Employment law in the Gulf

Published on
7 min read

Senior associate and employment law specialist Jack Fletcher, who has just returned from a five-year stint in the Middle East, looks at key similarities and differences between employment law in the Gulf and back in the UK.

Introduction

This briefing focuses on the labour law requirements in the six Gulf Co-operation Council (GCC) countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.  It does not address the separate legal jurisdictions of the various ‘free zones’ in the Middle East, for example the Dubai International Financial Centre in the UAE which has a very different employment law regime.

Contract of employment

Similar to the requirement under Section 1 of the Employment Rights Act 1996 to provide employees with a written contract of employment, so too employers in the GCC are required (and well advised) to enter into written contracts of employment with their employees.  The Labour Laws of each of the GCC countries include minimum requirements for what should be contained in contracts of employment and these requirements are not dissimilar to those provided for under section 1 Employment Rights Act 1996.

Under the Labour Laws in each of the GCC countries, the official language is Arabic, although given the large population of expatriate workers, employment contracts are commonly drafted in English (or indeed other languages), particularly in the UAE.  However, in the event of any dispute, the wording of any Arabic language contractual documents in existence will take precedence.  This is particularly important in jurisdictions where the relevant Labour Ministry requires employees and employers to enter into a standard form contracts issued by the Ministry, which are usually in Arabic or dual language format.  Organisations are therefore advised to consider having all employees sign dual language contracts in any event.

Where the local Labour Ministry does require employees and employers to enter into its standard form contract of employment, it is common for there to exist two employment contracts, an “internal” employment contract and the “official” standard form contract issued by the relevant Labour Ministry.  Where discrepancies exist between these two contracts the official contract will take precedence in the event of a dispute.

Another feature of employment contracts in the Middle East is the prevalence of limited (fixed) term contracts.  In some jurisdictions, Saudi Arabia for example, it is mandatory to engage expatriate workers on a limited term contracts.  However, limited term contracts can only be terminated prior to the expiry of the term if, potentially substantial, ‘early termination’ compensation is paid.  How this is calculated differs across the region but in some jurisdictions it can be as much as full pay for the remaining contractual period, in others it is capped at three months’ full pay.

Leave entitlements and working hours

Employees in GCC countries are generally entitled to annual leave, paid sick leave and maternity leave much in the same way as the UK based employees are, albeit the entitlements (particularly in respect of maternity leave and other “family-friendly” rights) can be substantially less (or non-existent; i.e. paternity leave does not exist in most jurisdictions). 

Statutory leave entitlements vary across the region but the applicable entitlement is always stated to be in addition to public holidays.  Public holidays in the GCC are more numerous than those in the UK and certain religious festivals can result in a two or even three day public holiday.  The exact timings of these public holidays are often not known in advance and are announced following moon sighting ceremonies performed in each of the relevant countries. 

One notable difference is the reduction in working hours (to 6 hours per day) during the holy month of Ramadan.  This reduction in hours, with some exceptions, applies to all employees (i.e. not just those who are fasting).  Employers are not permitted to reduce pay during this period.  For the rest of the year, working hours are generally capped at 8 or 9 per day and, employees who work longer hours are technically entitled to receive overtime pay.  Some exemptions exist in respect of higher level management employees, but these are interpreted narrowly.

Day to day management of the employment relationship

Generally speaking there is no statutory obligation to deal with employee grievances.  For obvious reasons, many employers do choose to publish grievance policies and commit to dealing with employee grievances in accordance with those internal procedures. 

By contrast, the labour laws across the GCC do all contain statutory disciplinary procedures.  These statutory provisions impose time limits on dealing with disciplinary issues, require disciplinary invites to be issued in writing and compel decision makers to conduct an investigation to the “defence” put forward by the employee.  One notable distinction is that these statutory provisions do not generally include any scope for an appeal. 

The position with regards to performance management is less clear but to the extent that disciplinary sanctions including warnings and dismissal are issued as part of such processes, these will be subject to the same provisions requiring a specific process to be followed before such sanctions can be issued. 

Termination of employment

Some readers may be surprised to hear that similar protections against dismissal exist in the GCC countries as they do in the UK.  Specifically employers, generally speaking, are required to have a valid reason for the termination and the relevant statutory process must be followed.  In the absence of a valid reason and/or where there are procedural failings, a claim for “arbitrary” dismissal is likely to succeed.  However, the compensation that successful claimants stand to be awarded differs across the region.  For example, in the UAE it is capped at 3 months’ full pay, whereas in other jurisdictions, Oman for example, there is no specified cap, rather the Labour Court can award any compensation that it considers appropriate in the circumstances with three months’ pay being the minimum amount. 

However, such claims are relatively rare.  One of the main reasons for this is the majority of employees employed by multinationals in the region are likely to be expatriate workers, some of these will be Arab expats (i.e. from countries such as Lebanon or Egypt) but many will be Western expats (i.e. from the US, UK, other parts of Europe and from South Africa and Australia).  For such individuals the prospect of bringing legal proceedings in the GCC countries is likely to be somewhat intimidating.  These proceedings are conducted entirely in Arabic and all documents that are submitted through the courts must be translated into Arabic.  Potential claimants would therefore be required to seek Arabic-speaking legal representation which has obvious cost implications.   The widespread use of settlement agreements (notwithstanding the statutory prohibition on contracting out of the Labour Law that exists in most jurisdictions) is another reason for the relatively low number of claims.

Most Labour Ministries around the region do offer pre-claim mediation.  Indeed, in some jurisdictions employees cannot formally submit Labour Court proceedings until they have first submitted a “complaint” through the relevant Labour Ministry.  On receipt of the complaint, the Labour Ministry will invite the parties to a conciliation meeting, often with very little advance warning.  If the parties refuse to engage, or settlement cannot be reached, only then will the employee be permitted to submit a Labour Court claim.

A further important point to note is that a system of statutory severance payments exists in the GCC.  Known as ‘end of service gratuities (or indemnities)’, these payments are calculated according to set formulae based on length of service.  The exact calculation and the eligibility criteria differ slightly from country to country.  Where an end of service gratuity is payable, such payment would be in addition to any ‘arbitrary dismissal’ compensation awarded by a Court or paid under the terms of a settlement agreement.

Post termination restrictions

Most of the Labour Laws across the GCC expressly recognise an employer’s ability to impose post-termination restrictions.  Generally speaking the drafting of such restrictions is subject to similar requirements as those that exist in the UK, specifically such restrictions must be reasonable and proportionate and limited in scope and geography so as to not amount to an unfair restraint of trade. 

As a general rule of thumb restrictions that are deemed reasonable in the UK are likely to be deemed reasonable in the GCC, however enforcement can be more difficult, notwithstanding the presence of appropriately drafted and enforceable post-termination restrictions.  Specifically the key barrier to effective enforcement is the fact that in most jurisdictions within the GCC injunctions are not available as a remedy.  As such, an employer’s only recourse is for a claim for damages, which is often seen as an inadequate remedy.  In order to successfully claim these damages an employer must be able to demonstrate that enforceable restrictions were breached and that the breach directly caused the employer a quantifiable loss.

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