Samir Kantaria: 'The UAE has never experienced such mass job losses across the board'
Employment law in the UAE is a hot topic at the moment. Samir Kantaria, head of employment practice/partner, Corporate Commercial, Al Tamimi & Company, gives you the low down...
The current worldwide economic crisis appears to be settling in for 2009, and perhaps beyond, and has not spared any business sector. One of the natural impacts is for companies to lay off employees as employers seek to reduce their overheads and costs in a declining world economy.
Pick up any newspaper in the UAE and you will come across numerous reports and comment on the redundancies being made across the world. The UAE has had its fair share of redundancies being announced and it is expected, in light of the bleak economic forecast for 2009, that further lay offs are, without a doubt, inevitable.
The UAE has never experienced such mass job losses across the board and certainly not in recent times. HR managers and legal practitioners alike have been furiously researching laws to ascertain the process, regulations, and provisions applicable to redundancies in the UAE.
The laws in the UAE
Until recently the UAE Federal Law no. 8 of 1980 (as amended) (UAE law) was the only statute regulating employment relationships in the UAE. Whilst most free zones, such as Jebel Ali Free Zone and Dubai Airport Free Zone, implemented their own unique employment rules, these have been based on the UAE Law.
With the establishment of the Dubai International Financial Centre (DIFC) in 2004 and its ability to introduce its own legislation in a number of areas which would prevail over UAE law within the DIFC, the DIFC introduced its own employment law by virtue of the DIFC Employment Law No. 4 of 2005 (DIFC Law). The purpose of the DIFC Law was to ensure that employees working in the DIFC received minimum international standards and conditions of employment.
Unlike employment legalisation in most other jurisdictions, neither the UAE Law nor the DIFC Law specifically provide for the concept of redundancy. Consequently there is a degree of confusion and lack of uniformity in their interpretation and application with respect to compensation payments that an employer is legally obliged to make under the laws.
How to?
In the absence of the laws recognising the concept of redundancy, instigating a redundancy process involves following the provisions under the relevant applicable law that deals with termination of employment.
Under the UAE Law an employee may only be legitimately dismissed by giving notice in line with the terms of the employment contract or in accordance with the provisions of article 120 of the law which provides an exhaustive list of instances where an individual may be summarily dismissed.
Moreover, the UAE law specifically provides that any termination of an employment contract which is not founded on the basis of performance or for any of the reasons listed under article 120 is deemed to be arbitrary. Similarly the DIFC law prescribes the provision of the contractually agreed notice period and summary dismissal where the employer determines that the employee’s conduct warrants termination for misbehaviour and where “a reasonable employer would have terminated the employee” as legitimate grounds for terminating an employment contract.
Consequently under the relevant laws, and in the absence of any statutory consultation process, a redundancy is generally initiated by the provision of a written notice to the concerned employee.
How much?
Ultimately, since one of the major driving forces that leads to the instigation of a redundancy process is the employer’s need to cut overheads, the most important question for an employer is how much is it going to cost to make an employee redundant.
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