UAE Federal Law No. 33 of 2021 to Bring Much Needed Reform to The Labor Market

On Monday, 15 November 2021, the Ministry of Human Resources and Emiratization announced Federal Law No. 33 of 2021 which was issued by His Highness Sheikh Khalifa bin Zayed Al Nahyan, president of the UAE. The new law, which will come into effect on 2 February 2022, will bring a number of much needed changes to protect employee rights in the ever-growing labor market and increase flexibility and competitiveness.The law sets out limited term employment contracts only for a maximum period of 3 years, subject to renewal. Where the parties continue with the relationship after the expiry of the initial term, the contract will be deemed to have been automatically renewed on the same terms and conditions.

According to the new law, employers must give 14 days’ written notice before terminating an employee during probation period. Similarly, an employee must give a one-month notice if planning to change employment during probation. If either of the parties fail to observe the requirement of written notice as aforesaid, they will have to financially compensate the aggrieved party with a pay commensurate with regular workdays of the remaining notice period.

The new law stipulates that probation period cannot extend beyond six-month which will be calculated as part of the overall service. Upon the successful completion of probation period, employers are expected to observe work conditions of the employees as stated in the contract

The new law further prohibits an employee under probation period from leaving the UAE without giving 14-day notice. Failure to do so will result in a one-year ban on the employee from obtaining a work permit. The law also prohibits employers from seizing employees’ official documents or charging workers recruitment costs in any from.

The new law also clarifies non-competition clause by stipulating that such restrictions should be limited in time, place and type of work and should not exceed a period of 2 years from the expiry of the employment contract. Furthermore, the law stipulates that non-compete restrictions will be void in the event the employment relationship is terminated due to the employer’s breach of the employment contract. Pursuant to the law, exemptions to the application of the non-compete provision will be clarified under executive regulations.

The law makes extreme departure from the current labor law by allowing employees to work for more than one employer in the UAE. While less clear at present, the new law outlines that employees can pursue employment opportunities in the form of part-time, temporary, or flexible work. What is clear is that these changes will safeguard employee rights while allowing them to engage in more than one job and use their skills differently.

The new law also benefits employers by allowing for employers to hire workers with expired contracts, but who are still in the country, through simple and flexible procedures. This is expected to reduce employers’ operating costs and improve their ease of doing business by making use of different talents and capabilities suitable to their need.

We shall expect further changes specifying the responsibilities of both parties and benefits due under each work model with the introduction of executive regulations to implement the law. With the executive regulations, we might also see the introduction of additional models of work, such as self-employment and condensed working weeks.

UAE Federal Law No. 33 of 2021 to Bring Much Needed Reform to The Labor Market