Forty years after it drafted a set of laws regulating the labor market, the United Arab Emirates has set itself on a new course to completely overhaul the labor laws in order to bring about a balance between the rights of an employer and workers, and to sync them with international practices.
The reform of the old laws, among many other things, is expected to lure young talent to the country’s labor market. According to Benjamin Hopps, of Counsel for the Middle East at Herbert Smith Freehills, a London-based international law company, thanks to the progress in technology and curbs from Covid pandemic, there have been several changes in working patterns and flexibility in workplace arrangements.
“The new law repeals the old law in its entirety. It is not as detailed as the old law, but all companies are waiting for new Executive Regulations to be published which it is anticipated will add more detail to what is in the new law”, he told TRENDS.
In addition to the recent changes to the working weekdays, like the new four-and-a-half-day week, the government has released Federal Legislation No. 33 of 2021 (the New Labor Law), which will go into effect on February 2, 2022, and will repeal the present labor law No. 8 of 1980 after 40 years.
Like the Current Labor Law, the New Labor Law will apply to all companies and employees in the private sector of the UAE, including its free zones, save for the Dubai International Financial Centre and the Abu Dhabi Global Market.
Reasons for these new changes
Pros and Cons
The New Labor Law introduces several unexpected changes. The rationale for some of the changes is not always clear, and difficult to see how certain provisions will operate in practice, not least because much of the detail in the New Labor Law has been outsourced to forthcoming executive regulations. It is hoped that these executive regulations will clarify existing areas of uncertainty.
“The detail in the law is lighter than anticipated, although we expect the Executive Regulations to plug these gaps”, says Hopps.
On the other hand, the main advantage of the new law is that it better balances the rights of employers and employees, removing the obvious imbalance in the old law in favor of employers. According to him, it also better aligns the UAE’s labor laws with international best practices in areas like discrimination and sexual harassment.
He added that the new law balances the interests of the employee and the employer as well. For example, there were no maximum notice periods under the old law, meaning that employers could hold more senior executives to 6- or 12-month notice periods, often on garden leave. The new law caps notice periods at 90 days, which is typically a reasonable length of time for both parties.
Here are a few significant changes to the new law:
- There is a new requirement for fixed term contracts according to a template provided by MOHRE, removing the distinction between fixed-term and unlimited contracts. Until February 1, 2023, employers must ensure all contracts are fixed term.
- The new law recognizes part-time working in addition to full-time working, meaning that an employee may be employed by more than one employer.
- Provisions relating to non-compete restrictions have been included.
The third point above often leads to a conflict between the employee and the employer since it limits their ability to relocate to a new job with better working circumstances.
However, according to Hopps, such restrictions are enforceable if they are specific in time, place, and nature of work. In addition, they protect the employer’s legitimate interests and do not exceed two years’ post-termination. Interestingly, where an employer terminates the employment contract in breach of the new law, such restrictions are not enforceable.
He went on to say that the new provisions afforded to an employer align with international best practices and are quite fair. Although, it is typically difficult for an employer to demonstrate that such restrictions are necessary, coupled with the unenforceability of such provisions where the employer has terminated the contract in breach of the new law, the provisions strike a fair balance between employer and employee”.
Saudi Labor Law vs UAE Labor law
In November 2020, Saudi Arabia’s Ministry of Human Resources and Social Development announced the Labor Reform Initiative (LRI), to replace the existing sponsorship system (kafala in Arabic), which governs foreign worker mobility in Saudi Arabia.
The LRI was intended to ease mobility and increase the competitiveness and attractiveness of the Saudi labor market. Prior to the reforms, foreign workers sponsored by employers in Saudi Arabia required the permission of their employer to change jobs, open a bank account, travel out of the country and do other administrative tasks.
The LRI also addresses Saudi entry and exit requirements for foreign workers. Previously, a foreign employee could not exit Saudi Arabia without first obtaining an exit and re-entry visa through his or her employer (kafeel). Under the LRI, the employer’s permission to leave or re-enter the country is no longer required; instead, workers may make the request themselves through the Saudi government’s online platform.
Despite this, Saudi labor laws favor employers, according to Hopps, who added that the UAE’s new labor law might give the country a competitive advantage by providing expat employees with comparatively better rights, attracting them to the UAE rather than Saudi.
“Obviously there are a number of different other relevant factors to take into account, including the number and nature of different job opportunities that exist in the two neighboring countries”, he concluded.