United Arab Emirates: UAE Labour Update: Four Key Changes For Onshore UAE Employers To Be Aware Of

The Ministry of Human Resources and Emiratisation, formerly the Ministry of Labour (the Ministry), has recently issued a string of new ministerial resolutions and decrees designed to address gaps in the employment regulatory framework and reinforce existing legislation affecting employers falling under the Ministry's jurisdiction. This article highlights four of those key changes and their potential impact on onshore UAE employers. Pleas also refer to our accompanying article in this bulletin entitled "UAE Emiratisation Update" which considers two key changes to the resolutions regarding Emiratisation.

Change 1 – Accommodation for Low Income Employees

Employers with more than 50 employees, earning less than AED 2,000 a month (pursuant to the Wage Protection System), are required to provide those employees with free accommodation according to Ministerial Resolution No. 591 of 2016. Such accommodation must meet the standards and criteria already in place for labour accommodation.1

It has been reported in the media that the obligation to provide accommodation shall apply from December 2016, however, the applicable resolution indicates that the resolution will take effect in two stages. For eligible low income employees with an existing work permit in place, accommodation must be provided by 1 September 2016, and, for new employees, accommodation must be provided from 1 January 2017.

Local authorities are given the power to extend the scope of the resolution to employers with less than 50 employees or to employees earning above the AED 2,000 threshold. Failure to comply may result in penalties being issued by the Ministry.

This new requirement is likely to be monitored closely by the Ministry. Employers caught by this new resolution should take steps to put in place the appropriate measures to ensure compliance.

Change 2 – Wage Protection System

The Wage Protection System (WPS) was introduced by decree in July 2009 and obliged all employers registered with the Ministry to pay their employees through this system. The Ministry recently issued Ministerial Decree No. 739 of 2016 (WPS Decree). The WPS Decree repeals the previous decree and any provision that is contrary or inconsistent with the articles of the WPS Decree. It further imposes the following key provisions:

  • It reconfirms that companies registered with the Ministry must pay their employees' wages through the WPS.
  • Failure to pay an employee's salary within 10 days of the due date will amount to late payment and failure to pay an employee's salary within one month of the due date will amount to a refusal to pay the salary (unless a shorter period is specified under the contract).
  • For employers with over 100 employees, where the Ministry discovers that the employer has delayed in paying an employee's salary, it will, for a delay of at least:

    • 10 days, issue the employer with a warning which provides that the Ministry will not issue any permits after payment has been delayed for 16 days;
    • 16 days, block the employer's ability to grant work permits (Late Payment Penalty);
    • 30 days, impose a variety of additional sanctions including informing the judicial authorities and any other relevant authorities to exercise caution when dealing with the employer, refusal to register new licences for the employer, a reduction in the employer's classification to the third class, an extension of the ban on granting work permits to the remaining establishments of the employer without notification and/or ban on transferring employees to other employers (Refusal Penalty); and
    • 60 days, impose administrative fines on the employer.
  • For employers with fewer than 100 employees, the penalties set out above will only be applied where the violation is repeated more than once in the same year.
  • A Late Payment Penalty (i.e. a block on granting work permits) will be removed immediately upon payment by the employer of the outstanding salary. A Refusal Penalty will however be maintained for two months following payment by the employer of the relevant salary and may be extended for longer periods in the event that the employer repeatedly fails to pay the salary.

Employers should adopt a prudent approach to the revised WPS requirements in order to prevent being subject to any of the penalties at the Ministry's disposal. 

Change 3 – Student Placement and Training

Getting a part time job, a summer placement or some training under your belt during your teenage years is quite common in a number of jurisdictions. In the UAE, the position is not straightforward due to the regulatory requirement to obtain work permits.

Work permits are not normally granted to individuals under the age of 18 years and as a result, very few companies in the UAE offer work, internships and training programs to such individuals.  In a bid to change this, the Ministry issued Ministerial Resolution No. 713 of 2016 which enables students between the ages of 12-18 years to work and train in the private sector. The resolution confirms that students between the ages of 15-18 years may be granted work permits and those between the ages of 12-18 may be granted training permits (with priority being given to UAE nationals) provided written consent is obtained from the individual's guardian.

Previous legislative constraints pertaining to the employment of minors will continue to apply, including the restriction on employment of minors in certain prescribed roles and industries which are considered hazardous, exhausting or detrimental to health. In addition, students are not permitted to work between the hours of 8pm-6am, they cannot work for more than six hours a day and they must be given a break of at least an hour for every four consecutive hours worked.

Whilst the effects of this new resolution remain to be seen, this is a positive step towards the introduction, integration and facilitation of young persons into the labour force.

Change 4 – Post-Termination Restrictions

A new ministerial resolution published earlier this year may strengthen the ability of an employer to enforce a post-termination restriction.

Pursuant to Article 127 of Federal Law No. 8 of 1980, as amended (the Labour Law) employers may contractually oblige employees to refrain from competing with the employer's business following termination of the employment relationship where the employee has been privy to confidential information. Limitations to the scope of this article apply, to the extent that it must go no further than is reasonably necessary to protect the employer's lawful interests, the clause must be limited in duration, geographical scope and the type of work being restricted.

Notwithstanding the presence of Article 127, enforcement of non-compete clauses has historically been very difficult as injunctive relief is not usually available in the UAE courts. Therefore the position to date has been that employers cannot prevent ex-employees from breaching such non-compete provisions and are limited to pursuing a claim for monetary damages caused by such breach, which has its own set of challenges.    

Ministerial Resolution No. 297 of 2016 was issued on 13 March 2016 and came into effect on 1 April 2016. This resolution confirms that where a final court decision is awarded pursuant to Article 127 of the Labour Law stating that an employee is bound by a contractual agreement not to compete with its employer, the Ministry is entitled to refuse to grant a new work permit or revoke an existing work permit issued to such an individual for the duration of the non-compete restriction. The effects of this resolution remain to be seen; however it has the potential to substantially strengthen an employers' ability to enforce non-compete clauses. 

Potential development – Maternity leave

The UAE government has set up a committee, established on the direction of Sheikha Fatima bint Mubarak, Chairwoman of the General Women's Union, Supreme Chairwoman of the Family Development Foundation and President of the Supreme Council for Motherhood and Childhood, to review and revise the existing maternity leave provisions in the Labour Law in order to support the role of women in the workplace. Timelines for reviewing and implementing any changes have not yet been set; however, it will be interesting to see how this progresses.

Conclusion

These new changes positively augment the employment regulatory framework by providing further clarity, certainty, protection and flexibility for both employees and employers. Employers must remain vigilant to these changes and their effects and any future developments as they unfold.    

Footnote

1 Ministry of Labour Resolution No. 212 of 2014 if the accommodation is dedicated to less than 500 workers or according to Cabinet Resolution No. 13 of 2009 if the accommodation is dedicated to more than 500 workers.

UAE Labour Update: Four Key Changes For Onshore UAE Employers To Be Aware Of

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