On January 1st 2016, three new Ministry of Labour resolutions came into effect. These resolutions were first announced in October and widely discussed in the press and at Ministry workshops. They have now been published in the official legal gazette and are now in force in the UAE. We examine the main provisions of the resolutions which will have far reaching implications for employers in the UAE.
The resolutions are aimed at protecting foreign workers' rights in particular and enhancing transparency in the employment relationship.
Resolution 764 of 2015
Under this resolution, the Ministry has introduced new prescribed form employment contracts and a new requirement for employers to use an offer letter in the recruitment process.
The offer letter is to be signed by the employer and employee in the employee's home country or, if the employee is in the UAE, then as a first step in the recruitment and employment on boarding process with the Ministry of Labour. The offer letter is registered with the Ministry and at that point, an employer can apply for an employment visa for the employee.
As is the case now, a prescribed form employment contract is then registered with the Ministry as part of obtaining the labour card and the residency visa. Importantly, the Ministry will expect the employment contract terms to correlate to those set out in the offer letter and will not accept any amendments unless these are to the employee's benefit and approved by the Ministry.
The Ministry has also taken this opportunity to significantly redraft the prescribed form employment contracts which all employers registered with the Ministry of Labour must use. There are now three prescribed form contracts; an unlimited term contract, a fixed term contract and; a renewal of a fixed term contract. All three are largely similar, with the fixed term contracts containing particular provisions regarding termination.
Many employers will note with interest the greater flexibility for structuring remuneration under the new contracts; with the new forms enabling remuneration to be expressed as an hourly, daily, or monthly figure or to be based entirely on commission or piecemeal production. Allowances are also provided for with the following being listed (there is no obligation to offer these but if part of the package employers should complete the appropriate sections): housing, transport, flight, cost of living, phone, furnishings, school fees, gym membership and food.
The contracts also provide that an employee's date of entering the UAE, or the date of changing visa status, will be the date employment starts. The place of work (meaning the employer's premises) must also be stated and probation can be expressed as any period between one and six months.
Each contract also has approximately fourteen pages of supplementary notes which form an integral part of the contract and are expressly incorporated into it. These notes set out in detail the obligations of the employer and employee as well as the ability of either party to termination the employment contract and the lawful reasons for doing so.
The inclusion of these notes marks a forceful step by the Ministry of Labour to ensure both employees and employers are informed of their entitlements and obligations. Each contract now also contains an express clause stating that the foundation of any employment relationship is mutual consent and agreement; that no employment can be based on any form of compulsion.
Resolution 765 of 2015
The new prescribed form employment contracts give effect to Resolution 765 of 2015 in their provisions on notice and termination which are potentially the most significant changes to be introduced by the new resolutions.
Fixed Term Contracts
Fixed term contracts are now limited to a period of two years. However, note that an employee can be engaged on a succession of fixed term contracts, the limit is simply on the duration of any one contract. There are two prescribed form fixed term contracts; one is for the first engagement on a fixed term which provides that if either party terminates the contract unilaterally then the provisions of the Labour Law regarding early termination will apply. The second contract is a 'renewal of a fixed term contract' and provides that the fixed term may be terminated on notice by either party of between one to three months (it is for the parties to elect the duration) and that the party (employer or employee) terminating the contract (other than due to the conduct of the other party) will be liable to compensate the other by a payment of between one to three months (again the period is for the employer and employee to agree in the contract) remuneration.
If an employee is currently engaged on a fixed term contract where no notice period is agreed then the applicable notice under this resolution is three months. Note that an employee is under a duty to work during the notice period.
Unlimited Term Contracts
Notice under this type of contract is now capped at a maximum of three months and under the prescribed form contract is applicable to either party. It is therefore not open to an employer to agree with an employee that notice from the employer will be one month but that the employee is obliged to give longer notice of say three months. Notice under the prescribed contract must be the same for both parties.
Resolution 765 also states that employment can be terminated by mutual agreement, by expiry of the agreed fixed term, in accordance with Article 120 of the UAE Labour Law (i.e. for summary dismissal) or unilaterally by either party giving notice.
The Resolution also states that the employment relationship will be regarded as terminated if an employer has fundamentally breached the contract for example by failing to pay remuneration for 60 days or closing the establishment for two months or more such that the employee cannot perform his work.
Resolution 766 of 2015
This resolution significantly enhanced labour mobility for the unskilled workforce. It provides that subject to the completion of six months employment, an employee may resign employment (whether the contract is a fixed term or unlimited term) in accordance with the terms of the contract and no labour ban on the employee taking up alternative employment will be imposed. Individuals who fall into skill sets one (hold a university degree), two (hold a diploma) or three (hold a high school diploma) are not subject to the minimum employment service requirement.
The six month service requirement will also not apply to employees were the employer has fundamentally breached the employment contract, e.g. by failing to pay remuneration for sixty days or more.