COVID-19’s Impact on Employment Law… A Perspective from the UAE

As countries cautiously lift movement restrictions and governments have begun announcing dates for suspension of government support programs, we find ourselves entering the next phase of the COVID-19 crisis. Companies and employees must now confront the redundancies that had been held in abeyance during the lock down phase. Preparedness from both the perspectives of the employer and the employee is crucial. For the next several weeks, Argentum Law will provide an overview of key changes in employment legislation and measures which governments and companies have implemented in the UAE and EU.

By Maheen Qasim

As countries cautiously lift movement restrictions and governments have begun announcing dates for suspension of government support programs, we find ourselves entering the next phase of the COVID-19 crisis.  Companies and employees must now confront the redundancies that had been held in abeyance during the lock down phase. While much remains uncertain, preparedness from both the perspectives of the employer and the employee is crucial.  For the next several weeks, Argentum Law will provide an overview of key changes in employment legislation and measures which governments and companies have implemented in the UAE and the EU. We begin this edition in the UAE taking a look at key learnings from changes in employment terms and conditions, redundancies and forced leave.  

United Arab Emirates

Changes in Employment Terms and Conditions

Ministerial Resolution 279 (“Resolution 279”) announced by the UAE federal government impacted all companies registered with the Ministry of Human Resources and Emiratization (the “Ministry”) and introduced a framework for private sector employers to consider alternative ways for reducing costs rather than resorting to redundancies. Resolution 279 does not apply to free zones.

Employers can consider gradually implementing remote working, placing employees on paid or unpaid leave and temporarily or permanently reducingsalariesIn the interest of protecting non-UAE national employees, the Ministry required  employers who wished to reduce salaries to enter into amendment agreements to existing employment contracts, in writing and registered with the Ministry.For any permanent changes in salary or other variations of an employment contract, requirement of prior approval from the Ministry has been maintained.

In line with global best practices, we found that many employers entered into consultations with their employees for reduction of salary or hours or other concessions, although this is not required by law.

A Presidential Directive affecting companies in the DIFC (a common law jurisdiction) allows similar measures to Resolution 279. However, in this case, employee consent was not required but the measures could only be enacted until 31 July 2020.

Redundancies

There are laws against arbitrary/unfair dismissal for onshore companies in the UAE, similar to the English law concept. While there is no obligation for the employer to consult with the affected employee on the prospect of dismissal, it is recommended to perform any such dismissal in keeping with global best practices to minimize the risk of successful employment claims and challenges.

Employment claims in the UAE can be lengthy, in some cases taking up to two to three years to conclude, and therefore very expensive. Companies may mitigate this risk by offering garden leave during a notice period, and it is common to offer an ex gratia sum over and above the statutory entitlement and contractual agreement. This may be followed by a compromise agreement where the employee would give up or waive their right to any current or future claims they may have against the employer.

These company-level measures ease the burden on the employee and allow the employee to get their affairs in order prior to having to leave the country, as visas must be cancelled one month after the termination date. However, the visa cancellation process is automatically blocked where an employee files a labor claim with the Ministry.  

To protect against claims of discrimination in dismissals, employers are advised to put in place a written policy which outlines criteria for fair selection so that an employer is effectively able to objectively justify the redundancies.

In the DIFC we do note there is no concept of arbitrary dismissal, nor any obligation to consult with the employee.

Paid Leave

Under the UAE Federal Labor Law, an employee may carry over holiday into the next year, but companies typically have their own policies governing such benefits. Companies may impose a period of paid leave  on employees under both the UAE Labor Law and DIFC law and deduct this from the employee’s annual leave entitlement.

Watch this space next edition for a look at developments in the EU.

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