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The employment relationship

Country specific laws

What laws and regulations govern the employment relationship?

Employment relationships in the private sector are generally governed by Federal Law 8/1980 (the Labour Law), as amended. The Labour Law is supplemented by various ministerial resolutions and decrees.

Some UAE free zones (eg, the Jebel Ali Free Zone) have introduced their own employment regulations (which broadly mirror the Labour Law’s minimum provisions). Where there is inconsistency between the applicable free zone regulations and the Labour Law, the terms most favourable to the employee prevail.

The Dubai International Financial Centre and Abu Dhabi Global Market Free Zones both fall outside the Labour Law’s scope and instead have their own free-standing employment regulations.

Who do these cover, including categories of worker?

The Labour Law applies to all employees in the UAE private sector (both expatriates and UAE and other Gulf Cooperation Council nationals). However, there are certain categories of individual who are ‘carved out’ of the protection provided under the Labour Law, including:

  • employees of the federal government and government departments of UAE member emirates;
  • employees, labourers and staff of municipalities and federal and local public authorities and corporations;
  • employees recruited for federal and local government projects;
  • members of the armed forces, police and security force;
  • domestic servants employed in private households (and similar establishments); and
  • farming and grazing labourers, other than those who:
    • work in agricultural firms that process their own products; or
    • are permanently employed to operate or repair mechanical equipment required for agricultural work.

The Labour Law does not distinguish between full and part-time employees. As such, part-time employees are entitled to the same benefits and entitlements as full-time employees. 

Misclassification

Are there specific rules regarding employee/contractor classification?

The Labour Law contains no specific provisions regarding employee/contractor classification. At present, the concept of a ‘contractor’ or ‘self-employed’ individual (as commonly understood in other jurisdictions) is not expressly recognised under the law. Individuals can establish their own consultancy company (akin to a contractor) and render services within the confines and terms of their trade licence, but such arrangements are limited.

In practice, there is a distinction between expatriates and UAE nationals insofar as the latter are afforded additional benefits and protections not otherwise enjoyed by expatriates.

Contracts

Must an employment contract be in writing?

Employment contracts must be in writing. As part of the visa sponsorship application process, employees must execute the UAE labour contract, as issued by the Ministry of Human Resources and Emiratisation (formerly the Ministry of Labour) or applicable free zone authority, which is in Arabic and English. Arabic is the official language of the United Arab Emirates and therefore prevails in the event of inconsistency in terms contained in English documents. It is common practice for employers to supplement a UAE labour contract with their own more comprehensive employment agreements, which need not be registered with the Ministry of Labour or applicable free zone authority.

Are any terms implied into employment contracts?

The Labour Law establishes a minimum framework of employment terms and all employment contracts should be read in conjunction with this framework. Implied terms of, for example, good faith and fidelity, are not generally incorporated in the UAE labour contract or any supplementary company employment contract. 

Are mandatory arbitration/dispute resolution agreements enforceable?

In an employment context, the UAE labour court has exclusive jurisdiction for hearing and determining disputes. The mechanisms of arbitration and dispute resolution are unavailable as a means of redress in labour disputes.

The first step in resolving a labour-specific complaint is the mandatory process of informal mediation through the Ministry of Labour or the applicable free zone authority’s labour department. In the event that the parties are unable to resolve the dispute amicably at this stage, it will be escalated to the labour court for adjudication, on the ministry’s referral.

How can employers make changes to existing employment agreements?

Employee consent is required before any change to the key terms and conditions of an employment contract can be effected. This should be in writing. The Labour Law permits an employee to terminate the employment relationship immediately without notice in the event that the employer breaches its contractual or legal obligations towards the employee. 

In case of companies falling under the remit of the Ministry of Labour or free zone authorities, changes to core contractual terms – such as remuneration package details – will likely necessitate formal amendments to the employment agreements registered with the ministry or applicable labour authority, which may, depending on the circumstances, also necessitate formal execution before or in front of the ministry or applicable free zone authority.

Employers and employees cannot opt out of the minimum requirements mandated by the Labour Law. 

Foreign workers

Is a distinction drawn between local and foreign workers?

All expatriate employees must be sponsored by a local UAE entity for UAE work permit and residency visa purposes. UAE nationals are required to have an appropriate and valid work permit regulating their employment in the UAE. There are no mandatory requirements for:

  • expatriates to be employed under fixed-term contracts; or
  • employment to be tied or equal to the duration of an expatriate’s residency visa or work permit.

Employers must repatriate expatriate employees on expiry of their visa sponsorship (limited exceptions apply). 

A distinction is drawn between expatriate workers and UAE nationals in the context of the provision of specific benefits, entitlements and, in certain circumstances, termination provisions. For example, UAE nationals must generally be enrolled in the state federal pension scheme (there is no equivalent state scheme for expatriates). Further, UAE nationals are afforded special protection regarding termination, limiting the grounds under which their employment can be terminated and necessitating, in certain circumstances, the Ministry of Labour’s prior consent and involvement. Expatriates are not afforded a corresponding protection.

The Labour Law also provides for a system of positive discrimination in favour of UAE nationals, granting them preferential status at the recruitment stage over expatriates. This system of positive discrimination is generally implemented by the Ministry of Labour, with the Labour Law specifically providing that the ministry cannot approve the recruitment of non-UAE nationals unless its records show that there are no unemployed UAE nationals who are capable of performing the job. If no UAE national is available, Arab employees who are nationals of other Arab states must be prioritised over employees of other nationalities.

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