As redundancy is not defined under the law in the UAE, there is often a lot of uncertainty and misunderstanding about its legality.
A redundancy dismissal is a situation where the employee gets dismissed. This dismissal occurs due to the reduction of the requirement of the person’s post in the employment. Redundancy dismissals are terminations that do not happen because of the employee’s poor performance or misconduct. It is a dismissal that happens as a result of a change in business requirements, a change in workplace location, or the closing down of an employing institution.
The courts have in the past acknowledged that where a business dismisses an employee for a cost-saving reason, this can amount to a legally fair and valid reason for dismissal under article 117 of the UAE Labour Law but there is no concept of redundancy in law.
The labour law provides that a company may terminate an unlimited term of employment contract for a valid reason at any time. The company must provide at least 30 calendar days’ notice of termination to the employee (or notice period accordingly as mentioned in the contract of the employee). Different rules apply to the termination of a fixed-term employment contract.
The process of redundancy
The redundancy process should be established as per the situation and the size of the workforce, which the process will affect.
Meeting should be conducted with all the employees and individual meetings with all the affected employees. In the process, the alternatives must be considered by the company and employees to redundancy, for example, changes in employee benefits, alternative roles within other parts of the business, or a reduction in working hours or shift to a part-time working arrangement.
The company should provide the employees with letters and formal updates during the process, and appropriate documentary evidence relating to the redundancy and present economic situation.
An employer must set out clear reasons for the redundancy dismissal, supported by evidence in a fair and thorough process. It is essential that the grounds for dismissal and the process are supported by clear documentary evidence. In this way, the employer will be able to defend any subsequent labour claims.
The consultation process and documentary evidence can be issued to the employee in English. If a dispute is later pursued before the Labour Courts, the employer will need to translate the documentation into Arabic to submit before the courts.
There is no requirement to pay any redundancy payment to employees. The standard statutory termination payments can be made. Such as:
Notice pay which is a minimum of 30 days, subject to the employee completing their probationary period
End of service gratuity is subject to the employee completing one year’s service
Payment for accrued and untaken annual leave
Repatriation flight, subject to an employee returning to their home country; and
Any other contractual payments arising out of the termination of employment.
Compensation for arbitrary dismissal
Along with the above-mentioned payments, the Labour Courts may also award employees with compensation for “arbitrary dismissal”. An arbitrary dismissal is the unfair and unlawful dismissal of an employee, who is subjected to an unlimited term employment contract, as determined by the Labour Court. In such circumstances, the court may award the employee up to three months’ remuneration as compensation.
As there is no concept of redundancy in the UAE laws, the company that is not capable of providing evidence of the dismissal will always be at risk of an employee claiming for arbitrary dismissals in a redundancy situation. On the other hand, if the employer has evidence to support redundancy, the employer can defend the claim of arbitrary dismissal and avoid the compensation awarded by the dismissed employee.
Restructuring in the UAE
Redundancy dismissals in the UAE can be challenged as several expats are residing in the country for employment purpose and their visa sponsorship depend on it. Due to this companies may wish to consider restructuring before entering into a redundancy procedure, which enables them to retain their skilled workforce while saving on costs.
Restructuring can be done in various ways such as transferring staff into different roles within the business, moving staff around regional or global offices where capacity is required, reducing working hours for a temporary period, removing non-essential benefits from employment terms for a temporary period or asking staff to take leave during periods where the business is quieter.
Wherever there are financial challenges and the business needs to cut costs the main objective should be to avoid a dispute or litigation with current or exiting staff.
The UAE Ministry of Human Resources and Emiratisation (the MOHRE) published the Ministerial Decree Number 279 of 2020 that allows for restructuring the contractual relationship between employers and employees during the implementation of the preventive measures taken to reduce the novel coronavirus’s spread.
