Work and business concerns in the UAE are getting back to an ever-evolving new normal. The population continues to social distance, wear masks, and the government is now vaccinating to control the spread of the virus.

Here, we review how labor and employment authorities managed the impact of the government shutdown on the stability of the labor market. Specifically, how the various employment laws of the UAE were supplemented to attend to the realities of the UAE economic shutdown. In particular, what level of guidance the particular authority provided to employers and employees. We address herein: UAE Federal Law No, 8 of 1980, as amended, (Labor Law), which is applicable to the mainland and the economic free zones; the Dubai International Financial Center (DIFC) Employment Law No. 2 of 2019, (DIFC Employment Law) as amended by DIFC No. 4 of 2020 (The DIFC Employment Amendment Law) and the Abu Dhabi Global Market (ADGM) Employment Regulations 2019 (Regulations).

The government-mandated shutdown resulted in shorter working hours, reduced wages, and loss of employment for many employees. Several industries immediately had excess employees who were unable to repatriate because of closed airports and borders. Each of these situations required employers to make many difficult decisions largely based upon their businesses’ particular economic condition, as well as on reliance upon newly issued labor and employment guidance provided by the relevant authority.

On January 29, 2020, the UAE Health Authorities reported its first novel coronavirus (COVID-19) case. All UAE schools were shut down on March 8, 2020, for four weeks. Two days later, March 10, 2020, the World Health Organization (WHO) declared the global outbreak of COVID-19 as a pandemic. On March 14, 2020, the UAE government shut down major tourism and cultural events and initiated a sterilization campaign throughout the UAE on March 22, 2020. On April 4, 2020, the UAE imposed a three-week, 24-hour shutdown allowing only essential workers to go to their official places of employment. All other persons were only allowed to leave their homes for a specific reason and pursuant to obtaining an approved permit (usually through the use of a downloadable smartphone app).

As the pandemic continued and cases increased, the various labor and employment authorities each provided guidance to assist employers and employees on measures to address surplus employees created by the shutdown. We now review the guidance and assesses their impact on the existing employment laws and regulations.

Onshore: UAE Labor Law

Early on during the crisis, on March 26, 2020, the UAE Minister of Human Resources and Emiratization (MOHRE) issued a guidance (Ministerial Order 279; the “Order”) with the purpose of stabilizing employer-employment relationships during the period of the precautionary measures in force to curb the spread of COVID-19. This Order remains in effect as of the date of this article. It directly addressed the practical aspects of attending to the economic needs of non-national employees whose working hours were reduced and/or were unable to work due the government shutdown, as well as those who could not repatriate as airports were closed.

The Order set out a series of steps an employer may utilize which include implementing a remote working system, granting paid and/or unpaid leave, temporarily and permanently reducing salary during the period of application. Each of these steps required employee consent. Further, the Order created a Virtual Labor Market and required employers to register their surplus employees on this government-created portal so that such employees may be in a position to secure other employment, or until they were able to leave the country.

Many employers in the retail, food and beverage industry have very large work forces that were especially hard hit by the government shutdown, leaving many idle employees. Being unable to return home they required food and shelter. As no one really could predict the length and extent of the shutdown, it was necessary to ensure the displaced employees were provided the basic necessities.

Accordingly, the Order’s option of allowing employers to grant unpaid leave to employees but continue paying their allowances squarely addressed the issue of surplus worker that were unable to repatriate. As the shutdown continued the measures and means set out in the Order to temporary and permanently reduce salaries became more important. Finally, the establishment of the Virtual Labor Market established an online system which allowed employers to search for skilled employees.

The options of implementing a remote working system and granting unpaid leave, were not openly available pre-pandemic. In fact, these practices were technically not addressed in the Labor Law despite being practical measures to handle certain situations. In providing both these options the Order essentially regularized these practices and employers and employees are the beneficiaries of these newly sanctioned practical actions.

Overall, the Order assisted businesses in stabilizing their employment relationship as it provided employers with more tools to address their ever-changing employment work force needs. By allowing temporary salary reductions, it provided employers the ability to keep already trained staff, which would be necessary when businesses were allowed to re-open. The Labor Law and the Order were sufficiently flexible to assist many employers in stabilizing their workforce while protecting the interest of employees.

Economic Free Zone: Dubai International Financial Center (DIFC)

On April 21, 2020, the DIFC President issued Presidential Directive No. 4 of 2020 in Respect of COVID-19 Emergency Measures, (“the Directive”) which temporarily superseded parts of the DIFC Employment Law.

The Directive provided specific guidance in effect from April 21, 2020 through July 31, 2020 (the “Emergency Period”). Throughout this period and to the present the DIFC Authority has been active in publishing the evolving restrictions upon businesses closures and changing limitations to businesses re-openings.

The Directive set out emergency measures which an employer may impose upon their employees without their consent to address the employment issues arising from the governmental shutdown. Under non-pandemic conditions such measures would require employee consent and notice period prior to implementation. During the Emergency Period all measures required providing employee five (5) days’ notice. The emergency measures included imposing vacation leave, leave without pay, reducing remuneration on a temporary basis, restricting workplace access, and requiring remote working.

Given the blanket travel ban, employers were allowed to defer cancellation of residency visas and sponsorships where employer provided basic medical insurance. In the case of retail, service or hospitality industry terminated employees, where employer provided accommodations, such accommodations would continue to be provided.

Regarding the ability to manage the excess workforce, similar to what was required on the mainland, employers provided a current list of terminated employees and those available to work to the Government Service Office. Employers had access to the DIFC Available Employee Database to hire suitable employees.

The Directive specifically sought to safeguard gratuity payments in view of the emergency measures. The gratuity would be based upon the basic salary as of a specific date prior (i.e., February 29, 2020) to the enactment of the measures. Further, the Directive set out rules regarding COVID-19 related sick leave. Namely where substantiated by a competent authority, all sick leave taken due to COVID-19 would not be assessed against the employee sick leave balance.

The Directive is broad and attempts to address the main issues arising from the shutdown. It appears prescriptive for a set period of time, during the Emergency Period. Overall, it attempted to balance the concerns and responsibilities of employer and to protect employees’ interest regarding termination where one could not repatriate or find new employment and protect the basis for the gratuity payment. The Authority provided more certainty to employers and employees as to what were acceptable and unacceptable practices during the Emergency Period.

Economic Free Zone: Abu Dhabi Global Markets (ADGM)

The Registrar of the ADGM Registration Authority, with the assistance of the Employment Affairs Office (EAO), issued on April 2, 2020 a frequently asked questions (“FAQ”) to provide guidance to ADGM entities and employees of ADGM entities in relation to possible challenges arising due to COVID-19.

The FAQ states they constitute a non-binding guide and advises they be read together with the Employment Regulation 2019 (Regulations), their subordinate rules, and any other relevant regulations. The FAQ areas addressed: termination rights and responsibilities of employer to employee; liability for costs of obtaining or cancelling a visa; imposing unpaid and vacation leave; temporarily and/or permanently reducing salary; requiring remote working; deferred payment of employee salary as agreed between the employer and employee; maintaining employee health insurance coverage; specific employer obligations due to COVID-19 crisis; and repatriation flight entitlements.

The responses to the questions directly cite the specific Regulation and set out the language of the Regulation that answers the question. Where the question concerned a subject that the Regulation did not address, the response stated such and maintained the decision could be made between employer and employee and further suggested that independent legal assistance may be sought. This was the case in regard to whether an employer may impose unpaid leave.

Regarding whether an employer may temporarily or permanently reduce an employee’s salary, the response cited the relevant Regulation and noted that in light of the current global situation an employer may have no alternative but to reduce an employee salary. The response further noted where the employee does not agree to the reduction the employee could avail the ADGM Courts for determination.

On the question of deferring payment of employee’s salary: the FAQ noted that the Regulations requires payment within seven days of the relevant pay period. However, the response also stated nothing in the Regulations prohibited the employer and employee agreeing to a deferred payment plan.

Finally, on the issue of repatriation of flight entitlement, it set out the relevant Regulation and acknowledged the current situation of halted air travel in and out of the UAE and suggested an employer and employee may enter into an alternative arrangement.

Essentially, the guidance provided in the FAQ reviewed and promoted a common sense reading of the relevant provision(s) of the Regulations. Where the Regulations were silent on an issue and did not prohibit a contemplated action, the FAQ noted such and suggested that the parties seek independent legal advice, as well as potentially entering into alternative arrangements.

The Registrar, through its publication of the FAQ, ultimately left it between the employers and employees to work with the existing Regulations and resolve pandemic-created issues between each other. As no new provisions were added to the Regulations, this promoted the continuity of employment practices as set out in the Regulations which are applicable in presumably all circumstances.

Summary

The various supplemental guidance provided by the authorities recognized that the government shutdown would directly impact the labor market. Each authority provided options and direction for employers to utilize to best manage their particular situation, as well as informing employees of their rights and responsibility during this ongoing pandemic. The directive(s) to utilize remote working systems, to grant unpaid leave and allow employers and employees to enter into agreements regarding deferring salary and/or end of service gratuity payments are practical options to address the immediate crises as well as upgrades to the employment practice toolbox from which both employer and employee benefit.

Written by Gloria Estolano – Strategic Partner