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Employment/ Legal Update

Terminating an unlimited term contract under Article 117

Terminating an unlimited term contract under Article 117

Federal Law number 8 of 1980 (as amended), colloquially known as the UAE Labour Law, regulates all employment contracts in the UAE, with the exception of certain ‘offshore’ jurisdictions such as the Dubai International Financial Centre or Abu Dhabi Global Market. It is therefore a fundamental piece of legislation, the understanding of which is essential to both employees and employers alike.

The UAE Labour Law distinguishes between two types of employment contracts; limited term and unlimited term. In their basic forms, the contracts are as the name suggests; limited term contracts specify a fixed term and an end date, and unlimited term contracts are open ended and therefore seen as more flexible. Different articles relate to the termination of the two separate contract types, and for the purposes of this commentary, we will review one of these articles – article 117 – one of the two main ways in which an employer may lawfully terminate an employee’s unlimited term contact.

Article 117 stipulates that there must be ‘valid grounds’ by which either an employer or employee can terminate an unlimited contract. These ‘valid grounds’ are not defined, although the UAE Labour Law does specify that they must be work related when seeking to be relied upon by the employer, and from previous judgments, the Labour Courts have been willing to accept poor performance or misconduct as a ‘valid reason’. Where an employee is terminated for a valid reason, they are entitled to their full end of service gratuity and other entitlements under the law.

Where a company fails to comply with the UAE Labour Law provisions regarding termination, they may be found to have arbitrarily dismissed the employee, and subject to a penalty of between 1-3 months compensation based on an employee’s full final salary. The penalty is at the court’s discretion, usually having regard to the specifics of each case; eg. length of employment, seniority etc.

Under the terms of article 117, a minimum mandatory notice period of thirty days is also prescribed, during which an employee is entitled to their full pay and benefits, and are still bound by the terms of their employment contract. Failure to abide by the notice period, by the employer or employee, opens up the possibility for a payment in lieu of notice. Whether the employer wishes the employee to remain an active part of the business during the notice period, or decides that gardening leave is more appropriate, is a matter of company policy. The requirements of an employee on notice should be set out clearly so as to avoid dispute, and should ensure that handover, and any other company requirements, happen during the notice period and specifically while the employee is still contracted with the company.

The legal obligations on an employer do not end once article 117 has been satisfied, but having a coherent and well-drafted company policy that expands upon what ‘valid grounds’ are, provides for company work standards and details procedure on termination, can ensure that the termination process is as straightforward as possible. The best outcome in any termination is one whereby both the employer and employee know the process, and are committed to it.

Where an employer is looking to rely on article 117 to terminate an employee, it is extremely important that the correct procedure is followed and the necessary paperwork is in place.

For further information on article 117 or any other employment advice

Christopher Chipperton
caschipperton@davidsoncolaw.com
+971 4 343 8897

Corporate Law/ Family Law/ Legal Update/ Wills

DIFC Wills Service Centre launches new Business Owners Will

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The DIFC Wills Service Centre (DIFC WSC) has launched a new Business Owners Will to encompass both free zone and UAE onshore company shares (including RAKICC registered companies). The Business Owners Will replaces the DIFC WSC’s Free Zone Company Will, which was previously available to encompass only free zone company shares.

The new purpose Will can encompass up to five separate shareholdings in any free zone or UAE onshore company incorporated in the Emirates of Dubai and/or Ras Al Khaimah, and will enable non-Muslim testators over the age of 21 to designate which beneficiary(ies) they wish their company shares to be transferred to on their passing. There are many advantages to ensuring that there is a succession plan in place with regards to the ownership and management of any company, including business continuity, sustainability, and reassurance that the business will be left in capable hands.

The introduction of the Business Owners Will is intended to allow testators to take advantage of the proposed changes to the foreign ownership system of UAE based enterprises, announced by the Cabinet early this year. Once implemented, the new law will allow certain foreign investors to have 100% sole ownership of their enterprise, bringing the position of onshore LLC companies in line with existing free zone and offshore entities.

The Business Owner Will is available to both UAE residents and foreign investors, and can be registered in person or via the DIFC WSC’s online Virtual Registry.

For further information on the Business Owner Will or any of the DIFC WSC’s wills, please contact Victoria Smylie or Finlay Donaldson on +971 4 343 8897.

 

Corporate Law/ Family Law/ Legal Update/ Private Client

Davidson & Co admitted to prestigious Legalink global network

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Davidson & Co is delighted to announce that the firm has been admitted into the prestigious Legalink network, a global legal network comprising more than 60 individually approved and selected law firms from around the globe.

Davidson & Co prides itself in its ability to offer a full service to clients, and by becoming a member of Legalink, Davidson & Co is now in a position to not only offer clients in-depth legal knowledge of proceedings in the UAE, but also access to dependable, first-hand legal advice from over 3,000 professionals worldwide.

Davidson & Co recognises that in our ever expanding and internationalised economy, our clients’ private wealth and assets are no longer confined to one jurisdiction, and this most recent accolade cements the firm’s goal to understand the needs of its clients, add value whenever possible, and to ensure ongoing development and success.

Further information on Legalink or its members can be found at https://www.legalink.ch.

Alternatively, please contact either Victoria Smylie at vsmylie@davidsoncolaw.com, or Yousif Ahmed at yahmed@davidsoncolaw.com, both of whom would be delighted to answer any questions you may have on the network.

Uncategorized

6-month UAE visa announced for job seekers

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The UAE Cabinet have recently announced plans for a six-month visa which provides for individuals who have overstayed their current visa but wish to continue working in the country.

The move will be welcomed by residents looking for employment and will replace the current system whereby individuals are either provided with a grace period of only 30 days to change their visa status or are required to exit the country and re-enter on a new visa.

Individuals wishing to adjust or renew their current visa will be able to do so for a fee without also having to leave and re-enter the country.

Further proposed amendments include a free 48-hour visa for transit tourists and the option for individuals who entered the UAE illegally to leave voluntarily with a “no entry” stamp for two years.

The new visa rules are intended to be introduced in the fourth quarter of 2018 with the specific costs and procedures to be announced in due course.

To find out more about visas in the UAE and for help with employment law or any other legal requirements please get in touch.

Corporate Law/ Economy

Ministry of Economy: 100% foreign investment proposed for both mainland and free zone companies within the UAE

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The UAE consists of various corporate structures ranging from sole proprietorships to fully fledged private companies. The mainland companies as well as the businesses operating within the free zones, comprise mostly of Limited Liability Companies (LLC).

At present, the rule is that only the companies based within the free zones give the foreign investor a full 100% right to ownership of their business. The law within the on-shore civil law jurisdiction that governs companies outside of the free zones in the UAE, requires an Emirati national to possess a majority ownership of 51% while the investor can hold only a 49% ownership. This was done to boost local entrepreneurship and to stimulate national business growth.

The United Arab Emirates has however proposed a new resolution that encourages greater FDI (Foreign Direct Investment) by way of providing sole ownership to foreign investors, without the need for an Emirati national to be a majority stakeholder in the business.

Recently in May, at the UAE Cabinet meeting chaired by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, the regulation for businesses within the free zones was amended to now allow foreign investors to own a full 100% ownership of their companies in the free zones.

It is unclear as to when the resolution will be implemented but Hamad Bu Amim, President of the Dubai Chamber of Commerce and Industry, has stated that, “The move sends a clear message that the UAE is a competitive market which is open to international investors and conducive to business growth. At the same time, I expect that the new measures will help raise the UAE’s global profile as a preferred investment destination, positively impact the local business environment and ultimately enhance the country’s economic competitiveness”.

For more information on company set up in the UAE or any other legal requirements please get in touch with Davidson & Co today.

Economy/ Employment/ Private Client

The UAE launches a 10-year residence visa

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The outcome of a cabinet meeting chaired by His Highness Sheikh Mohammed Bin Rashid Al Maktoum on Sunday 20th May 2018 is set to improve the trust and confidence of foreign investors, creating countless new opportunities within the UAE.

The meeting established the implementation of a 10-year residence visa aimed at applying to foreign investors and specialists such as doctors, engineers, researchers and scientists. The new rule will also apply to the family members of any such entitled persons. Eligibility for the visa will also extend to top performing students.

His Highness Sheikh Mohammed Bin Rashid Al Maktoum stated, “Our open environment, tolerant values, state-of-the-art infrastructure, and flexible legislation are the best plan to attract international investment and exceptional talents. The UAE will remain the land of opportunity, the best environment for realising human dreams and unleashing their extraordinary potential”.

The new law is expected to be implemented by the end of 2018.

Amendments to Foreign Ownership (Company) Laws

In the same meeting, the Cabinet also announced proposed changes to the foreign ownership system of UAE based enterprises, approving a decision to allow 100 percent ownership for international investors in specific business sectors.

The current position, found under Article 10(1) of the Federal Law No. 2 of 2015 (UAE Commercial Companies Law), requires onshore companies inaugurated by international persons to have a UAE National partner holding a 51 percent share of the company. The introduction of the new law would allow certain foreign investors to have 100 percent sole ownership of their enterprise, bringing the position of onshore LLC companies in line with existing Free Zones, and offshore entities.

For any of your visa, employment or company set up requirements please do not hesitate to get in touch.

Employment

New license required for Dubai social media influencers

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Social media influencers who promote brands, products and businesses for financial gain have until the first week of June 2018 to apply for a special e-media license, under new regulations issued by the National Media Council (NMC) in March 2018.

The requirement falls from the NMC’s recognition that an advanced legislative and regulatory environment for the UAE media sector is vital – especially given the highly influential and widespread marketing tool channelled and promoted by electronic media.

In accordance with the draft law, paid influencers must satisfy two mandatory requirements:

  • They must have a valid trade license in place; and
  • They must obtain a special e-media license from the NMC – costing in the region of AED 15,000.

The latter of the two licenses is essential as it enables influencers to post content that advertises and endorses brands on various social media platforms.

We understand that freezones such as the Dubai Creative Clusters Authority (DCCA) and twofour54 can issue a freelancer visa, which would satisfy the first mandatory requirement.

Any failure to comply with the new rules could result in the individual incurring a fine of up to AED 5,000 and closure of their social media accounts, blogs and other related websites – a potentially far reaching consequence given the potential for some bloggers to earn more than USD 25,000 per post.

The new law has sparked debates between balancing regulatory compliance and enhancing competition in an increasingly lucrative and ever-evolving market, on the one hand, and stifling the growth of smaller “micro-influencers” on the other hand. However, it is clear that individuals must profit from their posts in order to be captured by these requirements – those who simply share everyday posts with followers without any financial gain do not require a license.

This article is intended to notify individuals of recent legal and regulatory developments in social media based on a variety of published sources. In any situation, individual facts would need to be fully explored before legal advice could be provided.

For further information on how Davidson & Co can assist you and your regulatory requirements, or to discuss in more detail any of the general principles raised above, please contact us on 04 343 8897 where one of our team will be delighted to assist you.

Uncategorized

UAE Labour Law – FAQ’s

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UAE Labour Law – FAQ’s 

With an expat community making up over 80% of the total population of the UAE, Federal Law No.8 of 1980 otherwise known as the UAE Labour Law, is one piece of legislation that every employee in the private sector should familiarise themselves with.  To assist, we answer some of the most frequently asked questions.

What type of contract is available?

There are two forms of contract available under the UAE Labour Law:-

  1. Limited/fixed term contract – Generally a start and end date is provided for in the body of the contract up to a maximum of 2 years. Unless the contract is renewed by mutual consent prior to the end date, the contract is cancelled automatically. A renewed fixed term contract may only be for a maximum of 2 years service. An employer faces penalties for terminating a limited/fixed term contract before the end date unless it can be proved the employee breached one of the grounds provided for in Article 120.
  2. Unlimited term contract – An open ended contract with no specified end date. Generally seen as more flexible, an unlimited term contract may be terminated by either party provided that the notice period provisions as outlined in the contract have been correctly adhered to (UAE Labour law provides for a minimum notice period of 30 days). Similar to a limited/fixed term contract, an employee may be dismissed without notice if it can be proved that one of the grounds provided for in Article 120 has been breached.

What are the maximum working hours?

The maximum normal working hours for adult workers are 8 hours a day or 48 hours a week, although there are exceptions depending on the nature of your employment. During the holy month of Ramadan, normal working hours are reduced by 2 hours a day.

What is the maximum probationary period?

Any probationary period must not exceed 6 months and an employer is unable to place an employee on any subsequent probationary period. The probation period counts towards continuous service for purposes of gratuity calculation (see further below).

What is the annual holiday entitlement?

Employees are entitled to 2 days of annual leave per month having served between 6 months and 1 year of employment. 30 days annual leave if the employee has completed over 1 year of employment. Any annual holiday entitlement is in addition to a number of UAE official holidays.

What is the annual sick leave entitlement?

Employees are entitled to a total of 90 days sick leave a year calculated as follows:-

  • Full pay for the first 15 days
  • Half pay for the following 30 days
  • Unpaid leave for remaining 45 days

Sick leave is not applicable during an employee’s probationary period.

Who is eligible for end of service gratuity and how is it calculated?

If an employee has completed at least twelve months in continuous employment with an employer, then they are entitled to payment of an end of service gratuity upon the termination of their employment. The end of service gratuity is calculated as follows:-

  • 21 days wages for every year of employment completed, and for each year of the first five years of employment (calculated pro rata for any additional days served).
  • 30 days wages for each additional year of employment after five years, (calculated pro rata for any additional days served) subject to the limitation that the total of the gratuity does not exceed two years salary.

There are several restrictions on the payment of the end of service gratuity and the amount due depending on what grounds the contract was terminated on, and whether the contract is unlimited or fixed.

What happens if there is a dispute between an employee and employer?

In the event of a dispute between an employee and their employer, a complaint must be lodged by either party at the Ministry of Human Resources and Emiratisation, in the Emirate where the company is situated. On the submission of a complaint, the Ministry will summon both parties in an attempt to amicably settle matters. In the event that the dispute is unable to be settled at the Ministry, the case is referred within two weeks to the local courts to resolve.

Any complaint must be submitted within one year from the date on which the amount or entitlement was due.

This article is intended to be an introduction to the Labour Law in the UAE and a brief summary of some of the most frequently asked questions. In any situation, the individual facts of the employment and the circumstances surrounding the termination would need to be fully explored.

For further information on how we can assist you in your enquiries regarding Labour Laws, or to discuss in more detail any of the general principles raised above, please contact us on 04 343 8897 where one of our team will be delighted to assist you.

Please note that the DIFC has a separate legal framework for Employment matters.