Friday, February 10, 2017

UAE - The Importance of Employment Contracts

By Jack Fletcher, Associate, Rebecca Ford, Partner and Sara Khoja, Partner, Clyde & Co LLP

HR practitioners may be contemplating their "New Year To Do List". The start of the year is a good time to look at company contracts and policies and consider whether these need updating.
Whilst many employers in the UAE will be required to issue standard form contracts (either those by the Ministry of Human Resources and Emiratization, or by a free zone authority), it remains common for companies to also require their staff to sign company-issued contracts.

In this article we set out five key areas which employers in the UAE may wish to address in their company contracts to supplement any standard-form contract.

1 Duties, Obligations and Standards of Conduct and Performance

It is significantly harder to deal with conduct or performance issues if the employee can legitimately argue that they were never informed what was expected of them. In particular, in the event of a dispute, the UAE courts will take into account written terms. Employers are therefore encouraged to expressly set out an employee's duties and obligations in the contract in full.

2 Confidentiality

The duty of confidentiality features in a number of pieces of legislation relevant to the employment relationship, including the Labour Law, the Civil Code and the Penal Code. However, it is still important to highlight to the employee at the outset (i.e. in the contract) what exactly the employer considers to amount to confidential information.

3 Bonus/Commission Arrangements

Many disputes arise out of bonus or commission schemes that are not supported by clear contractual wording. Rules around how/when an employee qualifies for such payments, and in what circumstances any such payments with be withheld or even clawed back, are vital.

4 Termination

Most contractual disputes in an employment context arise following its termination. The contract therefore needs to be clear about what is and what isn't payable following its termination (or after notice to terminate employment has been given). This is particularly so in the UAE where employees often enjoy a range of benefits e.g. housing or flight allowances.

5 Post termination Restrictions

Under Article 127 of the Labour Law, restrictive covenants can be imposed on an employee if they are "limited with respect to the place, time and nature of work to the extent as is necessary to safeguard the lawful interest of business". This means they must be tailored to the specific employee and be reasonable and proportionate, otherwise they will not be enforceable.