mean termination due to the employee s conduct in circumstances where a reasonable employer would consider immediate termination to be warranted. An employee who is terminated for cause is not entitled to an end of service gratuity. 2. Collective Dismissals The UAE Labour Law does not contain any provisions governing work force reductions and does not recognise the concept of redundancy. If both parties do not consent to a termination of employment and the termination is not covered by one or more of the reasons for termination for cause, an employee may bring a claim against the employer for arbitrary dismissal (see below). The DIFC Employment Law and the ADGM Employment Regulations also do not contain any specific provisions regarding redundancy terminations. 3. Individual Dismissals In addition to notice pay, pay in lieu of accrued but unused holidays, and any other contractual sums due to an employee upon termination of employment, the UAE Labour Law provides that certain employees may be entitled to receive severance pay commonly known as end of service gratuity. If an employee has completed one year of continuous service, he or she will be entitled to a gratuity of up to 21 days of basic wages for every year of the first five years of service, and 30 days of basic wages for every year thereafter (provided the payment does not exceed two years of wages in total). The entitlement to a gratuity is pro-rated for partial years worked once the initial year of service is attained. The gratuity is calculated according to the last basic wage paid to the employee and is payable upon the termination or expiry of the contract of employment. Allowances and benefits are excluded from the calculation. However, payments such as bonus or commission may be included, depending on the terms for making such payments and the express provisions of the employment contract. If an employee resigns during the first five years of service, his or her entitlement to a gratuity will be reduced as follows: If the employee resigns between the first and third years of service, he or she will be entitled to receive only one- third of the severance pay If the employee resigns between the third and fifth years of service, he or she will be entitled to receive only two- thirds of the severance pay An employee on a fixed-term contract of employment will lose his or her entitlement to a gratuity if the employee resigns before the expiry of the fixed-term and has less than five years of continuous service. If an employee is dismissed summarily or resigns without notice (other than in certain prescribed circumstances), he or she will lose his or her entitlement to a gratuity. The DIFC Employment Law also includes an entitlement to an end of service gratuity calculated in the same way as under the Labour Law. However, there is no reduction in the entitlement if an employee resigns during the first five years of employment. Under the ADGM Employment Regulations the gratuity is calculated in the same way as it is under the DIFC Employment Law. As with the DIFC Employment Law there is no reduction if it is the employee who has terminated the employment (i.e. resigned). 4. Separation Agreements The DIFC Employment Law and the UAE Labour Law do not include any specific provisions regulating the use of separation agreements or statutory requirements dictating the contents or form of such agreements despite their use being quite common in the UAE. Such agreements do not act as a bar to the employee raising a complaint but are strong written evidence of the employee s acceptance of defined terms and payments on termination of the employment. Enforceability of such agreements may be enhanced if the agreement is signed in front of a Notary Public. Generally the most effective way to avoid litigation by non-uae national employees in the event of their termination is to offer them a settlement in return for their co-operation with the cancellation of their work permit and, thereafter, their UAE residence visa. In order to cancel an employee s work permit, the employee is required to sign an acknowledgment form called an End of Service

14 12 Entitlement Form that he or she has received all sums due from the employer and has no claims against the employer. This declaration is generally taken by the authorities to be a waiver or acknowledgement by the employee that no claims exist against the employer. The ADGM Employment Regulations contain a specific section relating to settlement agreements. This provides that it is open to the parties to settle any actual, threatened or potential claims provided that the agreement is in writing, it is signed by both parties and valid consideration must be provided to the party waiving any claims they might have. It remains to be seen how valid consideration will be interpreted. 5. Remedies for employees seeking to challenge wrongful termination Where an employer or an employee fails to give the other party notice of the termination of the contract or reduces the period of notice without prior agreement, the party obliged to give notice must pay the other party compensation in lieu of notice, even where no prejudice has been sustained by the other party as a result of such failure or reduction. The compensation shall be equal to the employee s remuneration in respect of the entire period of notice or the time by which it was reduced and calculated on the basis of the remuneration last received in the case of an Employee remunerated on a monthly, weekly, daily or hourly basis or, or in the case of an Employee remunerated on a piece work basis, on the basis of the average daily remuneration as set out in the UAE Labour Law. otherwise received as a result of his employment being terminated. Under the DIFC Employment Law, an employee who has been continuously employed for not less than 1 year on the date of termination of employment has the right to request a written statement of the reasons for an employee s dismissal and an employer must comply with this request. There is however no list of permitted reasons for termination under the DIFC Employment Law. The DIFC Employment Law does not contain any specific provisions that compensate an employee for unfair or arbitrary dismissal. Therefore regardless of the reason or manner of the termination of employment, there is no entitlement to any statutory compensation for unfair dismissal. Pursuant to the ADGM Employment Regulations, employees with a year s service are entitled to a written statement of the reasons for their dismissal upon termination of their employment. There are no specific provisions relating to unfair or arbitrary dismissal and it remains to be seen how the ADGM Courts will approach this issue. Where an employee is arbitrarily dismissed (for example, the reason for the termination is irrelevant to the work or the reason relates to the employee having submitted a serious complaint to the competent authorities or instituted legal proceedings against the employer), the competent court may order the employer to pay him compensation. The court shall assess such compensation with due regard to the nature of the work, the amount of prejudice he has sustained and his period of service, and after investigating the circumstances of the work. The amount of the compensation shall in no case exceed the employee s total remuneration for three months calculated on the basis of the last remuneration he was entitled to. The employee will also be entitled, if successful, to the end of service gratuity he should have

15 IX. Restrictive Covenants 13 Post-termination restrictive covenants are permitted under UAE law. Under Article 127 of the UAE Labour Law an employer may require an individual to refrain from competing with the employer, following the termination of the individual s employment with the employer, provided the restrictions imposed on the individual comply with certain specified conditions. The effect of Article 127 of the UAE Labour Law and Article 909 of the Civil Code is that the inclusion of non-compete clauses in employment contracts is valid and lawful under UAE Law. However UAE Law requires that there are clear limitations on the scope of the restrictive covenant with regards to the duration, geographical location and the type of business activity to which the restrictions relate. Moreover, a restrictive covenant can only be as wide as is necessary to protect the employer s legitimate business interests. When deciding whether or not to impose an injunction pursuant to any post termination restrictions, the DIFC Courts will also consider the reasonableness of such restrictions. This includes whether the restrictions are sufficiently limited in time, place and type to such extent as may be necessary to protect the lawful interests of the employer. Garden leave is commonly used in conjunction with restrictive covenants for maximum effect. The inclusion of a garden leave clause in a contract of employment allows an employer to require the employee to spend all or part of the notice of termination period at home, whilst his contract of employment remaining valid throughout the prescribed notice period and continuing to receive his usual salary and benefits. Whilst the Labour Law specifically recognises noncomplete clauses in the employment context, in practice it has to date been difficult to enforce such clauses in the UAE because UAE courts rarely grant injunctive relief preventing an individual from taking certain actions. However, enforcement may become easier following the publication of a new Cabinet Decision No. 297 of This decision confirms that, where a final court decision is awarded stating that an employee is bound by a contractual agreement not to compete, pursuant to Article 127, with its employer, the Ministry should refuse to grant a new work permit to such individual for the duration of the restriction. How this will be implemented in practice remains to be seen. The UAE courts do consider claims for damages for any loss suffered as a result of a breach of non-compete clauses. Injunctive relief is available from the DIFC and ADGM courts, but an injunction order is only enforceable within the jurisdiction where it was obtained. However, as the ADGM is a newly established territory it remains to be seen whether the DIFC will enforce an ADGM posttermination restriction, and vice versa. DIFC Law No. 6 of 2004, as amended (DIFC Contract Law) imposes implied obligations of good faith, fair dealing and reasonableness on contractual parties.

16 X. RIGHTS OF EMPLOYEES IN CASE OF A TRANSFER OF UNDERTAKING 14 There is no automatic transfer rights of employees from one employer to another (whether pursuant to the sale of a business or part of a business as an ongoing concern or the movement of a service contract pursuant to a retendering or a service provision change), either in the UAE, DIFC or ADGM. Due to the nature of employee sponsorship for UAE residency and labour purposes by a specific employing company, the movement of employees between companies can only occur pursuant to a process of termination and rehire. Issues such as continuity of service, end of service gratuity and accrued but unused holiday roll over can be addressed by side agreement with the transferring employees (and should be carefully drafted and documented).

17 XI. TRADE UNIONS AND EMPLOYERS ASSOCIATIONS Brief Description of Employees and Employers Organizations The UAE Penal Code (Law No. 3 of 1987, as amended) makes it a criminal offence for anyone to found, join or participate in a Trade Union or to participate in a labour strike. However, the UAE Labour Law contains a workforce disputes procedure under which employees may collectively submit a written complaint to the Ministry, which will appoint a labour committee to investigate the complaint and conciliate between the employees and the employer. 2. Employee Representation There is no legally recognised form of employee representation in the UAE, except for the collective labour disputes provisions of the Labour Law, outlined above.

18 XII. Social Security / Healthcare / Other Required Benefits Legal framework, state pensions and social security schemes There is no applicable social security legislation for expatriate employees. However, UAE and other GCC nationals are entitled to participate in state pension and social security schemes. Upon commencement of employment, an employer should register the employment of UAE nationals (or that of other GCC nationalities Saudi Arabia, Qatar, Bahrain, Kuwait and Oman) with the General Pension and Social Security Authority (GPSSA). The GPSSA will confirm to the employer and the employee the contributions to be made into the scheme. As GCC countries operate reciprocal state pension arrangements, employers of GCC nationals in the UAE are required to make payments to the GPSSA in accordance with the employee s home state pension laws. The GPSSA in turn passes these payments onto the employee s home state pension authority. In addition, employers in the Emirate of Abu Dhabi are subject to the Abu Dhabi Pensions Law, whereas employers in the rest of the UAE (including Dubai) are subject to the UAE Federal Pensions Law. These laws affect the required level of pension contributions, which vary depending on whether the employer is based in Abu Dhabi or one of the 6 other Emirates of the UAE. In Abu Dhabi, as a percentage of an employer s monthly salary, the employer is required to contribute 15%, the employee 5% and the Government of Abu Dhabi a further 6%. These contributions are payable on salaries up to a maximum monthly salary of AED 60,000. Salary in excess of this level is counted towards a statutory end of service gratuity award in line with the Labour Law. In the rest of the UAE, the requirement is for employers to contribute 12.5%, the employee 5% and the UAE Federal Government a further 2.5%. The maximum salary level for pension contributions is AED 50,000 per month; salary in excess of this level is counted towards a statutory end of service gratuity award in line with the Labour Law. 2. Maternity Leave and Other Leave Maternity Leave The UAE Labour Law entitles a female employee to 45 days paid maternity leave if she has accrued 12 months continuous service. Such leave is paid at 50% of remuneration if the employee does not have the required service. In addition to the 45 days paid maternity leave entitlement above, a female employee can take a maximum of 100 (consecutive or non-consecutive) days leave, without pay, if she suffers from an illness resulting from pregnancy or birth and, as a result, is unable to resume work. Such illness should be evidenced by a medical certificate issued by a UAE licensed medical practitioner/authority. For 18 months following the date of delivery, the employee is entitled to two breaks a day of not more than half an hour each to nurse her child, without any loss to remuneration. Maternity leave does not count as part of any other leave. This means that a female employee cannot be on both maternity and sick leave concurrently; it must be one or the other. The DIFC Employment Law provides that a working woman is entitled to 65 working days maternity leave, with 33 days at full pay (i.e. the daily wage) and the remaining 32 days at half pay, provided that she has: Been continuously employed with the employer for at least 12 months preceding the expected or actual week of childbirth (i.e. after three months of employment, the employee could fall pregnant and be entitled to maternity leave) Notified the employer 21 days before the date on which the employee intends to commence maternity leave; and Given notification of the expected week of childbirth, if requested to by the employer Any national holidays falling on a working day within the maternity leave period shall be treated as additional leave, thereby having the net effect of extending the maternity

19 17 leave by the period of the national holiday. Annual leave continues to accrue during the maternity leave period. Under the DIFC Employment Law, an employee who is pregnant and has, on the advice of a registered medical practitioner, made an appointment to receive antenatal care, is entitled to take time off during working hours in order to attend the appointment. The DIFC Employment Law also provides that a female employee adopting a child younger than three months is entitled to the same leave as a pregnant employee. The maternity leave and pay provisions in the ADGM Employment Regulations are broadly similar to those under the DIFC Employment Law. However there is an additional requirement that, if requested by the employer, an employee must notify the employer in writing that she is pregnant at least eight weeks before the expected week of child birth. The ADGM Employment Regulations also entitle male employees to a minimum paternity leave entitlement of five business days to be taken within two months of the birth of their child. During this minimum period of paternity leave the employee should be paid at their normal daily wage. The same provision regarding national holidays that exists with regards to maternity leave applies with regards to paternity leave. Sick Leave The minimum entitlement to sick leave is 90 calendar days a year, with full pay for 15 days, half pay for 30 days and nil pay for 45 days. An employee only becomes entitled to sick pay three months following the successful completion of the probationary period. Under DIFC Employment Law and ADGM Employment Regulations, sick leave is 60 working days on full pay in any 12 month period. Haj Under the UAE Labour Law an employee can take 30 days unpaid leave to perform Haj. Abbreviations used in this Guide AED UAE Dirhams DIFC Dubai International Financial Centre GCC Arabian Gulf Cooperation Council countries - includes UAE, Saudi Arabia, Qatar, Bahrain, Kuwait and Oman GPSSA General Pension and Social Security Authority UAE United Arab Emirates

20 Clyde & Co LLP United Arab Emirates 18 Clyde & Co is a global law firm with a pioneering heritage and a resolute focus on its core sectors of aviation, energy, infrastructure, insurance, marine, and trade. With over 1,400 lawyers operating from 35 offices and associated offices in six continents, the firm advises corporates, financial institutions, private individuals, and governments. The firm has a reputation for its work in emerging markets, being the largest international firm in the Middle East and with a rapidly expanding network across Asia, Latin America and Africa. Contact Us For more information about L&E Global, or an initial consultation, please contact one of our member firms or our corporate office. We look forward to speaking with you. L&E Global Avenue Louise 221 B-1050, Brussels Belgium This memorandum has been provided by: Clyde & Co LLP PO Box 7001 Level 15 - Rolex Tower Sheikh Zayed Road Dubai, United Arab Emirates P This publication may not deal with every topic within its scope nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice with regard to any specific case. Nothing stated in this document should be treated as an authoritative statement of the law on any particular aspect or in any specific case. Action should not be taken on this document alone. For specific advice, please contact a specialist at one of our member firms. This document is based on the law as of L&E Global is an alliance of independent law firms. L&E Global is not a law firm nor does it provide legal services. The L&E Global publication is intended for informational purposes only. Nothing in the document is to be considered as either creating an attorney-client relationship between the reader and L&E Global, or any of the law firms that are part of the L&E Global alliance and/or named in the publication, or as rendering of legal advice for any specific matter. Readers are responsible for obtaining such advice from law firms of L&E Global upon retaining their services. The independent law firms of L&E Global are not responsible for the acts or omissions of each other, nor may any firm or any of its partners or other employees, act as agent for any other L&E Global firm. Absent the express agreement and consent of the parties involved, no L&E Global firm has the authority to obligate or otherwise bind any other L&E Global firm.

21 2017