UAE Labour Law reforms: Enhanced dispute resolution and tougher penalties

The UAE Government has updated the UAE Labour Law (Federal Decree-Law No. 33 of 2021) to enhance dispute resolution processes and to significantly increase the penalties for non-compliance. Below are some key points that employers need to know.

Labour disputes

• The time limit for employees to start a claim relating to a breach of the UAE Labour Law has been increased from one year to two years and the period will start to run from the effective date of termination of employment.
• Labour disputes with a claim value of less than AED 50,000 that have been adjudicated by Ministry of Human Resources and Emiratisation are now referrable to the Court of First Instance instead of the Court of Appeal.
• The time period for the Court to then adjudicate such cases has been increased from 15 working days to 30 working days.

Increased fines

The fines for breaches of the UAE Labour Law have been increased dramatically, from a maximum of AED 200,000 to now ranging between AED 100,000 and AED 1,000,000 for the following:

• Employing a worker without a proper work permit.
• Bringing a worker to the UAE on the pretext of a job offer but without providing them with actual employment.
• Closing a business without settling employee rights and entitlements.
• Engaging in activities to evade labour laws, such as fictitious employment.
• Illegally employing a minor.

These changes signal a clear intention to make the justice system more accessible for employees and to encourage swifter resolution of disputes as well as underscoring the UAE's commitment to compliance enforcement.

What should employers do?

Employers are well-advised to undertake an urgent audit of their current employment practices to identify and rectify any areas of non-compliance to avoid incurring the severe punitive financial repercussions that lapses may lead to, especially as employees will be able to bring claims for issues dating back over two years.

If you have any questions on these developments, please contact your usual contact in the Middle East employment team at Stephenson Harwood.