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Nine things to know about UAE labor laws

Posted on Tuesday, 4th November 2014

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Employment issues in the UAE have certain unique characteristics reflective of the country's social fabric, cultural values and economic considerations. It is, therefore, imperative that foreign companies and individuals setting up businesses and hiring employees in the country understand the relevant laws and their impact on business. Below are some specific employment issues that all companies must bear in mind:
 
1. EMPLOYMENT VISA
Anyone who works in the UAE must have an employment visa and as a general rule, employees must only work for the company who sponsors their visa. There are few exceptions to this rule such as part-time employees, students and female spouses. Companies engaging the services of individuals who either do not have an employment visa or hold a wrong visa can be subject to heavy penalties, as set by the Immigration Law.
 
2. SPONSORSHIP CONCEPT
A sponsoring company is ultimately responsible for an employee as long as s/he remains in the country and on the company's visa. This sponsorship relationship is not to be underestimated, as it deeply permeates the relationship between the parties. The company may be held responsible for its employee's actions even those committed out of scope of the employee's responsibilities. It is also required to ensure that, at the end of the relationship, the employee has a ticket to exit the country and that s/he ultimately leaves the country or transfers to someone else's sponsorship. Also, in the unfortunate event of an employee's death, the company is responsible for the repatriation of remains. Furthermore, in some cases, the company may also be held accountable for the employee's debt, such as medical bills, if the employee cannot settle his/her dues and must leave the country.
 
3. MUTUAL RIGHTS AND OBLIGATIONS
Employees and employers have respective rights and obligations to each other. Employers are required to pay employees timely, provide them with certain working conditions, vacation, holidays and sick days. For example, the maximum working hours shall be 48 hours per week, except for certain professions and management designations. During the month of Ramadan, working hours must be reduced. Employers are also required to provide a special once-in-a-lifetime pilgrimage leave. Employees, on the other hand, must perform their obligations to the company and follow the laws.
 
4. EMPLOYMENT AT WILL
 Despite common perception, the relationship between companies and employees in the UAE is one at will. This means that no one can force employees to work - or companies to employ someone - against their will. Irrespective of the terms and conditions of the underlying employment contract, an employee can leave a company and a company can terminate employees at any time.
 
5. VALIDITY AND ENFORECEABILITY OF CONTRACTS
 Employment relationships are primarily based on the government-issued contract, irrespective of the particular economic zone. Most companies also have their own employment contracts, varying in form and substance. Sometimes these contracts are all together separate employment agreements. Other times, they outline additional benefits for employees. Commission, bonus, confidentiality and non-competition agreements are some such examples.
 
6. TERMINATION OF RELATIONSHIP
There are two types of notices. One refers to the notice of termination, where the minimum termination notice under the Labor Law is one month. The other form of notice is termination for cause. To be valid, the termination for cause notice must be served pursuant to Article 120 of the Labor Law, which refers to the employee's misconduct and sets out requirements for the company to document and notify employees accordingly.
 
Under the Article 120 notice, the company can terminate the employee without any further notice and, potentially, without having to pay any other dues. However, in the event a company terminates an employee prematurely and does not serve proper Article 120 notice, it may be held liable for arbitrary dismissal. Compensation for arbitrary dismissal, in turn, can be based on up to three months of gross salary. In practice, judges, almost as a matter of course, award the maximum three months of gross salary. When termination is at the end of the employment contract, no notice is required and no additional payments, other than outstanding dues and end-of-service benefits.
 
7. END-OF-SERVICE BENEFITS
Employees become entitled to end-of-service benefits after one year of continuous service. For the first five years of service, an employee is granted 21 days of basic salary for each year of service. After the fifth year of service, the end-of-service benefits are 30 days for each additional year of service.
 
In an unlimited contract, when an employee resigns, s/he is entitled to a third of the end-of-service benefits for the first three years of service. Between three and five years of service, the entitlement goes up to two-thirds. After five years of service, the employee is entitled to the full benefits even upon resignation. In a limited contract, if an employee resigns before the expiration of the agreement, s/he is not entitled to the gratuity.
 
8. OTHER COMPENSATIONS
 Companies may also be required to pay additional benefits to employees - some established by law and others by contract. Companies are also required to pay for employees' visa costs, Emirates ID and a ticket home at the end of term and in the event the employee wishes to leave the country. There is, however, no requirement for an annual ticket home. Contractually, some companies pay their employees bonuses and commissions.
 
9. RESOLUTION OF DISPUTES
 The resolution of employment disputes is subject to exclusive jurisdiction of the Labor Court. This excludes DIFC companies, which are subject to the DIFC Small Courts Tribunal. Companies in free zones must first go through mediation before their cases can be referred to the Labor Court. In many cases judges tend to want to protect employees, insofar as they are often the aggrieved party. Yet, the courts are generally objective and tend to just apply the law. As such, parties should not shy away from filing a dispute with the Labor Court when they reach an impasse.
 
 
Source: Gulf News
 

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