UPDATE: How UAE Employers Can Support their Business during COVID-19 Outbreak

On 26 March 2020, and in view of the declared nationwide state of emergency due to COVID-19, the UAE Ministry of Human Resources and Emiratisation (“MOHRE”) issued Ministerial Resolution No. (279) of 2020 on Employment Stability in Private Sector during the Period of Application of Precautionary Measures to curb the Spread of Novel Coronavirus (“New Decree”). The New Decree primary purpose is to help business owners in the UAE to protect their business and develop a contingency plan to prepare for a range of eventualities regarding the business impact of COVID-19, through providing further guidance to the private sector on certain topics already regulated under UAE Federal Law No. 8 of 1980 (“UAE Labour Law”). The New Decree would only be valid during the period of the precautionary measures to overcome this pandemic disease and protect the future of the country.

The New Decree does not apply to UAE nationals, but rather to foreign employees only. The New Decree primarily allows private sector employers and business units that are affected by the precautionary measures to curb the spread of COVID-19 to apply gradual and progressive measures in conjunction with their employees to address and tackle the negative economic impact on their businesses. These measures are as follows:

1. Implementing a remote work system
2. Granting employees paid leave
3. Granting employees unpaid leave
4. Temporarily reducing salaries during the aforementioned period
5. Permanently reducing salaries

Further, as the business owners in the UAE are facing unprecedented challenges amidst the ongoing COVID-19 crisis and with no certainty as to when this crisis will end, the New Decree provides some relief by enforcing the above actions while taking into consideration the following:

Temporary Salary Reduction: under article 5 of the New Decree, businesses seeking to temporarily reduce the salary of an employee during the said period shall sign an additional annexure provided by the MOHRE. The validity of this temporary annexure is limited to the agreed upon term, or as long as this New Decree remains valid, whichever is earlier.

Permanent Salary Reduction: under article 6 of the New Decree, businesses seeking to permanently reduce the salary of an employee should first obtain the MOHRE’s approval by applying for “employment contract details amendment” service.

Redundant Employees: The New Decree does not openly address the redundancy option, or introduce new regulations or obligations on the employers’ side who wishes to make employee(s) redundant. Though, the New Decree directs employers who have more staff than needed (impliedly means who wants to make employees redundant), they must register the additional staff on the virtual job market, so that they can be recruited by other businesses. Meanwhile, these employers will remain obliged to provide employees with accommodation, healthcare insurance and other employment commitment, except for salary, as long as they are in the country or until they are hired by other employers.

While some businesses may think that this is a reliable/economic option to their operation during this critical period (which will allow them to make partial redundancy), we believe that the regulator’s view of this provision is in favour of the employee for the following reasons:

• the employer will let go of the employee and continue to pay for his accommodation and other living allowances, which will be sufficient for the employee to survive during this critical period;
• the employer does not know for sure when the Application of Precautionary Measures period would last during which it keeps paying the allowances-, in order to calculate its continuing loss; and
• it is in the best interest of the employer not to make the employee redundant and seek one of the options under article 2 of the New Decree.

New Hires: under article 4 of the New Decree, business seeking to recruit during the suspension of overseas hiring shall find reasonably suitable replacement locally and apply for internal work permits through the MOHRE online system.

The main purpose behind this recommendation is to allow sectors that have high demand for hiring now to be able to secure its needs from other sectors, which have been affected by the COVID-19 financial distress.

Job Seekers: under article 7 of the New Decree, job seekers in the UAE shall register with the virtual job market and apply for available opportunities based on their qualifications and experience.

In conclusion, UAE employer strategies to address the crisis may implicate a variety of employment laws and regulations. This could lead to flooding the UAE courts with employment cases. Accordingly, business owners need to consider reasonable measures to protect their businesses and minimise losses.

Unlike the wider community interpretation of the legal effect of this New Decree on the employees in the UAE, we believe that it aims to provide several creative solutions to the employers that may reduce the redundancy decisions as a first option, rather than facilitating or allowing employers to take extreme measures against their employees.

Please note that the above is only a summary of the New Decree and not a legal advice, as we expect further guidance to be issued by the MOHRE in relation to the application of this New Decree and the obstacles that will rise once applied.

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