Redundancy of Employees in the UAE

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The past couple of months, throughout the globe, has seen a massive impact on the economic front of most jurisdictions. This, in turn, has led to a chain reaction of primary employment-related issues as companies have been finding it challenging to remunerate their employees like the years before. The Federal Law Number 8 of 1980 concerning the Regulation of Labour Relations (the Labour Law) does not stipulate the laws governing (or applicable) to termination on the grounds of redundancy.

 

Therefore, it is pertinent for the reader to understand the definition and implications of the term ‘redundancy’ to obtain a wholesome view on the subject. Redundancy of employment is when an employer decides to reduce their workforce because such an employee’s position is no longer required for the employer, even when there is no oversight. Nevertheless, predicaments like closing down, growing trends of information technology leading to replacements of labor with artificial technologies, or circumstances whereby a company is taken over or sold to another shareholder or entity and such (latter) shareholder or entity deems that a particular role or position in the company does not have any further benefit, amount to redundancy. Needless to state, redundancy does not apply when an employee is terminated on the grounds of ‘redundancy,’ and the company replaces such employee with another individual for the same role (or position). During the initial impact of the pandemic in the UAE, the Ministerial Decree Number 279 of 2020 was introduced to provide a legal frame to private-sector employers during the implementation of precautionary measures to reduce the spread of the novel coronavirus.

 

The Ministerial Decree Number 279 of 2020 

The UAE Ministry of Human Resources and Emiratisation (the MOHRE) published the Ministerial Decree Number 279 of 2020 that allows for restructuring the contractual relationship between employers and employees during the implementation of the preventive measures taken to reduce the novel coronavirus’s spread. Article 2 of the decree states that all establishments affected by the preventive measures should implement these actions gradually:

1. Implement the remote work system: Ministerial Decision Number 281 of 2020 regulates remote work in the private sector.
2. Give the worker a paid leave: If the employer wants the employee to take annual leave on specific dates, the establishment should notify the employee in writing (article 76 of the UAE Labour Law). It is not required the employee’s consent.
3. Give the worker an unpaid leave: It is essential the employee’s consent. The duration of unpaid leave implemented is a matter to be agreed upon between the employer and the employee.
4. Temporary salary reduction: the consent of the employee is indispensable.
5. Reduce the worker’s wage permanently: the approval of the ministry is mandatory.

 

Furthermore, according to article 3, when an establishment is affected by the precautionary measure, and it has a significant number of non-national workers permitted to work for it, it shall enter the details of these workers in the labor market virtual system so their curriculum vitae can circulate and be used by other companies in UAE. It is mandatory for the employer to continue paying the house allowances and other benefits, except salary, while the employee is under their sponsorship. Suppose an entity wishes to reduce their worker’s wage permanently; in which case, it must apply for the “work contract details amendment” service to obtain the ministry’s approval (article 6 of resolution 279). It is worth mentioning, this measure shall apply to the private sector and only during the implementation of the precautionary measures taken to reduce the spread of covid-19 (article 8 of resolution 279). Above all, this resolution gives various alternatives and steps before reaching an employee redundancy.

 

The selection of employees for redundancy

For an equitable selection of the redundancy employees, the employer could use methods like lay off those who have been short-term first, ask for volunteers, or review disciplinary records. This selection should not be based on gender, marital status, disability, or race.

 

The process of redundancy employment

Initially, it will be essential to do meetings with each employee affected by the redundancy. The employer will also provide an opportunity to consider alternatives to redundancy, for example, a change in employee benefits or offer other roles that are open in the enterprise. The company will also update with letters to the employee about the enterprise’s economic situation and redundancy.  This process must be supported by clear evidence to be used in case of labor claims. This documentation should be in English, but it must be translated into Arabic in the event of a dispute in the labor courts.

 

The payments for redundant employees

When an employee is under a procedure of redundancy, the employer should provide the following charges: the provision of notice or compensation, the payment of end of service gratuity, the payments of accumulated and unused annual leave, the repatriation flights, and the cost of any other contractual expenses arising from the termination of employment. If the employee cannot leave the country for COVID-19 flight restrictions, the visa and health insurance should be maintained until their departure.

 

Employers are obliged to pay EOSB (End of Service Benefits) to non-Emirati employees who have completed at least one year of continuous service. The amount of these benefits is based on the last basic salary of the employee. In the case of arbitrary dismissal, the employee under an unlimited term employment contract is unfairly dismissed; he/she can get up to three months’ remuneration compensation (Article 123 of the Labour Law). However, before that, the MOHRE prefers to resolve this arbitrary dismissal amicably. If it is unable to do so, the case will be referred to the courts. The court will evaluate the value of compensation, taking into account the duration of the employment, the type of work, and the extent of the damage.