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Tue 16 Jun 2009 06:19 AM

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UAE labour law confusing, needs overhaul - lawyers

New legislation needs to clairify compensation for dismissed staff - Clyde & Co.

UAE labour law confusing, needs overhaul - lawyers
CONFUSING LAW: UAEs labour law needs an overhaul to better recognise job redundancies, says Clyde & Co.

The UAE's labour law is in need of an overhaul and is confusing employers, according to associates with law firm Clyde & Co.

New legislation in the emirates would need to recognise redundancy as a valid reason for dismissal as well as outline procedures for termination of staff contracts and disciplinary procedures, said Sara Khoja, associate with the firm in Dubai.

The current law, which dated from 1980, had only been updated via decrees by the government but was expected to be overhauled, she said.

“Many employers seem to be confused as to when they can terminate (employees’) employment in the UAE and, in particular, when they can make redundancies,” according to Joanne Hennessy, another associate.

“Redundancy is not recognised in the UAE and so, strictly speaking, is not a valid reason for dismissal in the UAE. However, the labour courts have recognised an employer’s right to restructure their business and not doing so would be unrealistic and potentially jeopardise the continued employment of the entire workforce as opposed to part of it.”

The labour law implied staff could only be dismissed for performance or misconduct reasons, she said.

There was was widespread confusion over compensation for dismissed employees in the UAE.

“Contrary to popular belief, an employee has no automatic entitlement for compensation or three months remuneration on their dismissal,” said Hennessy.

An employee would have to complain to the Ministry of Labour or the free zone authority where their employer was based before they could make a claim for compensation.

Only a labour court could order payment of compensation by an employer to an employee and up to a maximum of three months remuneration if it established an employee had been arbitrarily dismissed, she said.

She also warned that extra care needed to be taken by employers contemplating dismissing a UAE national following a recent Ministry of Labour decree protecting national workers from dismissal where an expat performed the same role.

But it was not yet clear how the decree was going to be enforced, she added.

Domestic workers were excluded under the labour law in the UAE but the emirates may follow Saudi Arabia, which had published draft law protecting domestic workers.

Hennessey also pointed out that different labour law applied in the UAE depending on where an employer was based, with Dubai International Financial Centre (DIFC) having its own employment rules.

“The DIFC labour law does not provide a right of complaint for employees who think they’ve been unfairly dismissed and it also provides fairly limited guidance for employers as to when they can dismiss an employee," she said.

The absence of unfair dismissal rights in the DIFC was an “oversight” rather than a “deliberate omission” and it remained to be seen whether the DIFC would update its rules, she added.

gamby 10 years ago

what's new??? with all the leniency to the employers/business owners, why would they protect employees? they are replaceable, business is important than human right, right? welcome to their world!!

Maverick 10 years ago

This just shows how there is no equal rights in this country. When all along labour force is the first thing should be given importance as they are the backbone of any industry. Most people they just open business without even knowing lots about business ethics and all others for considerations.

Buddhadeb Mookerjee 10 years ago

UAE has made tremendous progress in the past 2 decades towards globalisation. But the country has not taken concrete steps to upgrade its legal framework. In order to be recognised as a world power one needs to have world class institutions including legal and financial institutions. Having the tallest tower in the world is awesome but not sufficient to become a world power. Unless the laws are of world standards and are applied uniformly all over the countryUAE will not be able to inspire the confidence of major investors from all over the world.

Akbar Kazmi 10 years ago

Labour Unions are banned in the UAE, which is not in line with the standards set forth my the International Labour Organisation (ILO), of which UAE is a member. Thus, there a great divide between UAE labour laws vis a vis the developed world. In the absence of Labour Unions, employees as a block cannot negotiate with employers to seek resolution of their grievances. In the current recessionary environment whereas some corporations indeed have and will continue to post losses and are therefore justified in terminating jobs to reduce costs, there are other corporations including banks in the UAE that are cutting jobs in dramaitic numbers despite having made more profits in the 1st quarter of 2009 than even in the 1st quarter of 2008, which was a better economic period. Comparatively, the massive job losses in the west have occurred in those companies that have sustanined significant losses for several quarters or have declared bankruptcies. There are only just one or two companies in the UAE that have offered to reduce salaries of staff or curtail other financial perks in these times as a possible measure for cutting costs while still retaining staff with good performance. The preferred strategy has been to let go of staff instead. The policy makers at the highest level should recognize that the UAE remains an engine that sustains itself for consumer consumption by a vast expat population. Significant cut in expat numbers will have a negative long term impact on rebuilding the economic well being of the country in the times when talent is again sought in the future as those who leave now will need a lot more assurance to return to the work force unless better laws pertaining to severence and end of service benefits are promulgated. Whereas letting go of UAE nationals from a company has come restrictive under new laws, the ease with with jobs of the expats can be eliminated by a company stands at the other extreme of the equation.

Marie 9 years ago

I think that the UAE labour laws are great and I am glad they are in place. Being one of the many whose positions were made redundant, I was very thankful for these laws as my former employer were very sneaky and unfair to me---they had actually cut my salary in half, urged me to sign on for a new apartment lease and take a short holiday break back to the USA to recharge and see my family and friends, then terminated me from the Company the week I return. They wanted to deny me my remainder of vacations by using them towards my 30 days notice and to provide me with a final severance based on half my salary cut. Their basis were on that it was part of my contract between employer and employee...however thank goodness for the UAE labour laws as they protect the employee against actions as stated above, esp. with Article 7, which enables the employee the right to a fair settlement based on UAE contract instead of the company's contract. I actually went ahead to write an article on the whole step by step process----which I would like to share with others to help them benefit from what I learned. http://www.associatedcontent.com/article/2432108/understanding_uae_labour_laws_with_pg6.html?cat=17

Mark 9 years ago

While the UAE Minister of Labout says that the rights of employees would be protected and this is done to a large extent, there are shortcomings in the system: a. The difference between categories of employees are not defined - labour is labour, of course when one pays and one receives services. However, the quality of labour as such differs. A bank manager would have so much more expertise than a bricklayer. The former can be terminated for faulty laying of bricks which is easily correctible, but if the bank manager is terminated on undefined grounds, how will he protect his career? Termination as such also needs indepth definition. A mandatory process flow is required whereby the actions of the employer and employee are transparent and with approached a win-win intention. Today if an employee is terminated, he can only claim monetary compensation, but why is reinstatement not part of the law when the employer has been unfair to the employee? The process of termination should have a safety feature inbuilt by way of a mandatory inquiry into any dispute in the presence of the legal advisor of the Ministry of labour. This will act as a deterrent for both employeesand employers from committing any unfair actions. Monetary compensation lasts for a while and then what? Reinstatement will ensure justice and be a deterrent to employers who harass employees. All companies must be compelled to provide a booklet with the UAE labour laws. How many employees do not know their rights and are caught on the wrong foot? It is necesssary also that every sponsor must be directly involved in his business and be responsible for any unfair dealing to his employees. Can sponsors exclude themselves from fair treatment to employees by asigning responsibility on their senior managers? Surely, there are many points such as these which may be considered for inclusion in the labour law.

usman 8 years ago

i am labour who working in uae from june 06/06/2009 my contract is unlimited.if i finish two year is there six month ban for me?.kindly waiting for answer.so many people ask me the same doubt.

Tony 8 years ago

This is a question, more than a comment. Can a company hire a person on a consultancy contract renewed yearly at a fixed rate paid monthly (inclusive of everything as per contract), with no holidays or Gratuity for that person for a period of 5 years?
If company does not renew the contract, can the individual bring the company to Labour court and seek gratuities for 5 years as well as the one month holiday per year? In other words, did the company circumvent the UAE's labour law by hiring an individual as a contractor but treated like an employee?
FYI- 1. The individual was initially brought in as a Contractor on a temporary basis (initially on a one-year contract) instead of employee basis. This was because HR had to officially create the position which would take time and company wanted to have the individual start immediately.
2. Contractor was treated like an employee throughout the entire 5 years, in that he had to report to the office daily and reported to a company manage.