Know Your Rights: Dubai Chamber And Clyde & Co Seminar Offers Insights For Employers And Employees During The COVID-19 Crisis
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A recent webinar organized by the Dubai Chamber of Commerce and Industry and Clyde & Co provided guidance to UAE-based employers and employees in relation to the changing nature of their mutual rights and obligations due to the impact of the COVID-19 outbreak. Attended by 278 participants from various sectors of the UAE business community, the webinar was moderated by Rebecca Ford, Partner- Employment, Clyde & Co, and Samantha Ellaby, Senior Associate- Employment, Clyde & Co.
The two legal experts started with presenting the changes in the UAE’s legal landscape when it comes to labor relations. They noted the Ministerial Resolution No. 279 of 2020, which set out rules for paid and unpaid leave arrangements, reduced salary arrangements, and redundancies. The Ministry of Human Resources and Emiratization has since released a template addendum that is a standard form document that enables employers to implement any of the chosen measures, most only upon a written consent by the employee in question, and that needs to be lodged with the Ministry. In case of any future disputes, the two legal experts advised that employers should have proof that they have at least considered, and where possible, implemented, some of the less intrusive measures before moving onto the more drastic measures introduced by the Resolution, such as salary reductions and redundancies. The Resolution No. 279 also introduces the concept of Virtual Labor Market, saying that if an employer has a surplus of non-national employees, those should be registered in the Virtual Marketplace. “In essence, it means that the employment, visa, and liability for all legal entitlements of those employees still rest with the primary employer, while the employees can effectively be borrowed by another employers,” explained Ellaby. The Virtual Labor Market, however, only applies and is available to employers and employees that fall under the jurisdiction of the Ministry.
Answering an attendee’s question whether the Ministerial Resolution No. 279 of 2020 applies to Dubai’s free zones, Ellaby replied: “There are many examples of Ministerial Resolutions which have become accepted and expected practice from employers across the board, including those in the free zones. Often, there is an expectation that employers in the free zones will comply with the spirit of Ministerial Resolutions.” In practice, Ellaby continued, that means that to the extent that free zone employers wish to implement some of the measures set out in the Ministerial Resolution No. 279 of 2020, they will, as the resolution requires, need to obtain an employee’s agreement. “It is also likely that, as a free zone employer, if you haven’t followed the measures set out in the Resolution or thought about them in advance, such as salary reductions or redundancies, then that might be something that will be taken into account by a labor court in the event of a dispute,” she added.
Looking into each of the measures in more details, Ellaby explained that, when it comes to paid leave, under the UAE Labor Law, employees are entitled to 90 calendar days for sick leave in a 12-month-period, 15 of which is full-pay, 30 half-pay, and the rest of it unpaid. “For now, it is considered that if someone is sick with the coronavirus, that should be processed as a sick leave in the usual way,” she added. “However, employers will have to reconsider that, as did Dubai International Financial Center (DIFC) since it has taken a different approach. In its DIFC Presidential Directive, effective April 21, to July 31, 2020, they have specifically said that any sick leave due to having coronavirus, or being placed in quarantine on the direction of a competent authority, falls outside of your statutory entitlement to sick leave, and is at full-pay. It will not be reduced from your statutory sick leave entitlement.”
In case of employers wanting to compel employees to take annual leave that is not related to any illness and must be taken on specific dates, Ellaby added that, under the UAE Labor Law, it is possible for employers to require employees to take annual leave on specified dates, and there is no requirement for employees’ consent. “So, from a legal perspective, the requirement is to notify them in writing on the dates that you wish them to take annual leave,” she said.
However, when it comes to unpaid leave, Ford said, the UAE Labor Law’s position is that there is no right to unilaterally impose this. “So, effectively, you do need employees’ consent, which is also reflected in the language of the Ministerial Resolution,” she said. Ford added that there is no statutory restriction to the duration of unpaid leave, if eventually implemented, and that it is a matter to be agreed between the employer and the employee. “However, the Ministerial Resolution No. 279 of 2020 envisages that the implementation of its measures will only continue whilst the authorities consider those measures necessary to combat the COVID-19,” Ford explained.
“In addition, the Ministry has issued a flyer that says that in case that employers send employees on unpaid leave to their home countries, the Ministry would that, and it appears that the standard form addendum that is issued with the Resolution needs to be completed by both parties in this case as well, and that the employer would need to pay for a roundtrip ticket for the employee,” she added. “Of course, the contractual relationship between the two parties must continue during that period. The leave ends upon the employee’s return to work, and in case that the UAE visa of the employee expires during that period, it will be renewed automatically.”
Moving onto the next measure -salary reductions- Ellaby stated that the Ministerial Resolution No. 279 of 2020 says that, in the case of permanent salary reductions, prior approval of the Ministry is required, whereas in the case of temporary salary reductions, it is an arrangement that must be agreed with the employee directly while the Ministry’s consent is not required. However, she repeated, temporary salary reductions would need to be done with employees’ consent “since employees have a contractual right to receive a certain salary, and to the extent that employers wish to amend that to employee’s disadvantage, they will need the employee’s express written consent to do so.”
She added, “In the addendum issued by the Ministry, where one of the options is a temporary salary reduction, employers can set out the duration of the reduction and the new wage post reduction. In order to avoid any future issues under the Wages Protection System for employers falling under the Ministry’s jurisdiction, it is prudent to lodge that with the Ministry once it’s been signed by the employee. So, again, where employers unilaterally impose a temporary salary reduction, i.e. without obtaining an employee’s consent, this would create the risk of claims of unpaid dues or breach of contract, as well as potentially raising issues under the Wages Protection System for employers that fall under that.”
In her experience so far, Ellaby explained, some employers have imposed a blanket salary reduction, meaning a set percentage across the board, while others have opted for a system whereby the highest earners get the highest cuts. “From a legal perspective, you need to consider how much the employees need to cover their basic needs, and, in any case, you need their written agreement,” she added. In case that an employee refuses to grant their consent to the requested temporary salary reduction, the employer can consider imposing it unilaterally despite the risk of claims for breach of contract or issues under the Wage Protection System. “In more extreme cases, employers are considering terminating the employment for the employees who have not agreed to the salary reduction,” Ellaby noted. “But, in doing so, you are facing the risk of arbitrary dismissal claims as well as attracting the obligation to pay termination entitlement which has immediate cost implications.” An exception is introduced by the DIFC Presidential Directive, effective April 21, to July 31, 2020, which states that temporary salary reductions can be implemented by employers without employees’ consent, but end of service gratuities will not to be affected by this measure.
Ford continued by explaining that there is no concept of redundancies in the UAE Labor Law; therefore, there is a risk that the employee who has been made redundant could claim an arbitrary dismissal compensation as a result of that redundancy, which is up to three months’ renumeration in addition to the statutory and contractual entitlements that the employee is due on termination. “However, it is not clear how labor courts will approach the redundancies in current circumstances,” Ford added. “From one hand, you could say that the reason why the employer is making redundancies is because of COVID-19, and because of the requirement for people to remain away from the workplace.
"Therefore, imposing a compensation element on an employer when, really, all that they are doing is simply complying with the COVID-19 measures does go against public policy,” Ford continued. “On the other hand, the fact that the Ministerial Resolution No. 279 of 20202 has been introduced does mean that employers have a number of options available to them before they have to move onto redundancies. Therefore, it can be expected that labor courts will consider on a case by case basis whether a reason for redundancy should lead to an arbitrary dismissal award.”
Lastly, Ford and Ellaby talked about the Ministerial Resolution No. 280 of 2020, which establishes a committee to consider stabilization of UAE nationals’ conditions in the private sector, and the Ministerial Resolution No. 281 of 2020 that relates to remote working. “There is nothing in the UAE Labor Law that addresses remote working, although there have been a number of announcements which are relevant in the light of COVID-19, the first one being Ministerial Resolution No. 281 of 2020 which provided that all private sector establishments were to reduce the workers attendance to a minimum, and that those necessary in the workplace should not exceed 30%, except in the vital sectors,” Ford said.
However, remote working raises a number of important questions. “It is the fact that the UAE Employment Law contains a number of obligations around health and safety of employees,” Ford said. “However, a recent Directive stated that those provisions of the UAE Employment Law will not apply during this emergency period. Given that most employers cannot actually control what employees are doing at home, this sounds as quite a sensible move.” Another area to consider relates to confidential information. “When you are working from home, a lot of information about the company is being managed effectively outside of the walls of the organization,” Ford explained. “I think that it is always worth reminding your employees that the company policies around the protection of confidential information still apply even though people are working remotely.”
At the end of the day, both Ford and Ellaby emphatically repeated that there’s one thing to kept in mind all the time when it comes to dealing with the impact of the COVID-19 crisis on the contractual relationship between employers and employees: “Communication is key!”