UAE new labour law in sync with the times

The regulation of the law further strenghthens and empowers the working class rights in the country

The latest Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations issued by President His Highness Sheikh Khalifa bin Zayed Al Nahyan is yet another milestone bringing significant change in the UAE’s rapidly evolving legal regime.

The new labour law came in response to changing workplace dynamics, technological advancements accelerated by Covid-19 and the changing economic environment. The Ministry of Human Resources and Emiratisation (MOHRE) announced the new law with amendments on employment contract terms, anti-discrimination clauses, gratuity terms, and extended parental leave, among other changes.

The primary objective of the new labour law is to increase transparency and efficiency in the labour market in the UAE. It will also help regulate employer-employee relationships and determine the rights and obligations of both parties fairly and equitably. The new law will also enhance the sustainability and flexibility of the labour market, further aligning existing labour standards with international best practices.

One of the key changes introduced in the new labour law is the discontinuation of unlimited contracts, which should be converted to limited contracts by February 2023. The law mandates employers to maintain written policies and handbooks as an important component of the employer-employee relationship.

New work models have been identified under the new law including full-time, part-time, temporary, flexible, and remote work subject to employer approval.

Another pertinent change is concerning the non-compete clause. Employees must enter a non-compete agreement with employers to protect the business interests of the latter. Such non-compete clauses must specify the terms of the time, place, and type of work to the extent necessary to protect the business.

As for annual leaves, the new law makes it compulsory for employees to use their annual leave before the end of that particular year. In the case of unused leave of an employee on termination of employment, compensation will be calculated only on the basic salary.

New types of leaves such as bereavement leave and study leave are introduced under the new law, which have also emphasised maternity and paternity leave.

Under the new law, if employees wish to move to another employer in the UAE, they may terminate their contract during the probation period by providing at least one month written notice to their employer. The new employer shall compensate the previous employer. If the employees wish to leave the UAE during the probation period, they may terminate their contract by serving 14 days notice period.

The probation period of not less than six months remains the same in the new labour law. A 14 day notice is required to dismiss an employee on their probationary period.

If an employee on probation resigns and then returns to the UAE within three months from the date of leaving to work with a new employer, the new employer is responsible for reimbursing the previous employer for the costs incurred in the recruitment of the employee.

Employees must provide a 30-day notice to the employer if they take up new employment in the UAE during the probation period. The new employer shall compensate the previous employer with the recruiting costs incurred.

As per the new labour law, the end of service gratuity will be calculated based on working days. Employees are entitled to their full end of service gratuity regardless of the reason for termination, even in the case of termination without notice, with certain exceptions as stipulated in the new law.

The Way Forward

All the entities on which new law is applicable must review their employment contracts, employee handbooks and other employment policies and procedures to reflect the changes brought in by the new law.

To know more or if you have any queries regarding the UAE’s new labour law, get in touch:

Email: uae@mbgcorp.com; WhatsApp/Call: +971-526406240

Visit: www.mbgcorp.com/ae

— Piyush Pandey is Senior Partner – Legal and Sakina Dickenwala is Associate Partner - Legal, MBG Corporate Services