Can employers terminate employees due to COVID-19?

With the recent outbreak of the COVID-19 Virus, the hardest hit are establishments within the hospitality, F&B and retail industry, with many restaurants, gyms and many other businesses being forced to shut their doors temporarily or at least downscale their production and/or services drastically.

The greatest expense for most businesses is the payment of employee salaries. In circumstances where businesses are sometimes not operating and employees are not working as a result of the COVID-19 outbreak and the resulting measures adopted by the UAE government, certain queries arise.

BSA provides answers to these queries in an effort to allow employers/businesses to curb their losses and employees to know their rights.

Employment provisions relating to the COVID-19 outbreak

At the outset, it is important to note that, to date, no special provisions/exceptions have been implemented to govern the relations between (1) the establishments that have been affected by the mandatory closures relating to the COVID-19 outbreak (or any establishment facing the direct/indirect repercussions of the pandemic); and (2) their employees.

BSA has reached out to the MOHRE and they have confirmed that their stance thus far is that the COVID-19 outbreak has not been declared a force majeure event and in the absence of special provisions relating to the exceptional measures taken as a result of the COVID-19 outbreak, the status quo remains and both employers and employees will be bound by their rights and obligations as outlined in Federal Law no. 8 of 1980 (as amended) (the ‘Labour Law’) and their relevant employment agreements.

In light of this unprecedented global pandemic, it is preferable for employers and employees to enter into discussions, negotiate and agree upon terms that are acceptable to all parties involved.

Can an employer terminate an employee under the current circumstances resulting from the COVID-19 pandemic?

Yes, however, such employer will be at risk of facing arbitrary dismissal claims.

In the absence of specific provisions adopted as a result of the COVID-19 outbreak, employers can terminate their employees, however, such terminations will be governed by the provisions of the Labour Law and the relevant employment contract(s). Any such employers will likely be required to settle the employees’ dues (including but not limited to payment in lieu of notice) and will be at risk of facing arbitrary dismissal claims. In circumstances where the COVID-19 has not been declared a force majeure event, employers will need to assess this risk in light of the Labour Law.

The same rules will apply as regards limited term employment contracts given that the Covid-19 outbreak has not yet been deemed a legitimate justification for termination. As such, if an employer terminates an employee as a result of the COVID-19 pandemic, the termination will be considered to be without cause and the employer may be held liable for compensating the employee.

Can an employer compel its employees to take unpaid leave?

No.

In light of the COVID-19 outbreak and resulting mandatory closures, many employers are likely to attempt to avoid payment of their employees’ salaries and consider their absence as ‘unpaid leave’.

Any such attempt will be considered unlawful under the Labour Law as employers are not permitted to ‘freeze’ the employment of their personnel for a set period of time.

Unless the parties agree that the employee will be taking an unpaid leave, an employer’s instruction to enforce unpaid leave on his employees will constitute a breach of the Labour Law (as outlined above) and the contract given that the employer will be failing to pay the employee’s salary (in accordance with the terms of the employment contract).

Can an employer compel its employees to take their annual (paid) leave during the COVID-19 outbreak?

The general principles embodied in Article 76 of the Labour Law state that the employer may determine the date of the commencement of the annual leave, and may divide it if necessary, to two or more periods. This right has been given to employers since they are the responsible persons who are aware of the volume of work being undertaken by the company, and also to determine the priority as to when the work must be executed. This right is given with a view to prioritise continuity of work. In view of this principle, the converse is also applicable during this period of slowdown caused by the outbreak of COVID-19, where there is a discontinuity of work. Therefore, given the above information, the employer can determine the date of commencement of an employee’s annual leave during the COVID-19 outbreak.

Can an employer impose a salary reduction?

No.

Should an employer perform any deduction of salaries outside the scope of Article 60 and the employment contract, an employee can seek the recovery of any deducted amount(s) before the competent labour courts.

In a context of cooperation during these unparalleled circumstances, parties may wish to agree upon a structure suitable for both the business, which is likely to be facing financial difficulties arising out of the COVID-19 outbreak, and its employees, who need to be paid their salaries, in an effort to avoid mass terminations as a result of the pandemic.

Is there a moratorium on salary payments?

The MOHRE has confirmed that at this point, the status quo remains, notwithstanding the COVID-19 outbreak. As such, there is no moratorium on the payment of salaries and employers must continue with making salary payments unless the employment contract provides otherwise.

The peculiarity of the situation will undeniably need to be considered by labour courts when hearing employment cases arising out of the COVID-19 outbreak.

Taking affirmative steps now is especially important as companies currently can foresee and attempt to mitigate any potential operational impacts in advance of the outbreak spreading to any new locality. Ideally, businesses will be able to plan accordingly to avoid any disruptions in their operations if the virus continues to spread.

We urge individuals and businesses to seek legal advice as to their existing and future contracts with the above information in mind.

1 reply
  1. Enrique Pavlo
    Enrique Pavlo says:

    I have been under lot of stress and this article really cleared some stuff up for me .

    Thank you so much .

    Reply

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