United Arab Emirates

    1.1 In what circumstances does the employee transfer law apply?

    There are no transfer laws in the UAE in the event of employment transfer from one entity to another. Accordingly, in order to effect a ‘transfer’, employment with the current employer must be terminated and the employee will be engaged with the new employer.

    There will also need to be a cancellation of the existing residency visa and employment permit with the current employer (including any dependant visas) and an application for new visas and permits with the new employer.   

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    Author: Al Tamimi & Co

    Date: January 2017

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    On the sale of a business, employees will not automatically transfer as an asset. Instead, where employees will form part of the assets for the purpose of a business sale, their employment must be transferred by termination and re-engagement of the employee. This can cause difficulties the employer must obtain the employees’ consent to be ‘transferred’.  

    (b) Outsourcing

    The same applies upon outsourcing as on the sale of a business. Employees do not transfer automatically but must be transferred by termination and re-engagement. Again, their consent is required.

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    Author: Al Tamimi & Co

    Date: January 2017

    1.3 In outline, what are the implications of the employee transfer law?

    There are no transfer laws in the UAE in the event of employment transfer from one entity to another. In order to effect a ‘transfer’, employment with the current employer must be terminated and the employee engaged with the new employer. Accordingly:

    • employees who ‘transfer’ between entities may be offered new (and potentially less favourable) terms with the new employer;
    • there are no applicable considerations in respect of trade unions or collective bargaining agreements;
    • there is no requirement to consult employees in advance as to any ‘transfer’;
    • employees must be notified and ultimately consent to any ‘transfer’;
    • given the termination of employment involved in a ‘transfer’, employees may claim against the transferor for any amounts owed (e.g. outstanding pay, accrued but untaken annual leave, payment in lieu of notice and arbitrary dismissal compensation etc);
    • the dismissal required as part of the ‘transfer’ may be deemed to be without lawful reason and this may lead to claims for arbitrary dismissal compensation.
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    Author: Al Tamimi & Co

    Date: January 2017

    2.1 Who transfers?

    The number and identity of ‘transferring’ employees will be determined by the transferor and transferee as part of commercial negotiations. Employees do not have an automatic right to transfer even where, for example, the employee is responsible for the part of the business being purchased as part of a business sale.

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    Author: Al Tamimi & Co

    Date: January 2017

    2.2 Can employees object to transferring?

    Since a ‘transfer’ involves a termination and re-engagement, employees can object to it simply by refusing to accept employment with the transferee.

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    Author: Al Tamimi & Co

    Date: January 2017

    2.3 What happens to terms of employment contracts?

    Employment terms do not automatically transfer. All rights and obligations under the employment contract terminate as of the agreed termination date. The transferee must offer new contracts of employment (with its preferred terms and conditions), which can either be accepted or rejected by the employee.

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    Author: Al Tamimi & Co

    Date: January 2017

    2.4 What about other employee benefits?

    The transferee is not required to maintain contractual benefits or to provide similar benefits. 

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    Author: Al Tamimi & Co

    Date: January 2017

    2.5 What happens to pension rights?

    Nationals of the Gulf Co-operation Council (‘GCC’) are eligible to participate in the state pension scheme and employers are required to register and pay contributions on behalf of those individuals. Upon ‘transfer’, employees must be de-registered from the transferor’s pension number and re-registered under the transferee’s number.

    There is no state pension scheme for expatriates. Where the transferor has a company-maintained pension scheme for its employees, it can agree with the transferee as to arrangements post-‘transfer’. Ordinarily, the employee’s participation in the scheme ceases after transfer.

    More commonly, employees are entitled to receive an end-of-service gratuity (‘ESG’) payment in lieu of pension contributions. The amount of the ESG payment will depend upon an employee’s length of service and his or her final basic salary prior to termination. Broadly however an employee will be entitled to:

    • 21 calendar days’ basic salary for each of the first five years of service; and
    • 30 days’ basic salary for each additional year
    • up to a maximum of two years’ salary.

    Strictly speaking, employees are entitled to be paid in respect of accrued ESG upon ‘transfer’. However, in some circumstances, the parties agree to roll over accrued ESG and pay out on termination of employment with the transferee.

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    Author: Al Tamimi & Co

    Date: January 2017

    2.6 What liabilities transfer?

    The transferor will be responsible for any liabilities referable to employment before the transfer.  No act or omission of the transferor will be treated as an act or omission of the transferee (other than in circumstances where the parties have expressly agreed in writing that obligations will be assigned to the transferee). 

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    Author: Al Tamimi & Co

    Date: January 2017

    2.7 Do collective agreements transfer?

    Collective agreements are not used in the UAE.

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    Author: Al Tamimi & Co

    Date: January 2017

    2.8 How does the transferee obtain information on transferring employees?

    Where the terms of ‘transfer’ are negotiated between the transferor and transferee (e.g. on a business sale) there is usually an agreement as to provision of information on transferring employees and the terms on which they work. 

    However, there is no statutory requirement for the transferor to provide information in respect of transferring employees.

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    Author: Al Tamimi & Co

    Date: January 2017

    3.1 Can employers make changes to employment contracts?

    Transferees can and often do make changes to the terms and conditions offered to employees upon ‘transfer’.

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    Author: Al Tamimi & Co

    Date: January 2017

    3.2 When can employers safely dismiss employees before or after a transfer?

    There is no way to safely dismiss employees at any time (unless there is a lawful reason which relates to the employee’s performance and the correct procedure is followed by the employer prior to dismissal). No termination of employment which forms part of a ‘transfer’ is without risk, given that any dismissal in this context will rely on a reason not connected to the employee’s performance.

    Claims for arbitrary dismissal may be made by any employee irrespective of length of service. In cases of arbitrary dismissal, the Labour Court may award compensation of up to a maximum of three months’ pay (i.e. total salary including allowances), in addition to all other statutory and/or contractual termination payments.

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    Author: Al Tamimi & Co

    Date: January 2017

    4.1 Who must employers consult?

    There is no requirement to consult as part of a ‘transfer’.

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    Author: Al Tamimi & Co

    Date: January 2017

    4.2	What information must they provide?

    Given that employees will be required to sign new employment contracts in order to ‘transfer’, it is good practice to provide information about the fact of the transfer, when it will occur and the reasons for it, plus any new terms and conditions which will apply post-transfer.

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    Author: Al Tamimi & Co

    Date: January 2017

    4.3	What does consultation involve?

    There is no requirement to consult as part of a ‘transfer’.

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    Author: Al Tamimi & Co

    Date: January 2017

    4.4	How long does consultation last?

    There is no statutory requirement to consult. However, as a matter of good practice, any information should be provided in sufficient time to issue statutory or contractual notice (whichever is longer) to employees prior to the ‘transfer’ taking place.

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    Author: Al Tamimi & Co

    Date: January 2017

    4.5	What happens if an employer fails properly to inform or consult?

    There are no adverse legal implications for failure to consult, as it is not mandatory to consult. However, failing to notify or consult with employees as soon as possible prior to the ‘transfer’ may cause practical difficulties with employees, who may then refuse to transfer.

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    Author: Al Tamimi & Co

    Date: January 2017

    5.1	Identify up to three issues in this country of which employers should be aware?

    First, there is no automatic transfer of employees in the UAE. Therefore, effecting a ‘transfer’ involves employers in significant work on the practicalities associated with ‘transferring’ employees.  

    Second, employees are required to have their residence visas (if applicable) and work permits cancelled and new approvals must be obtained. This means there is a period between cancellation and obtaining new approvals within which employees cannot lawfully work. Therefore, wherever possible, employees should be transferred in tranches to enable work to continue without interruption as far as possible.

    Third, employees may refuse to take up employment with the transferee, which may cause difficulties where particular employees are required, for example, to operate machinery or deal with specific projects.   

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    Author: Al Tamimi & Co

    Date: January 2017

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    Not applicable.

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    Author: Al Tamimi & Co

    Date: January 2017

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    Not applicable.

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    Author: Al Tamimi & Co

    Date: January 2017

     

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