How can Employers in the UAE Reduce Negative Business Impact during the Covid-19 Pandemic?

 

Dubai, 5th March, 2020

This legal briefing looks at practical measures that employers can implement in order to reduce negative business implications resulting from the Covid-19 outbreak in the UAE.

I.    What is the current situation?

Since the outbreak of Covid-19 continues to unfold, employers all over the world are adapting to the situation and try to safeguard their business continuity, while, at the same time, trying to make sure that their employees are safe.

The UAE government has implemented several measures in order to stop the spread of Covid-19 in the UAE, including the closure of commercial establishments (excluding outlets such as grocery stores, supermarkets, cooperative societies, and pharmacies that provide for the basic needs of residents), as from 25th March 2020 until 8th April 2020.

The Ministry of Human Resources and Emiratisation (“MOHRE”) further issued Ministerial Resolution 281/2020, requiring private sector entities to adapt remote working, with only the minimum amount of staff necessary being physically present (to a maximum of 30 %) in offices. This restriction is now in place until 9th April 2020, subject to further notice.

Other important measures implemented by the UAE government are:

  • On 11 March 2020, the Dubai Municipality (“DM”) through a circular directed all businesses to increase cleaning and disinfection at their premises.
  • On 15 March, the UAE government advised all governmental employees to work remotely.
  • On 18 March 2020, the UAE also imposed mandatory 14-day quarantine for people entering the country.
  • On 19 March 2020, the UAE banned the entry of its resident visa holders while suspending all sorts of labor permits, and visas on arrival.
  • On 23 March 2020, the Ministry of Health and Prevention (“MOHAP”) and the National Emergency Crisis and Disaster Management Authority (“CEMA”) announced the temporary closure of all malls and markets, further urging residents to remain in their homes unless necessary.
  • On 26 March 2020 movement was further restricted in keeping with the country wide sanitation program.
  • On 26 March 2020, the UAE has issued Ministerial Resolution No. 279 of 2020 to regulate Employer-Employee relationships and ensure employment stability in the private sector during the ongoing restrictions amid the Covid-19 pandemic (“Ministerial Resolution 279/2020”).

Considering these measures companies in the UAE should review their business continuity plans and start working on detailed contingency plans.

II.   What can employers do in order to reduce negative business implications?

Ministerial Resolution 279/2020 provided employers with guidance as to which practical measures can be taken in order to ensure stability of their business and safeguard the rights of their employees, who are equally affected by the Covid-19 crisis.

The Ministerial Resolution 279/2020 is applicable to non-Emirati employees only and applies to companies that are registered with the MOHRE. It provides the following options, which will be assessed in more detail below:

i) Remote Working

ii) Paid Leave

iii) Unpaid Leave

iv) Temporary Reduction of Salary; and

v) Permanent Reduction of Salary.

Under the Ministerial Resolution 279/2020, employers are required to implement all the measures in a chronological order starting with the first step by enforcing remote working and only as a last resort they can implement the salary deductions.

A timeline related to the separate measures was not mentioned in the Ministerial Resolution 279/2020 and it is yet to be seen how these measures will be implemented by employers from a time perspective.

The UAE Labour Law will continue to have precedence over the Ministerial Resolution 279/2020 and any measure taken by an employer under it must conform to the provisions of the UAE Labour Law.

1.Can an employer request its employees to work from home?

Ministerial Resolution 279/2020 states this measure as first step to be implemented by employers in order to reduce negative business implications. This is in line with Ministerial Resolution 281/2020 where employers are requested to implement remote working for a minimum of 70 % of their employees.

The restrictions on movements and people contact requires employers to allow their employees to work remotely. Most multinational companies already had contingency plans in place well ahead of the Covid-19 crisis, but most local businesses had to start implementing the new ways of working within a very short period of time in order to comply with the directives of the UAE government.

For employers where the nature of their business allows such remote work, this can be considered an important step in order to

  • guarantee business continuity during the Covid-19 crisis,
  • adhere to the government implemented measures, and
  • ensure safety of their employees.

2.  Can an employer request its employees to take their annual (paid) leave during the COVID-19 outbreak?

In cases where the remote work is not sufficient to reduce negative business implications, e.g. where working remotely is impossible due to the nature of the business or where the workload has diminished considerably due to the Covid-19 crisis, employers may consider requesting their employees to take paid annual leave.

As per article (76) Labour Law, the employer may at his discretion determine the date for commencement of annual leave and, when necessary, he may decide to divide the leave into two parts at the most. Hence, employers may order their employees to take all or part of their paid annual leave during the Covid-19 crisis.

3. Can an employer request its employees to take unpaid leave?

As the result of business closure and decline in productivity many businesses are considering requesting their employees to take unpaid leave in order to reduce the amount of salaries payable during the business closure. Ministerial Resolution 279/2020 makes clear, that such measures cannot be taken without the consent of the employee.

Where employers face critical losses that are specifically related to the current Covid-19 crisis, it is essential to communicate the same to their employees in order to find an amicable solution. When implementing unpaid leave, employers require a written agreement which must be in line with UAE labor law and such agreement should be signed by both parties.

4. Can an employer impose a temporary or permanent reduction of salary?

Under the Labour Law, employers are not allowed to unilaterally impose salary reductions upon the employees, be it temporary or permanent.

Any such action shall only be taken with prior consent of an employee and upon reaching an amicable agreement.

When implementing reduction of salary, employers require a written agreement with the employee which must be in line with UAE labor law and such agreement should be signed by both parties.

In addition, Article 5 of Ministerial Resolution 279/2020 states, that such agreement must be registered with MOHRE.

5. Can an employer terminate an employee based on the current circumstances resulting from the Covid-19 pandemic?

In absence of any specific provisions in the UAE Labour Law dealing with the situation of a pandemic, employers under Article 117 can terminate employment contracts with an unlimited period, for a valid reason at any time after the conclusion of the contract by giving written notice respecting the contractually agreed notice period to employee.

However, employers will need to consider whether a pandemic situation would be deemed as a valid cause under the Labour Law. In case that the UAE labor courts do not consider this a valid cause for termination such a dismissal will give rise to arbitrary dismissal claims of maximum 3 monthly gross salaries.

Article 3 of Ministerial Resolution 279/2020 further provides protection of employees’ rights in circumstances where an employer requires to terminate employees due to the Covic-19 crisis.

In such cases, the employer must continue to provide such terminated employees’ housing and all of their entitlements (except their basic salary) until the earlier of

  • the employee being able to exit the UAE or
  • obtaining the necessary authorization to work for another company or
  • the repeal of the Ministerial Resolution 279/2020 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.

This is especially important for companies that were in the process of terminating employees prior to the Covid-19 crisis, e.g. where employees are in their notice period, upon issuance of Ministerial Resolution 279/2020 or for companies that intended to liquidate the company and were in the process of terminating its employees.

It is not clear what the consequences of Ministerial Resolution 279/2020 will be for these cases, but it can be assumed that these cases fall under Ministerial Resolution 279/2020 as well.

Article 3 and 7 of Ministerial Resolution 279/2020 state further that employees affected by the Covid-19 crisis may register in the virtual labor market system, allowing them to find other job opportunities with registered employers. Employers seeking to hire new employees are also asked to register in the virtual labor market system (www.mohre.hyrdd.com).

III.    Conclusion

The Ministerial Resolution 279/2020 is silent on the practical implementation of above stated measures and it is yet to be seen how these measures will be implemented and if any additional implementing regulations will be issued.

However, at this stage it can safely be assumed that Ministerial Resolution 279/2020 is in no way giving unilateral powers to the employers to carry out measures such as ordering unpaid leave or reduction of salaries.

Employers are advised not to take any drastic steps in an attempt to cut costs or in response to loss of productivity. Any steps taken should be in line with the relevant laws and shall not infringe rights of the employees.

Before initiating unpaid leave requests, salary cuts or termination of employees due to the current Covid-19 situation, a thorough legal review of the situation of the company and the employee relationships should be undertaken to avoid or at least minimize further damage to the company. Any additional agreement with the employees in this regard needs to be drafted thoroughly in order to fulfil the legal requirements. The team of Schlüter Graf Legal Consultants is specialized in these matters and can support you in these challenging times.

The regulatory framework is changing with the development of the crisis and new regulations may come into effect in the next weeks and months. SCHLÜTER GRAF will monitor the situation closely and will share updates whenever available.

Although SCHLÜTER GRAF Legal Consultants make every effort to provide correct and up to date information in their newsletters and briefings, they cannot take responsibility for the accuracy of the information provided. The information contained in this briefing is not meant to replace a personal consultation with a qualified lawyer. Liability claims regarding damage caused by the use or misuse of any information provided, including information which is incomplete or incorrect, will therefore be rejected, unless this misinformation is deliberate or grossly negligent.

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