The changes are heralded as facilitating greater flexibility and efficiency for businesses and employees alike. The increased employee protections are seen as an important move towards both attracting and retaining talent for the country.
Who is affected?
The Employment Law applies to all UAE private sector business with the exception of those located within the Dubai International Financial Centre and the Abu Dhabi Global Market.
The Employment Law introduces a variety of different changes with varying impact for employers and their employees. Some of the key changes are:
- Abolition of unlimited term contracts: All existing employment contracts must be converted to limited term contracts by 2 February 2023. Going forward, employers must only offer limited term contracts for a maximum term of three years (renewable) subject to early termination of minimum 30 days and maximum 90 days. Renewal can be implied by conduct or set down in writing between the parties. All renewals are deemed an extension of the original contract term. This can be seen as an employer-friendly change, to allow for termination at the end of each limited term without the need to pay extra contractual compensation, which was the case in a no-fault termination of an unlimited term contract under the old law.
- Flexible working models: The Employment Law sees an expansion of the recognized models of working beyond the traditional full-time model to include part time, temporary, and flexible working structures. The implementing regulations also cover freelancing and self-employment, along with job-sharing. The changes are an important foundation for improving the flexibility of the labor market by ensuing businesses and individuals can take advantage of the right working model for their situation.
- New protections against discrimination, bullying, and sexual harassment: In an effort to strengthen employee protection, the Employment Law introduces provisions to combat discrimination on grounds of race, colour, sex, religion, nationality, social origin, or disability. In addition, sexual harassment, bullying, verbal or psychological violence against an employee by any colleague is prohibited. In either case an employer who violates these provisions could be liable for significant fines under the new law. The introduction of these protections shows clear focus on ensuring the UAE’s legal framework aligns better with those of more developed jurisdictions where such protections are commonplace.
- Improved leave entitlement: The Employment Law has introduced several family friendly changes with respect to new and enhanced leave entitlements. Maternity leave for working mothers has been increased from 45 calendar days to 60 with the first 45 days at full pay and the remaining 15 at half pay. The same entitlement also applies in cases of stillbirths/newborn deaths for pregnancies of more than 6 months' duration. An additional 30 days of paid leave is also now available to care for sick or disabled newborns. Whilst not technically new, the law confirms five working days' parental leave will be available to either parent within the first six months of the child’s life. Employees are now also entitled to paid compassionate leave for the death of a close relative and paid study leave under certain conditions.
- Confirming the requirements of non-compete clauses: The Employment Law has codified the position that non-compete clauses must be specific in geographical scope, that the term must not extent beyond two years from the date of the end of employment, and that the activities covered must seriously harm the legitimate interests of the employer. The law also stipulates that the non-compete clause will not apply if the termination of employment is attributable to the employer or its breach of any legal or contractual obligations. It is also possible for an employee or their new employer to pay a sum to the former employer as compensation for the early release of the employee from their obligations under a non-compete clause. This change gives greater certainty to employers on the protections surrounding non-compete clauses and provides for circumstances in which the employee can be released from these restrictions.
To ensure compliance with the changes, employers in the UAE will need to take the following actions:
- Discuss these changes with employees to make them aware of changes that may affect them and the potential need to amend their employment contracts.
- Review existing employment contracts and related documentation and prepare amendments that convert unlimited contracts to limited term ones prior to the conversion deadline and/or address any other requisite changes in light of the new law.
- Review and update all employment related templates.
- Review of all workplace or human resources policies.
How we can help?
Given the importance of these regulatory changes, employers should act now to ensure proper implementation and awareness within their organizations. Hogan Lovells is well-versed in the changes and their impact. We can provide practical guidance on implementation for your firm, and insight into emerging market-standard practices. Please contact us for more information on how we can help.
Authored by Imtiaz Shah, Erin Kiem, and Ashley Connick.