The New UAE Ministerial Decrees on Labour Law

In the United Arab Emirates (“UAE”), employment relationships are governed by Federal law no. 8 of 1980 (as amended) (the “UAE Labour Law”). In the 1980’s, the UAE had a very different legal and social landscape from the sophisticated, dynamic community it is today. The amendments that have been enacted over the course of the last 35 years have been essential to meet evolving social requirements. Whilst the substance of the UAE Labour law has not changed, ministerial and cabinet resolutions have moulded and continue to mould the UAE Labour law to suit current legal requirements.

In September 2015, the Ministry of Labour announced three new Decrees, effective 1 January 2016:

1. The UAE Ministerial decree 764 of 2015 (Introduction of a mandatory Employment Offer letter).  
2. The UAE Ministerial decree 765 of 2015 (Mechanisms of terminating Limited/ Unlimited contract).
3. The Ministerial decree  766 of 2015 (Issuing of work permits – Bans/ visas).

The Minister of Labour (“MOL”) announced that the Decrees were aimed at increasing labour mobility and were a mechanism to increase employee protection in the UAE. We briefly address and summarise the main amendments:

1. The UAE Ministerial decree 764 of 2015

The Decree introduces a mandatory employment offer and states that:

• An entry permit will not be granted for an expatriate employee until an employment offer has been lodged with the Ministry of Labour;
• Terms and conditions set out in the employment contract cannot be changed from the employment offer unless the employer offers more generous terms.

We anticipate that the MOL offer letter will be a simpler version than the standard MOL employment contract and set out full details of the compensation i.e. designation, notice, basic salary and allowances and these terms will need to be adhered to in the employment contract. A common cause of complaint amongst expatriate workers, is that the final terms and conditions set out in an official MOL contract are often less favourable than the terms and conditions set out in the offer letter used to entice the employee to move to the UAE. This Decree should therefore be welcomed and increase stability and transparency.

1. (A). The UAE Ministerial decree 765 of 2015 – Termination of a limited contract

The Decree states that for employees that are employed on a limited (fixed term) employment contract, the relationship can be terminated as follows:

• Expiration of the fixed term – not renewed;
• Article 120 of the Labour law (termination for cause);
• Unilateral termination by either party subject to compliance with certain formalities:

•  Notify other party( maximum 3 months notice);
•  Parties to honor contractual obligations;
•  Indemnify the other with the agreed compensation between 1 and 3 months for early termination;
• The term of a Limited contract cannot extend over two years (maximum term).

Currently under Article 116 of the UAE Labour law, where an employee terminates a limited contract prior to the end of the fixed term, the compensation payable is a maximum of 45 days wages. There appears to be a potential conflict with the UAE Labour law if parties agree compensation over and above 45 days wages.

The reduction of the fixed term to a two year limit should bring more flexibility to employees who may want to leave their employer and the term will also be in line with the majority of UAE visas which has a two year life span.

1. (B) The UAE Ministerial decree 765 of 2015 – Termination  of a unlimited contract

The Decree states that for employees employed on an unlimited employment contract, the relationship can be terminated as follows:

• Mutual consent;
• Notice between 1 – 3 months;
• Parties to honour obligations throughout notice;
• Article 120 of the UAE Labour law (termination for cause).
• For terminations all parties should follow legal procedures.