The UAE Ministry of Labour (the Ministry) has issued a new set of rules promulgated through new Ministerial Decrees:

  • Ministerial Decree (764) of 2015;

  • Minister of Labour’s Decree (765) of 2015; and

  • Ministerial Decree (766) of 2015.

All of the three Decrees were issued on 27 September 2015 and will become effective on 1 January 2016. The Decrees will have wide reaching implications on employer/employee relations in terms of protecting employment rights in the UAE and are a welcome change. In this legal update, we provide a summary of the new provisions, which supplement Federal Law No. (8) of 1980 (As Amended) (“Labour Law”). Should you have any queries or require a detailed advice on the impact of these provisions, please feel free to contact us.

Ministerial Decree (764) of 2015 on Ministry of Labour - approved Standard Employment Contracts

With effective from 1 January 2016, if a UAE based employer intends to employ a foreign worker, they must provide him/her with an offer letter, which terms mirror and are equivalent to the employment contract (usually referred to as the “Labour Contract”) and obtain the employee’s signature and agreement to the offer letter. If the employee is in the UAE, he/she must sign the offer letter before the employer approaches the Ministry for approval of the Labour Contract. Any application for approval of the Labour Contract, whether for a foreign worker or a worker who is currently in the UAE will be approved only when the employer can provide evidence that an offer letter was issued to the employee, which he/she has accepted and the Labour Contract has the same terms as the offer letter. In this context, please note:

  • the provisions apply to the renewal of existing contracts as well;

  • no alternation of the standard Labour Contract is allowed unless it is for the benefit of the employee and has been approved by the employee as well as the Ministry; and

  • no new clause(s) can be added to these Labour Contracts unless they are consistent and compliant with the Labour Law, do not conflict with other legal provisions and are approved by the Ministry.

Minister of Labour’s Decree (765) of 2015 on Rules and Conditions for the Termination of Employment Relations

Decree (765) provides clarity on the termination provisions by making clear distinctions between fixed term contracts (referred to in the Labour Law as “limited contracts”) and unlimited contracts. Termination of fixed term contracts is still permitted for all the same reasons under the Labour Law i.e. if the term expires, or by mutual consent, or either party unilaterally terminates, whether in the case of a new contract or a contract before or after this Decree becomes effective. However, in all such cases the following “legal steps” are to be adhered to by the parties:

  • notify the other party in writing, in accordance with the agreed notice period, which shall be a minimum of one month and not in any case exceed three months;

  • for all cases of renewal which do not specify a notice period, the notice period shall be three months;

  • during the notice period continue to discharge their contractual obligation; and

  • indemnify the other party to the extent agreed in the contract which in no case shall exceed three months’ wages.

If either party decides to terminate the contract unilaterally without complying with the foregoing legal steps, and without any basis for such non-compliance, then the terminating party shall bear any legal consequences of such early termination. An employer need not follow the foregoing steps if the employee is in violation of Article 120 of the Labour Law. The termination provisions and rights accorded to parties for unlimited contracts have now been made identical to fixed term contracts, with the notice period for unlimited contracts as a minimum of one month and maximum of up to three months.

The Decree also states that if the employer/employee terminates the contract without following the procedure, the wronged party has the right to initiate legal action against the other party.

Ministerial Decree (766) of 2015 on Rules and Conditions for granting a permit to a worker for employment by a new employer

A new work permit may be issued to a worker only if his termination is in accordance with the provisions of this Decree. For both fixed term and unlimited Labour Contracts the termination must be for reasons specified and in accordance with the procedure set out in the Minister of Labour’s Decree (765) of 2015 on Rules and Conditions for the Termination of Employment Relations (see above). Apart from the foregoing, an employee who wants to move to a new employer will be considered qualified for a new permit only under the following conditions:

  • It is established that the employer has failed to meet his legal or contractual obligations, including but not limited to when the employer fails to pay the worker’s wages for more than 60 days;

  • If the worker files a complaint to the Ministry that the entity has been inactive for two months and he/she is therefore unable to perform work; and

  • If a labour complaint is referred by the Ministry to the Labour Court, issuing a final ruling in favour of the employee whether in relation to owed wages for no less than two months of work, indemnity for arbitrary or early termination, any other rights that the employer has abstained from granting to the employee, and/or dues of end-of-service benefit owed to the employee.

This Decree also nullified the earlier rules which granted permission to an employee to obtain a new permit to work for a new employer when his/her employment relation has ended. In addition, any permit issued as part of the application of this Decree will be considered null and void if it is established that the information submitted for the permit was false in any manner.

These changes will provide a fair balance of protection for employees while clarifying the employer’s legal obligations.