UAE labour law updates bring significant changes to employment disputes

One of the most significant updates to the UAE Labour Law, which came into force on 31 August, is the extension of the statutory limitation period to bring a claim. The extension allows employees to bring a claim to assert their rights within two years from the termination of the employment relationship. Previously, they only had one year to do so. The extended limitation applies not only to all future dismissals, but also to dismissals that took place prior to 31 August.

Lujain Assaf, employment law expert of Pinsent Masons in Dubai, said that employers should retain records relating to employee dismissal for a longer following this change.

“Where the circumstances surrounding the termination of employment are contentious, it is particularly important that evidence is kept on record as parties now have two years from the termination date to bring a claim,” she said.

The updates have made important changes to dispute resolution procedures, in a bid to make the process faster for employers and employees.

Under the updated regime, the Ministry of Human Resources and Emiratisation (MoHRE) will continue to use its power to resolve employment disputes that do not exceed AED 50,000 (approx. US$13,600) in value by issuing binding settlement decisions. The ministry now also has the power to issue binding decisions in disputes arising out of parties failing to comply with previously issued settlement agreements, regardless of the value of the claim.

There are also changes to the appeal process. Parties in dispute can appeal MoHRE’s decision before the Court of First Instance, instead of the Court of Appeal under the previous regime. The judgment issued by the Court of First Instance will be a final judgment.

“The amendments in relation to MoHRE’s power to deal with settlement agreement disputes even for high value claims, and allowing its decisions to be appealed before the Court of First Instance instead of the Court of Appeal, make these kinds of disputes faster to resolve,” said Assaf.

Other notable changes to the UAE labour law relate to penalties. Employers now face heftier penalties for breaching employment laws. For example, employers that use a worker without proper authorisation or that misuse work permits will be issued fines ranging from AED100,000 to AED1 million, a significant increase from the previous range - between AED50,000 and AED200,000.

Employers could also face criminal charges under the new regime. The amended law allows the MoHRE or an authorised representative to initiate criminal cases against an employer over suspected fictitious employment. However, the MoHRE has the option to settle a criminal case upon the request of the employer before a judgment is issued. To settle, the employer must pay at least 50% of the minimum fine specified for the particular crime, as well as return all financial incentives obtained through fictitious employment.

Stricter penalties and potential criminal ramifications demonstrate a more employee friendly approach in the UAE, which also indicate that MoHRE is going to enforce employees’ rights more robustly and make sure unlawful practices/non-compliance will be discouraged with heavier fines. Employers are therefore encouraged to strengthen their compliance practices with the new amendments coming into force, Assaf said.