The clock is ticking for Al Reem Island employers to transition to ADGM Employment Regulations

The clock is ticking for Al Reem Island employers to transition to ADGM Employment Regulations

In April 2023, the jurisdiction of the Abu Dhabi Global Market ("ADGM") expanded to include Al Reem Island. This means that employment contracts and practices of employers and employees based there are to be governed by the ADGM Employment Regulations 2019 (“ADGM Regulations”), instead of the UAE Labour Law 2021 ("Labour Law"). This is a significant change that affects various aspects of the employment relationship and Reem Island companies will need to transfer their employees from existing employment contracts and work permits issued by the Ministry of Human Resources and Emiratisation to ADGM work permits and employment contracts that align with the ADGM Regulations. They have until 31 December 2024 to complete this transition.

Key differences: ADGM Regulations vs UAE Labour Law 

Employers on Al Reem Island will need to familiarise themselves with the requirements of the ADGM Regulations and understand how they differ from the Labour Law. Differences include, but are not limited to, the following examples:

  • English law applies: The ADGM’s legal system is based on the common law of England, which means that, subject to other ADGM laws, certain English statutes and precedent court judgments in English cases are directly applicable in the ADGM. This approach can be said to provide employers with a good degree of predictability and certainty as to how the ADGM Regulations would be interpreted by the ADGM Courts.
  • Working hours: Working hours differ such as on the entitlement to rest breaks, and the eligibility for reduced working hours during the holy month of Ramadan. Under the Labour Law, all employees, regardless of their religion, have their working hours reduced by two hours per day during Ramadan whereas under the ADGM Regulations, only Muslim employees who observe the fast may reduce their daily working hours. This may have implications for future work scheduling and productivity.
  • Sickness and vacation leave: Sick leave and annual leave provisions differ in terms of the amount of paid leave and the calculation of pay.
  • Discrimination and harassment: Both the Labour Law and the ADGM Regulations include protections against discrimination on the grounds of sex, race, colour, religion, nationality, and disability. However, the Labour Law additionally prohibits discrimination on the ground of social origin, and the ADGM Regulations protect against discrimination on the grounds of age and marital status.
  • Family-related leave: The Labour Law and the ADGM Regulations differ significantly on the entitlements and conditions for maternity, paternity, and adoption leave for employees. For example, the ADGM Regulations provide for a minimum of 65 business days of maternity leave, with full pay for the first 33 business days and 50% pay for the next 32 business days, whereas the Labour Law offers a minimum of 60 calendar days of maternity leave, with full pay for the first 45 days and half pay for the remaining 15 days.
  • Data protection: Employers will have to comply with the requirements of the ADGM Data Protection Regulations 2021 when processing the personal data of employees.
  • End-of-service gratuity: Gratuity is a statutory entitlement for employees who have completed one year or more of continuous service under the Labour Law and the ADGM Regulations. However, the ADGM Regulations provide for the forfeiture of the entitlement if the employee has been dismissed by the employer for cause.
  • Non-compete restrictions: Whilst the ADGM Regulations do not contain provisions dealing with the enforcement of restrictive covenants, the ADGM Courts are likely to apply the English doctrine of restraint of trade to an action by an employer to enforce restrictive covenants. Accordingly, the ADGM Courts may be persuaded to grant an application for an injunction to restrain an employee from engaging in certain competitive activities post-termination. Therefore, employers may wish to review and revise their non-compete clauses to ensure that they meet the criteria to maximise the prospect of stopping an employee from breaching them. 

Action points 

Employers have until the end of 2024 to get matters in order. During this transitional period, it is crucial for businesses to take proactive steps to ensure compliance with the ADGM Regulations. This includes:

  1. Reviewing existing employment contracts and HR practices.
  2. Identifying and amending any gaps or inconsistencies in relation to ADGM standards.
  3. Amending, or re-drafting and issuing, employment contracts as required.
  4. Training HR and other staff responsible for managing employees on the ADGM employment framework and how it differs from the Labour Law.

How Stephenson Harwood can help

Our Employment team is well-versed in the ADGM Regulations and can provide employers with tailored assistance to navigate this transition smoothly by conducting a comprehensive review of current employment documents to ensure full compliance with ADGM requirements and delivering training sessions for staff. To discuss how to start the process, contact the Employment team or your usual contact at Stephenson Harwood.