Employers and NEW Ministerial Resolution 279 in the UAE

On March 26, 2020, the Ministry of Human Resources and Emiratization (MOHRE) issued Resolution 279 on Employment Stability in the Private Sector during the period of application of the precautionary measures aimed at curbing the spread of Coronavirus.

The Resolution is aimed at protecting the non-UAE employees for the duration of COVID-19 precautionary measures applied by the UAE Government and is intended to be effective until such precautionary measures are removed.

On the employer’s side, the application of the Resolution is deemed to protect them against financial volatility, as well as against Wages Protection System (WPS) sanctions in cases of wages reduction, therefore lower amounts transferred via the WPS route. Such protection is obviously subject to the employer following the procedural steps stated in the Resolution.

2. To whom does the Resolution apply?

The Resolution applies to the private sector companies that operate under the remit of MOHRE. By this, we understand onshore companies and companies registered in the commercial free zones, since they generally follow the country-wide employment framework under Federal Law 8 of 1980 as amended (the “Employment Law”). The financial free zones (DIFC and ADGM) have enacted their own employment regulations, hence do not fall under the auspices of the Resolution.

The Resolution only applies to the relationship between an employer and its foreign employees, hence non-UAE workers, as mentioned at Articles 1 and 8 of the resolution.

3. Does an employer need to prove that it has been affected by the preventive measures? And if so, how?

Whereas the Resolution is silent on this point, we are expecting MOHRE to issue further guidance and clarification.

As a result of the precautionary measures, it is already a fact that the contingency capacity of companies is tested at maximal levels and that some companies ought to implement cut-offs in order to sustain. The business environment worldwide is skeptical in relation to turnover, stability of cash flow or extraneous events that may force them to exit in the future, even though they are not directly affected by the preventive measures and still operate.

Nevertheless, few salient concepts are to be re-emphasized, such as the overarching principle of “good faith” in the execution of contracts and the narrow approach of Courts towards hardship events. Despite the array of measures allowable pursuant to the Resolution, an employer cannot be fully protected from employment claims in this period. As such, a competent Court would analyze whether a certain measure has been implemented by an employer in good faith or, on the contrary, for the sole purpose of taking advantage of this “new opportunity” and cut costs.

Considering the above, we are on the opinion that the Resolution does place a burden on an employer willing to reduce workforce in this period.

4. Which measures are the employers authorized to take pursuant to the Resolution? Can such measures be taken altogether or progressively?

The measures allowable to the employer need to be taken progressively, gradually, as the Resolution mentions at Article 2. Accordingly, the employer has the right to implement the following:

1. Working from home (remotely);
2. Grant Paid Leave;
3. Grant Unpaid Leave;
4. Temporary salary reduction;
5. Permanent salary reduction.

For measure no. 2, the paid leave is to be understood as Annual Leave. The Employer may “at his discretion determine the date for commencement of annual leaves and, when necessary, he may decide to divide the leave in two parts at the most”. (Art. 76 of the Employment Law). Such measure can be unilaterally imposed by the employer.

For measures 3, 4 and 5, the mutual consent of the employer and of the employee needs to exist.

From a procedural perspective, few highlights below:

• For temporary wages reduction, the employer and employee would need to sign an amendment to the employment contract, to be kept available to MOHRE if requested. Needless to mention, the amendment should specify its limited validity (e.g. by specifying its term or pairing its duration to the duration of the Resolution, whichever ends earlier).
• For permanent wages reduction, similarly, a signed amendment to the employment contract would need to exist; however, such reduction needs to be mandatorily notified to the MOHRE and is subject to the approval of MOHRE.

5. Unpaid Leave means totally unpaid or do allowances still need to be paid?

We have received client requests stating that during an alleged Unpaid Leave period, the employee would still be entitled to allowances pursuant to this Resolution, but not to the base salary.

In our opinion, Unpaid Leave and measures allowable for surplus of workforce (such as Redundancy) are different. In the second case the allowances remain payable, however in the first case (Unpaid Leave), the employee is not paid, by this meaning that the employee does not receive both the base salary and allowances.

At the same time, we reiterate that the Unpaid Leave period is of a temporary nature and subject to mutual agreement. The Employment Law itself contains a single reference at Art. 87 for a one-month period yearly as unpaid leave for pilgrimage activities, applicable for Muslim employees.

Consequently, we highlight the rather narrow meaning that the legal provisions in force give to the concept of Unpaid Leave. A situation where an employer would place an employee under Unpaid Leave for the whole duration of the preventive measures or indeterminately is, in our opinion, legally impracticable.

6. Can an employee on Unpaid Leave ask for parts of his gratuity to be paid to have some cash in hand?

There is nothing in the Employment Law or in the Resolution preventing the employee in making such a request. At the same time, an employer is not legally obliged to pay gratuity in advance, given that gratuity is a right inherent to the termination of an employment relationship.

Conclusively, our recommendation is that such agreements can be made by the employer and employee, who are both in a situation of distress; employers are encouraged to contain as much as possible such requests in order to make the situation of their unpaid employees bearable.

7. Should a company support their employees to find solutions with their landlords and creditors, such as banks?

At the outset, the employer has no statutory obligation in this respect since the obligations contracted by the employee (such as loans) are personal to him/her. However, noting that not all employees have the capacity and the power to negotiate with their creditors, it is recommendable for the companies to support them as much as possible. In the end, any support granted to an employee at this stage would later guarantee a more motivated and dedicated workforce and a less turnover cost.

8. If a company has no other choice than lay off employees, is this legally possible pursuant to the Resolution?

The Resolution does not expressly mention “termination of employment”, therefore in the economy of this instrument, it is recommendable that companies keep this measure as a last resort.

Nevertheless, the employment contracts can be terminated according to and in the cases prescribed by the Employment Law, by both the employer and the employee. We emphasize that the Employment Law provisions referring to lawful or arbitrary dismissal remain valid in this period as the Resolution does not supersede or affect the application of the Employment Law.

Additionally, the Resolution grants specific protection for categories of employees in cases of so called “redundancy”. If, for instance, an employer identifies that it has surplus of workforce, then such surplus would need to be registered in the Virtual Labor Market. Such employees may be used, as needed, by other establishments.

The Resolution imposes certain conditions for such registration, namely:

a) The employees to already have valid employment permits under the employer; and

b) The employer to continue supplying food, accommodation and legal entitlements (not basic salary) until the employees leave the country or obtain a work permit for another employer.

The above may represent a form of recognition of the controversial concept of “redundancy” under the UAE Law and, in our opinion, the Resolution implies that, for cases of redundancy, the employees cannot be dismissed without a form of compensation. It is therefore aimed at prohibiting employers from taking advantage of this opportunity and cut costs at the account of their employees.

9. What is the Virtual Labor Market and how does it work?

It is an online portal offered by MOHRE to the employers and the employees, where job seekers and employers can look for or advertise vacancies.

The Virtual Labor Market is accessible at https://mohre.hyrdd.com/

The Resolution mentions that the Virtual Labor Market is accessible to all job seekers in the country, all of them having the right to register to the Virtual Labor Market. In other words, the system is accessible even to employees who are currently looking for employment, even if they had no prior placement in UAE.

10. Can new employment permits and residence visas be processed during this period?

The Resolution mentions that transfers of work permits, temporary work permits, or part time work permits can be obtained for employees recruited via the Virtual Labor Market. The Resolution is silent in determining whether for employees recruited from outside the Virtual Labor Market the same procedure would apply.

Whereas a number of aspects in this Resolution would need to be clarified, we will issue regular updates on the same, in line with the new developments and guidance issued by MOHRE.

For any legal assistence related to employement, please do not hesitate to reach us at, please email us at info@fichtelegal.com or call +971 4 435 7577