The Clyde & Co MENA Employment Group held a half day seminar on 22 February 2016 regarding the new Ministerial Decrees introduced by the Ministry of Labour (MOL), which took effect from 1 January 2016.
The Seminar was hosted by the Chartered Institute of Personnel and Development (CIPD) a professional association for human resource management professionals headquartered in the UK with a Middle East branch office, with a significant number of attendees being members of the CIPD association in the UAE.
The seminar was based on a panel format and speakers from the Clyde & Co MENA Employment Group provided insight into the most pertinent implications of the ministerial resolutions from a HR management perspective.
Attendees were also provided with case studies in order to highlight the application of the Ministerial Decrees and in order to provide the opportunity to discuss their practical effect. Attendees were also able to submit questions during the seminar using an online application, which were addressed by the panel in a Q&A session.
Sara Khoja, Partner, Clyde & Co
Sara opened Clyde & Co’s presentation, highlighting that the MOL introduced the ministerial resolutions with the primary focus being to promote transparency and labour mobility in the UAE.
Sara explained that the ministerial resolutions do not officially amend Federal Law No. 8 of 1980, as amended (the UAE Labour Law) and that the ministerial resolutions only apply to employers under the MOL’s jurisdiction. However, notwithstanding this:
- there is a possibility that other free zones may choose to adopt the spirit of the ministerial resolutions in future;
- the employment regulations of the Dubai Creative Clusters Free Zone (DCC) specifically provide that all resolutions issued by the MOL (as well as the UAE Labour Law) will apply to govern employment relationships in the free zone; and
- the labour courts are federal courts which may choose to apply the provisions of the resolutions to cases brought by employees of free zone entities.
This means that the directions under the ministerial resolutions are likely to be relevant to companies operating in the DCC and potentially other free zones.
Rachael Smith, Associate, Clyde & Co
Rachael discussed the changes to the contractual documentation which must now be issued to employees. The following changes were introduced by Ministerial Decree 764 of 2015:
- A prescribed form offer letter (Offer Letter) must be issued to prospective employees before the employer can seek MOL approval for the appointment.
- The subsequent MOL contract issued to the employee must reflect the terms of the Offer Letter.
- In addition, the Offer Letter contains a number of explanatory notes in a form of an Annex, which must also be provided to the employee.
- The Offer Letter must be in a language the employee can readily understand.
MOL Standard Form Contract
- The MOL standard form contract has also changed considerably. There are now three separate prescribed form contracts one for an unlimited term, one for an initial limited term (two years) and one for a renewal of a limited term contract.
- In addition to the substantive provisions provided for in the contracts, each contract also contains supplementary notes in an Annex.
- The Annexes are expressly incorporated into the MOL Contracts and set out both the employer and the employee's rights and obligations under the UAE Labour Law.
Practically, employees will therefore be issued a significant amount of documentation:
- Offer Letter and enclosed Annex and
- MOL Contract and enclosed Annex.
Employers will still be able to enter into company specific contracts but will have to ensure that the terms of such contracts remain consistent with the documentation in (i) and (ii).
Rachael also emphasised that the introduction of the Annexes may increase the prospect of employees questioning or challenging their terms and conditions of employment, given the Annexes provide information regarding the employee’s entitlements under the UAE Labour Law.
Samantha Ellaby, Associate Clyde & Co
Termination of Employment
Sam considered the impact of Ministerial Decree 765 of 2015 on the rules and conditions for the termination of employment of unlimited term contracts and limited term contracts. The following points were highlighted:
Unlimited Term Contracts
The current position under the UAE Labour Law remains the same, save that Ministerial Decree 765 now imposes a maximum notice period of 3 months in employment contracts. This could be a concern for employers who want to include longer notice periods for employees who are particularly senior, for the purposes of transitioning their roles and duties in the event of their exit.
Limited Term Contracts
Termination of limited term contracts issued to new employees remains the same as under the UAE Labour Law, meaning the application of early termination compensation (3 months’ remuneration or the remaining period of the contract, whichever is the shorter) will still apply.
However the duration of limited term contracts which are issued to new employees has been amended by Decree 765, so that new employees engaged can only be employed for a maximum fixed period of 2 years (as opposed to 4 years previously).
Renewed Limited Term Contracts
Decree 765 has introduced a specific form limited term contract which should be issued to employees on renewal. It provides that:
- if no contractual notice period is agreed in the contract, a 3 month notice provision will automatically apply; and
- if no level of compensation payable on termination is agreed, the employee will be entitled to receive 3 months’ remuneration (in addition to notice) on early termination of the contract.
In order to manage these changes, employers will therefore need to have one template limited term contract in place to be issued to new employees and another template to be issued to employees on renewal.
Conditions on granting employment permits
Sam also discussed the key changes introduced by Ministerial Decree 766 of 2015 (Decree 766), in relation to the granting of work permits on the termination of employment. Some of the points highlighted included:
- an employee being able to obtain a new work permit without a 6 month labour ban being imposed, provided they have complied with their contractual and legal obligations regarding their previous employment;
- most unskilled employees needing to have 6 months’ service to avoid a labour ban (as opposed to the previous position of 2 years’ service); and
- no minimum service requirement for skilled employees to satisfy in order to avoid a labour ban.
The seminar was well received by the CIPD and attendees, including the case study sessions which enabled attendees to consider the practical impact of the Ministerial Decrees and engage with other HR professionals to discuss the appropriate approaches from a HR management perspective.