Chapter 9
Labour Law
The introduction of Federal Law No. 33 of 2021, effective from February 2, 2022, marked a significant shift in the UAE’s employment landscape, replacing Law No. 8 of 1980. The new labour law is designed to align the UAE’s employment regulations with international standards, promoting flexibility, fairness, and enhanced protections for workers.
Key Features of the New Labour Law
The law mandates that all employment contracts in the private sector must be fixed-term, with a maximum duration of three years. These contracts can be renewed upon mutual agreement. Employers were given a one-year transition period to convert existing contracts to the new fixed-term model.
Recognizing the need for diverse working arrangements, the law accommodates full-time, part-time, temporary, and flexible working models.
The law introduces structured notice periods for termination based on the employee’s length of service. For employees who have been with a company for less than five years, a 30-day notice is required, while longer-serving employees are entitled to up to 90 days’ notice. The law also emphasizes fairness in dismissal processes, setting clear guidelines for terminating employment contracts to ensure employees are treated equitably.
The new law strengthens protections for workers by:
- Prohibiting workplace harassment, bullying, and discrimination based on race, gender, religion, and nationality.
- Introducing the principle of equal pay for women.
- Forbidding employers from retaining employees’ passports, which has been a contentious issue in the past.
Employers must comply with the Wage Protection System, ensuring that wages are paid transparently through an electronic system regulated by the Ministry of Human Resources and Emiratisation (MOHRE).
The new labour law establishes clear guidelines for the probation period. Employers can terminate an employee during probation by giving a minimum of 14 days’ notice. If an employee decides to resign during the probation period, they must provide at least 30 days’ notice.
Special Considerations in Free Zones
Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), operate under their autonomous legal frameworks and are not subject to the federal labour laws of the UAE. Businesses operating in these zones must comply with the employment regulations specific to the respective free zone.
While these frameworks offer more tailored regulations for financial and corporate services, employers and employees must be aware of the differences in employment protections and obligations compared to the federal law.
Emiratisation Policy
The Emiratisation policy is a significant feature of the new labour law reflecting the UAE’s strategy to integrate Emirati nationals into the private sector, primarily targeting mainland companies.
10%
representation in skilled roles by 2026
As of 2023, businesses with 50 or more employees are required to increase their Emiratisation rate by 2% annually, aiming for 10% representation in skilled roles by 2026.
Smaller companies with 20 to 49 employees must hire at least one Emirati by 2024, and two by 2025. The Nafis programme offers incentives like financial support, training, and benefits for companies meeting their targets.
On the other hand, companies that fail to comply face fines starting at AED 96,000 per month.
While free zones are generally exempt from mandatory Emiratisation quotas, some zones have adopted voluntary programs to encourage Emirati hiring, especially in skilled and leadership positions. Free zone companies should monitor regulatory updates as the policy may evolve.
Comprehensive Overview of the Labour Legislation
The new labour legislation applies to all private sector enterprises and employees, with a few exceptions such as federal government personnel and employees working in DIFC and ADGM.
This law enhances various aspects of employment, including:
- Employment models: Offering full-time, part-time, and flexible contracts.
- Leave entitlements: Expanding on maternity leave, paternity leave, and sick leave rights.
- Discrimination protections: Safeguarding employees from unjust treatment and promoting equality in the workplace.
- Safe Working Conditions: Employers are legally obligated to provide safe working conditions, ensure timely payment of wages, and comply with termination and end-of-service gratuity requirements. Failure to comply with these obligations can lead to legal consequences, including fines or business sanctions.
Employee Inventions and Intellectual Property Rights
Under UAE law, intellectual property (IP) created during employment is governed by specific rules:
- The employer typically owns inventions or works created by employees if they are produced during the course of employment. This is particularly applicable to inventions and patents under Federal Law No. 17 of 2002, which regulates and protects patents and industrial designs.
- However, employees are entitled to fair compensation if the value of the invention was not anticipated at the time of employment.
- If an invention is made outside the scope of the employee’s duties but using the employer’s resources, the employee must notify the employer, who can claim the invention in exchange for fair compensation.
In creative industries, the rights to authored works can belong to the employer, provided this is clearly outlined in the employment contract.
Protecting Business Interests
To safeguard their interests, UAE employers often include restrictive covenants in employment contracts. These can take the form of non-compete clauses, non-solicitation agreements, or confidentiality agreements, which protect the business from potential harm if an employee leaves to join a competitor.
However, it is important to note that outside the DIFC and ADGM, injunctive relief is not available in the UAE. As a result, enforcement of non-compete clauses is reliant on post-employment actions such as financial penalties.
Gratuity and End-of-Service Benefits
The new labour law also strengthens the framework for end-of-service gratuity. Employees who complete one year of service are entitled to a gratuity payment based on their final basic salary.
The gratuity is calculated as:
21 days’ salary for each of the first five years of service.
30 days’ salary for each additional year of service after five years.
This benefit is capped at two years’ salary.
