What key changes have been made?
- Extended Statute of Limitation
Under the UAE Labour Law, the limitation period was originally one year. The Decree now extends this period to two years, allowing employers and employees to file a labour claim within two years from the date the cause of action arises (e.g. the termination date). - Increased penalties for employers
The UAE Labour Law allows courts to impose fines on employers for breaches of the labour law. As a result of the new Decree, fines have been significantly increased, now ranging from AED 100,000 to AED 1 million, compared to the previous range of AED 50,000 to AED 200,000. The specific fine imposed will depend on the nature and severity of the labour law violation. - Wages to be paid during disputes
In situations where an employer has suspended an employee’s pay due to a dispute, the Ministry of Human Resources and Emiratisation (MOHRE) may require employers to continue payments for up to two months until the dispute is resolved. - Legally enforceable decisions by the MOHRE
The first step in pursuing a labour claim is to submit the complaint to either MOHRE or the relevant free zone authority (if the employer is based in a free zone). This initial approach aims to resolve the issue amicably before further escalation. If a dispute cannot be resolved through MOHRE or the relevant free zone authority, it may be referred to the UAE courts. The Decree has enhanced the MOHRE’s role in resolving labour disputes by granting it greater authority. Specifically, it now allows MOHRE decisions to be enforced like court orders, with the power of a writ of execution. This means that any rulings made by the MOHRE can be legally enforced. However, this applies only to cases where the value is less than AED 50,000. - Criminal penalties
In addition to civil penalties for breaches of the labour law, the Decree also imposes criminal penalties for engagement in fictitious recruitment practices which would enable an employee to obtain a benefit from a government entity. An example of this includes cases where private companies seek to employ Emirati individuals without assigning them any effective work roles and additionally claiming financial incentives designed by the government for such employment in addition to misusing work permits.
What are the implications for employers?
The amendments indicate a tougher regulatory environment requiring strict compliance with UAE Labour Law. Employers should review their current practices to ensure compliance with the law. Key steps to consider include:
- Retaining employee records for longer: In the UAE, it is recommended that employers keep employee records, including payroll documents, timesheets, and performance reviews, for at least seven years after an employee’s departure. Nonetheless, employers must retain a record of the termination decision and date for a minimum of two years.
- Providing internal training to staff: Employers should provide training to staff on the UAE Labour Law, the new regulations, and how to remain compliant with the law.
- Ensuring proper recruitment practices: Any recruitment must align with the specific purpose for which the employee is hired and/or brought into the UAE, ensuring no breaches of the labour laws.
- Updating policies and procedures: Employers should review and update internal policies and procedures to reflect the changes in the law and ensure compliance with the new requirements.
For further information on the UAE Labour Law or if you require assistance with reviewing your practices, ensuring compliance, or implementing the necessary changes, please get in touch with a member of the MDR ONE team.
