On November 15 2021, the UAE President issued Law No. 33 of 2021 to regulate labor relations in the private sector, applicable to the mainland companies (“New Law”). Upon its entry into force on February 2 2022, the New Law shall replace Federal Law no. 8 of 1980 and its amendments. Nonetheless, Law 33 of 2021 shall be applicable to the mainland companies and in the free zones that apply the federal employment framework (hence the financial free zones, namely ADGM and DIFC, will be excluded from the domain of this New Law).
The team at Fichte has reviewed the current text of the Law and summarizes the major takeaways as follows:
A. The New Law brings along a major overhaul in the employment compliance sector
On the compliance side, the changes in the New Law are comprehensive. The Law creates enhanced safeguards for the employees, as well as more flexibility in the conclusion of employment contracts. As such:
- In line with the international standards in the field, the New Law provides for equal pay for men and women;
- The New Law provides legal safeguards against violence, bullying, harassment and discrimination of any type in the workplace;
- It prevents coercion against employees and stipulates that seizure of employees’ documents is illegal (i.e. passports);
- Provides financial lenience for employment claims initiated by employees, noting that employment claims of maximum AED 100,000 shall be exempted from court fees;
- Overall, the New Law creates the requisite rules for flexible work arrangements and for the possibility that the employee has multiple employers (is freelancing), elements that are of novelty in comparison with the current law;
- For the employees on probation, the New Law provides a notice period of 14 days in case of termination of work, by comparison with the current law where such termination is immediate.
It is expected that the domain of the New Law to be completed with executive regulations that are expected in the upcoming months. We could not assess from the current version whether the above requirements (and others) would need to be inserted in the contracts or they apply ipso facto as norms of public policy.
B. The New Law creates one single type of employment contract but multiple and flexible work arrangements
A much-awaited development in the UAE employment landscape is the possibility that employees work part-time, full time, independently, or under flexible work arrangements, such as telecommuting, shared jobs or condensed work models whereby, for example, a 40 hours week can be covered in 3 working days if so agreed contractually.
Curiously, the New Law does not distinguish anymore between fixed-term and unlimited term contracts. This distinction has been replaced with a general 3 years limited-term employment contract. It only provides that the fixed-term employment contract could be subject to extension for other fixed terms of equal or lesser duration.
At this stage, this may imply sustained employment restructuring, provided that it is untested how the conversion from unlimited to limited employment contracts would operate with the regulatory authorities.
Further, it is expected that the executive regulations will provide more clarity on potential damages applicable in case of early termination of the 3-year general fixed-term contract, knowing that in the current law, both the employer and the employee would need to pay damages in such cases of early termination (unless agreed otherwise).At the outset, questions remain as to how the employees would be required to freelance for various jobs, if there are any filings that such employees need to do with the regulatory bodies or whether the employees need to obtain certain pre-approvals from their residence visa sponsors.
Conclusively, the effects of the New Law are expected to be generational and boost the talent pool in the UAE. Finally, it is expected that the New Law to incentivize the employment market, providing a much-awaited flexibility in the employment arrangements of all types.
** The current document does not constitute legal advice and is intended for information purposes only. Whereas the New Employment Law no. 33 of 2021 is yet to enter into force, we will issue regular updates in line with the upcoming clarifications and measures to be adopted by the UAE regulatory bodies. For further information, please feel free to contact us at info@fichtelegal.com.
