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COVID-19 and employment in the UAE

With ever evolving changes in light of the Covid-19 pandemic, employers in the UAE are facing unprecedented business challenges and are grappling with how to manage their employment relationships within the boundaries of the law, while at the same time keeping their businesses afloat.

The UAE Ministry of Human Resources and Emiratisation (''MOHRE'') issued Ministerial Resolution No. 279 of 2020 (the ''Resolution'') on 26 March 2020. The Resolution applies only to non-UAE national employees and is expected to remain in effect until the precautionary Covid-19 measures are suspended in the UAE.

The Resolution provides that employers can implement the following measures "gradually", which is understood that this should be done in a phased manner and the more draconian measures only considered when necessary:

  1. to implement a work from home program and require employees to work remotely
  2. to place employees on paid leave
  3. to place employees on unpaid leave
  4. to reduce the employee’s salary on temporary basis
  5. to reduce the employee’s salary on permanent basis 

Paid and Unpaid Leave

Employers may impose a period of paid leave and deduct this from the employee's annual leave. This is consistent with Article 76 of the Labour Law (Federal Law No. 8 of 1980) ("Labour Law") which allows an employer to determine when an employee may take their annual leave.

Employees may be placed on unpaid leave, with their agreement.

Reduction of Salary 

Employers may temporarily or permanently reduce the salaries of employees with the agreement of the employee. In the case of a temporary reduction, this is effected by executing an appendix to the employment contract of the individual in the form prescribed by the MOHRE and lodging it with the MOHRE. In the case of permanent reduction, the approval of the MOHRE is required and an amended contract must be lodged with the MOHRE.

If employees are paid through the Wages Protection System ("WPS"), the adjustment will need to be registered with the WPS to ensure that this does not flag any issues with the WPS, and subsequently the labour and immigration files of the company.

Excess Employees

In an effort to minimize redundancies and incentivize other alternatives, the Resolution provides that if an employer has excess employees, the employer is required to register any such employees' data in a 'Virtual Labour Market System' to allow the data to be accessed by other companies for the purposes of providing these candidates with opportunities to be hired by other companies in the UAE. During this time the employer must continue to provide their housing and all other entitlements (apart from basic salary) until the employee leaves the country or gains employment with a different company. In such circumstances it is understood that the contract appendix to reduce the employee's salary as mentioned above should be completed.

In the event that termination is unavoidable, it is not clear whether employers will be exempted from having to pay any compensation for arbitrary dismissal under the Labour Law. Should an employee that is dismissed during the crisis bring a claim for arbitrary dismissal, in our view the courts are likely to take a more sympathetic approach to the employer where the employer can show that it has exhausted all options 1-5 listed in the Resolution and that termination was the only viable alternative to ensure the survival of the business.

Applicability to Free Zones

While the Resolution does not state that it is applicable to free zones, our view is that it would be prudent for companies that are registered in free zones whose employment relationships are governed by Labour Law and which do not have their own courts (i.e. excluding the DIFC and ADGM), to follow the guidance issued in the Resolution as ultimately it is the MOHRE and on shore courts that would be the forum for the resolution of any disputes that arise during this time.

Conclusion

A consultative process with employees is recommended in order to determine whether or not any of the 5 measures set out in the Resolution will see the business though the crisis. It is recommended that employers should consider termination of employees as a last resort at this time and consider redeployment through the Virtual Labour Market System prior to taking any such action.

For more information please contact;

Rula Dajani Abuljebain
Partner
T +971 4 423 0502
E rula.dajaniabuljebain@hfw.com

Tania De Swart
Partner
T +971 2 235 4902
E tania.deswart@hfw.com

We are working with clients across our international network to help them minimise the impact of COVID-19 on their business and to prepare for what's next. To find out more, visit our dedicated Covid-19 hub.

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