New Ministerial Resolution relating to employment and COVID-19

The Ministry of Human Resources and Emiratisation (the “MOHRE”) published a new Ministerial Resolution No. 279 of 2020 (the “Resolution”) effective 26 March 2020, in response to the outbreak of the novel coronavirus (COVID-19).

The Resolution aims to protect the position of non-UAE national employees by private sector employers (who operate under the remit of the MOHRE as well as those in a few free zones that follow MOHRE resolutions) during the application of the precautionary COVID-19 measures by the UAE government.

A. Redundancies

The Resolution provides procedural guidance to protect employees in circumstances where the employer identifies a surplus of non-national workers.

Significantly, the Resolution provides that the employer must continue to provide the outgoing employees’ housing and all of their entitlements (save for their basic salary) until the earlier of the individual exiting the UAE or obtaining the necessary authorization to work for another establishment (or the repeal of the Resolution upon the precautionary COVID-19 measures being removed). This is a material development and will act as a disincentive for employers when considering whether to reduce headcount.

In such circumstances the employer is required to offer outgoing employees the option of registering their details on the MOHRE’s portal for jobseekers known as the ‘Virtual Labour Market System’. Accordingly, these employees can be rotated and utilised by other establishments seeking to hire candidates within the UAE given the suspension of foreign recruitment. These employees can then be hired and authorization obtained electronically for the necessary work permits (work transfer permit to new employer, temporary work permit or part-time work permit).

The Resolution does not explicitly provide that employers can dismiss employees by reason of redundancy without compensation being payable. However, the recognition of the concept of redundancy within the Resolution (given the lack of recognition of this concept by the UAE authorities to date) may be an indication that the UAE Labour Courts may be more sympathetic to employers implementing redundancy dismissals (during the crisis) than it has viewed redundancy dismissals previously.

B. Amendments to terms and conditions

The Resolution gives the employer the right to take the following measures provided (steps 3-5 require employee consent):

1. Working from home;
2. Leave with pay (in reality this will be enforced use of annual leave);
3. Unpaid leave;
4. Temporary salary reduction; and
5. Permanent salary reduction

The Resolution makes reference to these steps being taken ‘gradually’ and it remains to be seen how this will be construed in practice.

The Resolution provides the following requirements when the parties agree that the employer will temporarily reduce salary:

1. Prepare a “temporary additional supplement” to the MOHRE labour contract between the two parties (in a form provided by MOHRE) with the reduction in salary being valid until the period stipulated in the supplement or until the end of the validity of this decision, whichever comes first;
2. If required, renew the supplement referred to above with the approval of both parties; and
3. Prepare two copies of the supplement, one for each party, to enable the employer to disclose its copy upon request by the MOHRE.

Where the salary is to be permanently reduced, the employer has to apply to the MOHRE for the MOHRE labour contract to be amended.

C. Wage Protection System

One of the concerns around reducing salaries or placing employees on unpaid leave has been the resultant impact from a Wage Protection System and the fear that the MOHRE may impose a block on an employer’s establishment card. With the introduction of the Resolution, provided that employers follow the procedural steps outlined therein, we anticipate that the employer should not face any such issues via WPS given that it is a scheme administered by MOHRE.

In summary, the Resolution places a significant burden on employers who choose to reduce headcount during the current COVID-19 crisis. In the alternative, it sets out procedural guidance and affords some flexibility for employers in terms of other steps that may be taken to alleviate cash flow pressure in the current climate.

A number of aspects within the Resolution that require to be clarified and we will issue an updated alert in due course.

Key Contacts:

Samir Kantaria
Partner, Head of Employment & Incentives
s.kantaria@tamimi.com

Gordon Barr
Partner, Employment & Incentives
g.barr@tamimi.com

Ivor McGettigan
Partner, Employment & Incentives
i.mcgettigan@tamimi.com