No concept of redundancy in UAE means job cuts ‘a challenge’

Out-Law News | 17 Dec 2020 | 12:01 pm |

Luke Tapp tells HRNews that firms cutting jobs in the UAE require a clear business reason 

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  • Transcript

    It's redundancy, but not as you know it. We are referring to the fallout from restructuring in the UAE as firms in the region continue to make difficult decisions around cost cutting which are having a direct impact on staff. Job cuts are a sensitive and challenging issue in any jurisdiction but for companies operating in the UAE the issue is particularly difficult for HR and legal given there is no statutory definition of redundancy to help guide the process, so quite unlike the UK. The result? There is often a lot of uncertainty and misunderstanding around the correct legal approach to take. Someone who sees this first hand is Luke Tapp who has been based in the region for many years and who, back in April, wrote about the challenges he was seeing in the early days of the pandemic. I had the opportunity to catch up with Luke to ask him about the absence of a definition of redundancy and whether it is a problem. He joined me by video-link from Dubai:

    Luke Tapp: "Yes, there is no statutory concept of redundancy in the UAE. Wherever an entity is incorporated, whether it's a free zone or onshore mainland area, the laws do not talk about redundancy. That means that the starting position for a client when they're having to take difficult cost cutting measures, when they're having to restructure the workforce, is that they need to identify the underlying reason for that, they then need to look at the law that's applicable to their entity and they need to determine the best way about approaching the potential dismissal. So although there's no statutory concept of redundancy set out in the law, in all of the jurisdictions, DIFC, ADGM, onshore mainland area, it is still possible to dismiss a person by reason of redundancy but the client just needs to take into account the local position, the way that local court is likely to approach a redundancy type dismissal and, ultimately, the circumstances, the factors, that have led the client to make that decision. So if it's purely financial, it's because the client hasn't hit the budget they want to hit because their market has contracted a little bit over the past six to 12 months, it's making sure that we have that data, that evidence, to support the decision and then going through a reasonable consultation process that's documented to execute the decision."

    Joe Glavina: "Can I just ask about the balance of employment laws in your region, Luke, because in the UK, and in Europe as a whole by and large, employees enjoy a good level of protection. The UAE is well known for attracting businesses so is that reflected in a bias towards employers when it comes to employment laws in the region?

    Luke Tapp: "I think that's a really interesting question to think about, actually, because I think if you were to speak to most of our clients, the CEOs, the HR directors, that work with us from our international clients, they would probably say that the law is employee friendly in this part of the world, but equally, I think if you spoke to a lot of employees they would probably say it's a company friendly jurisdiction from employment law perspective. I think if you look at redundancies and unfair dismissal claims that come out of that, one important point is that there is a limitation on the amount of compensation an employee can claim for arbitrary dismissal, which is capped at three months, which is obviously lower than a lot of international jurisdictions, so in that regard you would say probably is a bit more company friendly because the financial exposure is more limited from a company's perspective. But I think what we do see over here is a level of sympathy for Expat employees, for individuals, from the labour courts which does make it important for clients to ensure that the documentation is correct and clear and that any process that might lead to a dispute such as a dismissal or redundancy process, the correct approach is adopted to demonstrate to the court the real reasons for the dismissal and that the employer adopted a lawful, fair and reasonable approach to any such decision. So I think the law can be company friendly but it's really important that companies take into account the local law and the local courts whenever implementing any HR or employment related decisions."

    Luke's guide on this subject is called 'Redundancy and restructuring in the UAE'. You can find that on the Outlaw website.