Recent Developments in UAE Employment Law

Recent Developments in UAE Employment Law

December 20, 2023, Covington Alert

This alert provides a high-level summary of some recent developments in UAE employment law.  Other than where we say otherwise below, these developments do not apply – and will therefore not be relevant – to companies or organizations with employees exclusively in the Dubai International Financial Centre (DIFC) and/or the Abu Dhabi Global Market (ADGM).

Emiratisation

The Ministry of Human Resources and Emiratisation (“MOHRE”) recently released a public statement calling on private sector establishments to ensure that they meet their Emiratisation targets for 2023 and going forward.

 Private sector establishments employing 50 or more employees must achieve a 2% annual growth rate in the Emiratisation of skilled jobs before December 31, 2023 to avoid financial penalties for non-compliance. In addition, companies that meet the 2% annual growth requirement will get priority when tendering for government procurement contracts, according to MOHRE and the Ministry of Finance.

In 2024, companies with between 20–49 employees in 14 sectors (including information and communications, finance and insurance, and professional and technical activities) will be required to hire one UAE national. MOHRE has already notified over 12,000 private companies with 20–49 employees of this expansion of Emiratisation targets from January 2024.

MOHRE is taking Emiratisation requirements seriously. In November, MOHRE referred 98 companies to the public prosecutor for “fake” Emiratisation posts, and 15 companies for circumventing their Emiratisation targets. 

New Alternative End-of-Service Gratuity Scheme

The UAE has introduced a new voluntary scheme as an alternative way of managing end-of-service gratuity payments for employees. The aim of the scheme is to ensure workers receive their end-of-service benefits (protecting them from inflation, insolvency, and bankruptcy), provide savings opportunities for employees, enhance the attractiveness and flexibility of the labour market, and to promote responsible investment – similar to the scheme already in operation in the DIFC (DEWS).

Instead of paying an employee a lump sum on termination of their employment, private sector employers (both onshore and in free zones other than the DIFC and ADGM) can choose to invest on their employees’ behalf by paying a monthly contribution to a licensed investment fund and saving their employees’ end of service gratuities that way. 

Employers participating in this scheme are under various obligations when it comes to the election of a licensed investment fund and the provision of documents/information to both the fund and in-scope employees.

Employment Disputes

The process for individual labour disputes has been amended in the UAE Labour Law.  Effective January 1, 2024, for employment disputes valued at less than AED 50,000, MOHRE will act as a judge and settle the dispute with a final decision.

A MOHRE decision will have the power of a writ of execution, which has the same legal power as a final judgment issued by a first instance court. If a party is dissatisfied with MOHRE’s decision, they can file an appeal with the Labour Court of Appeal within 15 working days from the date of notification of the decision. Any judgment issued by the Labour Court of Appeal will be final. It is currently unclear whether legal representation will be permissible for claims before MOHRE.

In practice, this will only apply to companies and employees onshore in the UAE, since most free zones generally have their own initial dispute resolution mechanisms.

New Anti-Discrimination Law

Federal Decree-Law No. 34/2023 on Combating Discrimination, Hatred, and Extremism prohibits contempt of religions (defined as “Abrahamic religions”), discrimination, and extremism. The law makes clear that freedom of speech and opinion may not be used to speak on or carry out acts that incite defamation or disrespect of the protected religions.  More broadly, the act prohibits and penalizes hate speech, defined as any word or act that sows discord or leads to strife or discrimination among individuals or communities. Discrimination is defined as any distinction, limitation, exception or preference among individuals or groups on the basis of religion, belief, rite, community, sect, race, colour, ethnic origin, gender or race. Employers should be aware of this renewed focus when terminating or dealing with any other employee issues.

As this is a Federal law carrying potential criminal penalties (fines and/or imprisonment), this would apply to all employees in the UAE, including those based in free zones like the DIFC and ADGM. 

Updates to Existing Employment Contracts – Final Call

The deadline for updating existing contracts of employment to comply with the new UAE Labour Law (Federal Decree-Law No. 33/2021) was previously extended to December 31, 2023 and to date there have not been any suggestions that this deadline will be extended again.

If you have any questions regarding the material discussed in this alert, we would be happy to provide additional guidance.