Out-Law News

Fines up to Dh1 million for breach of UAE's new Labour Law, warn lawyers

Luke Tapp and Ruth Stephen tell HRNews about the UAE’s new labour laws and the risks of non-compliance 

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  • Transcript

    Six weeks ago, a raft of new labour laws came into force in the UAE – the first substantial update of the region’s labour laws in the last 40 years. Gulf News reports it as a qualitative leap in the region’s efforts to develop and sustain the labour market. So how are the new laws impacting businesses? We ‘ll ask two of the region’s lawyers.

    Luke Tapp and Ruth Stephen have been writing about this for Outlaw, commenting on the new implementing regulations that supplement the new labour laws. They explain how the regulations will shape the terms of employment contracts as well as employers’ policies and procedures. So, for example, they require companies with 50 employees or more to put in place internal policies which govern holidays, bonuses, appraisals, and salary reviews, working hours, health and safety, grievance, and disciplinary procedures.

    So, these are substantial changes, clearly, but are employers in the region ready for them? What should employers be doing to ensure compliance? To find out, I joined Luke and Ruth on a call from Dubai to get an overview of the changes and how their private sector clients are dealing with them. I started by asking Luke what these new laws are designed to achieve?

    Luke Tapp: “That’s a really interesting question and, actually, it's something that a lot of clients have asked us about when they've been looking at particular provisions within the new Labour Law and it's an obvious answer, actually, which is set out in Article 2 of the new Labour Law which gives a list of particular objectives that the authorities have in relation to this new law which items like attracting talented employees into the UAE private sector, it’s about achieving a balance between giving employees good protection, but also making this a favourable jurisdiction for investors and for companies, and it's also about re-establishing a strong workforce as we come out of the COVID pandemic, and also a flexible workforce as well, so there's discussion around alternative ways of working and new types of structures for employment relationships. I think one really important point that comes out in the legislation, as well, is that there's a real desire from the authorities for all companies to be compliant with the new Labour Law and that's referred to in the legislation where there's particular financial penalties of up to 1 million dirhams where companies are found to have contravened the new Labour Law. So, I think ultimately, the objectives of the authorities are to achieve all of those particular objectives for employees, for companies, but also to make the new Labour Law a really relevant and important piece of legislation that all parties look to comply with.”

    Joe Glavina: “So, Ruth, can I turn to you? Have employers in the region been ready for this?”

    Ruth Stephen: “So, the new law came into force on 2 February this year, employers weren't given much notice of the laws enforcement, and then the law made reference to these executive regulations which essentially filled in the gaps of the areas that were missing and those just came into force last month. So, employers have had very little time to get to grips with what the new law requires in light of the executive regulations coming out and effectively filling in all of the gaps and telling employers what they have to do now in order to be compliant. It’s really important, particularly in light of the penalties that are now provided for under the law which are potentially quite far reaching into 1 million dirhams for any non-compliance under the law, and any fine would be in addition to any compensation that's an employee could claim in a labour court.”

    Joe Glavina: “So, Luke, what’s the message you want to get across to your clients?”

    Luke Tapp: “I think the key message for clients, really, and you know, many of our clients, HR directors, GCs, senior managers, whenever they've been referring to the Labour Law, or developing internal policies based on the Labour Law, a question that always gets presented back to them is the ‘so-what’ question - why do we need to comply with this Labour Law? What’s the risk? The risk historically has been quite limited from a financial perspective but as we talk about this new fine that's applicable to companies of up to a million dirhams for any breach of the new Labour Law I think is really relevant to that discussion because I think the new Labour Law does have more teeth in terms of areas where there's non-compliance. I think in addition to that there's obviously the reputational piece as well and we see the reputational impact that companies suffer from where they failed to comply with the new Labour Law. So, I think the most important thing is to be aware of the new Labour Law, the possible consequences of not complying with it and then, obviously, to understand some of the key developments and the key changes from the new Labour Law to just make sure those changes are embedded into the organisation and are applied from an HR perspective.”

    Joe Glavina: “So a final word from you, Ruth. These new laws reflect changing times for the region, don’t they?”

    Ruth Stephen: “Yes, so the law is moving and it's reflecting what's happening in business and in practice. The Labour Law is much more international and reflecting how other jurisdictions enforce their employment laws. So what I'm saying is in terms of anti-discrimination provisions, they are expressly provided for in the law together with identifiable protected characteristics, so you know, gender for example, social and ethnic minorities, all in there, and also the different types of employees and what I mean by that is atypical employees. So the law now expressly provides for part-time employment and the executive regulations set out a whole range of different work permits that are available which weren't before. So the law is really reflecting the current times and the current market and the employment relationship.”

    I went on to talk to Luke and Ruth about how the new labour laws are affecting employment contracts, policies and procedures and we will hear about that next week. Meanwhile that recent Outlaw article on the implementing regulations is called ‘Regulations supplement new UAE labour law’. You can access that from the Outlaw website.

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