Zaid: Hello. Welcome and welcome back to Lawgical with LYLAW. This is Zaid. I’m a legal assistant at the firm, and I do some behind the scenes work for Lawgical. I wanted to chime in for this episode to let you know that we have some interesting changes coming up. We’re going to shift the format of Lawgical to a more Q&A based discussion with our Managing Partner, Ludmila Yamalova. Ludmila will be answering some questions that we’ve received from listeners. If you would like some of your questions to perhaps be featured in future episodes of Lawgical, please feel free to reach out to us on our various social media platforms and we’ll notify you if your question gets selected for an upcoming episode.
In this upcoming segment, Hannah is going to ask Ludmila one of the questions that we’ve received from our listeners. The names have been changed in the interest of confidentiality, but either way, we hope you enjoy this upcoming segment and our latest format.
Hanan: Ludmila, we received a question from one of our listeners, Ahmed. He asks the following: I am five months into a limited contract with a six-month probation period. The owner sends me an email saying she wanted to cut my salary by 15% due to financial problems in the company. I sent an email back saying I didn’t accept. She then replied saying that she cannot pay the salary from her personal finances, and as I was still on probation, I could just give one month’s notice and leave. She never actually reduced the salary for the salary date. I have since found another job, so a week ago I resigned, giving one month notice as requested. She is now saying she wants to charge me the 45 days for breaking the contract and also will put an employer ban on me for one year if I leave before the summer.
Considering I have these emails from her, can she do this? What is the point of having a probation period if you cannot resign within it? What are my options? Do I have to lose the job I have found as she can ban me? Or do I make a complaint at Labor?
These are multiple questions that maybe we can address all under the same umbrella.
Ludmila Yamalova: It’s correct. This is a very multifaceted question. I will try to break it up as much as possible, answering the most relevant aspects of the question.
With regard to the first component, and that’s the one regarding the compensation for breaking the contract early, there are two parts to it. (1) If you terminate the contract during the probation period, it is correct, probation by definition involves a party’s freedom to terminate the contract without any notice or compensation to one another for the most part. In your case, if you are terminating during your probation, then it is true you do not even need to give notice to the employer, and you can terminate with immediate effect. There is no compensation related to a so-called early termination because of probation.
However, since there is a question of the 45-day penalty was introduced in this question, I will address the other aspect of this or the potential scenario of this question, and that is in the event either probation has already ended or in fact somehow the probation was much shorter or you had no probation, the 45-day compensation that the employer referred to in fact is a concept in the U.A.E. labor law that refers to a penalty imposed on the employee for terminating a limited contract early. This is obviously based on the presumption that the contract was in fact limited. If it was limited and you’re terminating it early outside of a past probation, then there is a concept in the law that allows the employer to ask for compensation up to 45 days or a month and a half of salary. However, what’s very important to highlight is that this remedy is in fact compensation to the employer for early termination. Compensation by definition means that it’s a subjective exercise and compensation means the employer in theory has to have suffered some kind of damage and then to be compensated for this damage. Who can determine whether (1) there was damage and (2) what the appropriate compensation should be? Really, it’s only the court. In fact, that’s exactly the law in the U.A.E. and that is that this 45-day penalty is not an automatic penalty that an employer can impose on the employee without a court order. In fact, the court order is required for the employer to demand that compensation and through the court process the employer will have to show that it suffered damages and that the damages were to the tune of warranting up to 45 days of employee salary to compensate for the damage. It may be that if this case goes to court, the court might decide that yes, in fact, there was a damage but the compensation for this damage was somewhere, let’s say, to the tune of two weeks versus 45 days.
Just to summarize quickly, the penalty on the employee for terminating the limited contract early is not an automatic penalty and, in fact, a court order is required for the employer to demand that compensation. That being said, it is quite common in the U.A.E. for employers to automatically deduct this sum, but the legality behind that practice I have explained. If it is an issue and it’s a substantial amount, I recommend that employees, first of all, educate their employers there at the companies, and second of all, if it is a substantial amount that they file a claim with the Ministry of Labor because it is a practice that would clearly be overruled. That’s with respect to early termination and the penalty.
The other part of the question is the listener asked about the employer’s threat to ban the employee from joining another company. What this refers to is what used to be called or known as an employee ban. This is a practice that existed in the U.A.E. for many, many years. It referred to companies exercising the option of banning someone from working for another company if they were to terminate a contract early. This practice existed in particular when the economy was very buoyant, and the talent pool was at a shortage. What a lot of employees would do is that they would jump ship quite regularly and they would accept a job for a certain amount and then allow that employer to pay for tickets and a visa just to come into the country, only to jump ship the next month. That practice in particular was in existence in order to deter employees from doing that.
Over the years and in particular perhaps over the last five years, the practice has more or less faded. In relevant terms, most employees will now not qualify for this particular ban, and that is anyone with a university degree and/or a position of a particular level will no longer be subject to an employment ban. Furthermore, the employment ban in particular is imposed by the Ministry of Labor. The Ministry of Labor is the governing authority for all companies that are set up under its umbrella which are, in relevant terms, DED companies or companies registered by the Department of Economic Development and they are often referred to as LLCs. The Ministry of Labor does not have jurisdiction over companies that are set up in the free zones and therefore employees that are set up in free zones. Therefore, even if somehow the company manages to impose an employment ban, that employment ban would only apply within the particular economic zone, i.e., the DED. Therefore, if your new job is in a free zone, then that ban will not apply. Similarly, if you’re working right now for a free zone and the employer is threatening to impose an employment ban, it’s just not possible. It’s more of an empty threat because the employment bans can only be done by the Ministry of Labor and not by any of the free zones. Therefore, if you are within the free zone, then you can basically dismiss that as a threat altogether.
Now with regard to the salary, you asked about the employer wanting to amend your salary and perhaps what the stance is and the U.A.E. law related to an employer wanting to amend the salary. Just like any contract, the terms of the contract can only be amended if all parties that are signatories to that contract agree to it. There cannot be a unilateral amendment of a contract. In this case, if you were hired on the basis of the salary being x and now the employer wants to amend that salary, they cannot do so without your approval. That is just the general rule. However, if you raise objections, for example, to the salary being amended, but the salary in practice is being amended and you continue to work for the company and continue to accept an amended salary, that can be considered as an implicit amendment of the contract by virtue of the fact that you have accepted the new salary, and therefore you may not be able to challenge this amendment in the future even if the correspondence or emails evidencing that you were challenging the amendment of the salary. The contract can be amended by practice and not necessarily by writing.
That sums up the legal aspects of this question. In relevant terms, we discussed probation and compensation for early termination of a limited contract, employment ban, and amendment of salary. Just in relevant parts, with regards to probation, there is no notice required. With regard to compensation for early termination of a limited contract, the penalty on the employee has to be approved by the court and so therefore the company does not have an automatic right to withhold 45 days of employee salary. With regard to the employee ban, it only applies to a very limited segment of the employee talent pool these days and only outside of free zones. With regard to salary, it can be amended even if it’s not in writing by practice.
Zaid: Hello again. This marks the end of this latest episode of Lawgical with LYLAW. Thank you for tuning in. We hope you like the new format. If you have any feedback or suggestions on how you would like the show to progress or if you have any questions that you would like us to address, please let us know via any of our social media platforms. Stay tuned for upcoming episodes. We have some exciting things planned, and we really hope that you enjoy the show as much as we enjoy making it. See you soon.
