December 2013 - Clyde & Co international law firm · 2013-12-12 · 2 Employment International...

Employment Immigration and Pensions

International newsletterDecember 2013

In this issue...This quarter we have updates from the UK, Hong Kong, Singapore, Qatar and UAE. We also continue our series of “In a nutshell” guides with a summary of employment law in Australia. We have prepared other “In a nutshell” guides covering China, Hong Kong, India, Qatar, Saudi Arabia, Singapore, the UAE and the UK. For a copy please contact Ruth Bonino.

Our UK immigration team

On page 14 we introduce you to Jonathan Chaimovic, Consultant in our Clyde & Co immigration team which is based in London.

International seminar series

On 16 October 2013 Clyde & Co held a seminar in London on the topic of “Terminating Employment – An International Perspective”. The panel, chaired by Nick Dent, discussed how to avoid the pitfalls associated with termination in an unfamiliar jurisdiction, focusing on redundancies, poor performance terminations and misconduct dismissals in the UAE, India, Singapore and Australia. The speakers were Rebecca Ford, Satyendra Shrivastava, Thomas Choo and Jenni Priestley.

Nick Dent also spoke at a seminar in Milan hosted by LabLaw, the Italian member firm of our international alliance partners L&E Global, on 14 November 2013. The seminar covered a number of the most common employment issues facing international businesses, from the different approach to hiring as employees or freelancers across Europe and the US, to how to downsize and the risks you face in doing so. Nick’s colleagues on the panel were L&E Global partners from Italy, Germany, France, Spain and the USA as well as Stephan Swinkels, L&E Global’s Executive Director, and two clients. The seminar received extensive coverage in the Italian press.

On 13 December 2013, Nick Elwell-Sutton will be speaking at the New Jersey Corporate Counsel Association’s seminar in New York. The panel, which includes John Sander (partner in Jackson Lewis’s New York office), will be talking about “Critical employment law issues for multinational employers operating in Europe and Canada”, and will focus in particular on termination issues and managing employment law claims in the UK, France and Canada.

The next L&E Global seminar will be in London on 26 February 2014. For details please email [email protected]

ContentsIntroduction

UK – The Christmas party season is herePage 2

Australia employment law issues “in a nutshell”Page 3

Hong Kong - taxation issues for cross-border employees clarified Page 6

Consider recruiting Singaporeans firstPage 8

Qatar labour law – End of service benefits Page 9

UAE Recruitment in light of Expo 2020: Securing the best talentPage 11

Meet Jonathan Chaimovic Page 14

Meet the teamPage 15

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Employment International Newsletter December 2013

UK – The Christmas party season is here …James Major, employment partner, and Corinna Harris, professional support lawyer, in Clyde & Co’s London office report on the perils of office Christmas parties from a UK employment law perspective.

Office Christmas parties in the UK are nearly as traditional as mince pies! In addition to holding a Christmas party as a “thank you” to staff, it provides an opportunity for the whole organisation to come together and as such is a way of reminding staff that they are part of a common endeavour. For many workers, the office Christmas party is the social event of the year!

These parties are usually the only work event that embraces everyone in the business, and so is the only time that individuals within an organisation who have polarised social, religious and political beliefs are thrown together, along with plenty of free alcohol and festive high spirits. Inevitably, this combination can result in inappropriate conduct.

Most employees in England and Wales know that discrimination in the office is unlawful. What many do not appreciate, however, is that the Equality Act 2010, which prohibts discrimination and harassment in the UK, applies where individuals are acting in the course of their employment. The Act does not distinguish between acts done in the office during the working day and events that take place out of the office (even in the early hours of the morning) – so it will cover any discriminatory behaviour at the office party Christmas party.

Probably the greatest risk at office parties is that someone will suffer harassment – which could relate to sex, race, disability, age, sexual orientation, religious belief, gender reassignment, pregnancy, marriage or civil partnership. The classic example of this is where a person makes a joke about, say, sexual orientation to a group of people. Most of them laugh, but one person feels humiliated. It is irrelevant that the ‘joker’ did not intend to upset anyone, they can still create liability for both themselves and their employer (which is vicariously liable for the acts of its employees done in the course of their employment).

So what some people regard as ‘harmless banter’ can potentially lead to a member of staff being the subject of a formal grievance, being dismissed for gross misconduct, then having an employment tribunal claim brought against them (as well as against their employer), and in some cases even being ordered to pay compensation. That is a very sobering thought.

While it is impossible to remove the risk of inappropriate comments or harassment occurring, there are steps that employers can take to reduce that risk, and to put them in a stronger position to defend any claim. Employers have a defence to a discrimination claim if they can show that they took all reasonable steps to prevent employees from committing a discriminatory act – for example by:

– Ensuring their equal opportunities policy is up to date

– Offering a selection of food and drink that caters for different religions and cultures, with a limit on the amount of alcohol provided

– Circulating written guidance, which warns staff against inappropriate behaviour at the party and reminding them that such behaviour could result in disciplinary action

– Dealing with any complaints raised about the party appropriately, and in accordance with company procedures

It is easy to dismiss these measures and anti-discrimination legislation as trying to stop people having fun during the festive season. But the laws exist so that everyone feels at ease both at work and while socialising with colleagues. After all, not least at Christmas time, we should embrace the notion of peace and goodwill to all!

If you would like further information please contact:

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James Major E: [email protected]

Corinna HarrisE: [email protected]

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Australia employment law issues “in a nutshell” Jenni Priestley, partner in Clyde & Co’s Sydney office, gives an overview of employment law in Australia.

The Fair Work Act 2009 is the principal legislative instrument governing the employment relationship in Australia. The Fair Work Commission and the Fair Work Ombudsman (both established under this Act) are the government agencies charged with providing for workplace-related supervision, assistance and redress for employees and employers.

The employment of most employees in Australia is governed by the national workplace relations system. Within that system, employment is primarily regulated through the use of industry specific modern awards or enterprise agreements negotiated between an employer or employers and employees (or union officials on behalf of employees) for a particular workplace.

The National Employment Standards (NES) also apply to employees under the national workplace relations system. These standards provide a guarantee of basic minimum benefits for employees. These ten conditions cover working hours, leave, flexible work arrangements and termination of employment and cannot be supplanted to the employee’s disadvantage by a modern award, enterprise agreement or individual employment contract.

Issues arising on hiring individuals

ImmigrationAny non-Australian or non-New Zealand citizen seeking permission to work in Australia will need to apply for a visa from the Department of Immigration and Citizenship (DIAC). If eligible, an employer can also sponsor an individual to work in Australia.

Employment DocumentationEvery employee in the national workplace relations scheme must be given a copy of the Fair Work Information Statement. This document provides information relevant to employment, including the NES, modern awards, agreements, the right to association and termination of employment.

DiscriminationEmployees have the right under the Fair Work Act and various other state and national anti-discrimination statutes not to be discriminated against due to race, colour,

sex, sexual preference, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction and social origin. Anti-discrimination principles apply from the time of job application and throughout the employment relationship.

Issues arising from the employment relationship

Working hoursEmployees covered by the national workplace relations system generally have a standard working week of 38 hours, as provided for by the NES. Employers are not able to request or require employees to work more than the standard 38 hours and an employee can refuse to work extra hours if they are unreasonable.

As a matter of practice, working hours above 38 hours a week are often agreed to between employer and employee as being ‘reasonable’ and overtime may be provided for in an applicable award or agreement.

The NES also specifies that carers can request flexible working hours with their employer if they have been working for that employer for at least 12 months prior to the request for flexible hours or, for casual workers, have a history of employment with the company and expect to continue in that employment.

WagesThe minimum wages for employees are set out in the relevant industry award or enterprise agreement. There is also a national minimum wage (currently AUD 15.96 per hour or AUD 606.40 per week) for employees not covered by an award or an agreement, and other minimum wages set for junior workers, trainees and apprentices.

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Casual workers and independent contractorsCasual workers are paid based on the number of hours they work. Casual work is not guaranteed from week to week, nor is any notice required for termination. Casual workers do not accrue holiday or personal leave. Instead, they receive a casual loading.

Independent contractors work autonomously and are typically hired for specific tasks. A contractor typically organises their own hours of work and can work for more than one organisation at a time. They generally do not receive any employee benefits from the organisation(s).

SuperannuationEmployers are currently required to pay a 9.25% superannuation contribution in addition to salary or wages for full-time, part-time and casual employees. An employee is able to select the fund that the superannuation contribution is paid into and can also make their own additional superannuation contributions.

LeaveUnder the NES, full-time employees (other than casual employees) are entitled to four weeks’ paid holiday leave a year, with a supplementary leave allowance for shift workers. This leave accrues over the course of the working year and rolls over from year to year if unused. Unused holiday entitlements are paid out to the employee on termination.

Employees are also entitled to 10 paid personal leave days a year (which accumulate from year to year), covering personal illness as well as the need to care for a member of their immediate family or an emergency. Employees (including casual employees) are also entitled to take 2 days’ unpaid carers leave on each occasion they are required to care for an immediate family member.

An employee covered by an award, enterprise agreement or individual contract may have different leave entitlements from those provided in the NES provided those entitlements are in excess of those minimum standards.

Parental leaveOnce an employee has worked for their employer for 12 months, they are entitled to 12 months’ unpaid parental leave upon the birth of a child or adoption. In addition, certain periods of paid parental leave may be available to an employee. The employee is also able to return to the same or an equivalent position once they return from unpaid parental leave.

The position of casual employees as regards parental leave depends on their employment history and expected future continuous employment with their employer, as they are generally not entitled to leave unless they are a long-term casual employee.

Trade unionsMembership of a union is voluntary and discrimination of an employee on the basis of membership of a trade union is not permitted. All unions are registered with the Fair Work Commission.

A trade union representative is able to enter Australian workplaces in certain circumstances, such as investigating a breach of a workplace-related law, if they represent workers at that particular workplace and they hold a current right of entry permit issued by the Fair Work Commission.

Issues arising from the termination of the employment relationship

TerminationThe termination provisions of the NES provides a minimum protection for employees which cannot be undermined in an award or agreement. Under these provisions, an employer is able to terminate a contract of employment upon written notice. The amount of notice required is up to 5 weeks depending on length of service with the company. An award, agreement or individual contract might provide for alternate notice terms in excess of the minimum standards and provision for payment in lieu of notice is permitted.

There are some situations where no notice is required, such as for serious misconduct or for a casual employee.

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RedundancyUnder the NES, an employee is entitled to redundancy pay if the employer decides that the position is no longer required or upon the bankruptcy or insolvency of the company and the worker has been with the company for at least 12 months.

Redundancy entitlements provide employees with up to 16 weeks’ pay, based on their length of service to the company. A modern award, agreement or individual contract may provide for an alternative redundancy scheme for an employee provided it is more beneficial than that provided for under the NES.

Unfair dismissalThe unfair dismissal provisions of the Fair Work Act apply to national workplace relations employees. A minimum period of service applies in order to qualify an employee to bring an unfair dismissal claim and the employee must not be a high income earner.

Under the unfair dismissal scheme, if a dismissal is harsh, unjust or unreasonable, or is not a case of a genuine redundancy, the employee is able to challenge that dismissal in the Fair Work Commission. Specific considerations apply for a small business. An unfair dismissal claim must be lodged with the Fair Work Commission within 21 days of the dismissal. The Commission has powers of redress such as reinstatement and payment of compensation to the wronged employee.

If you would like further information please contact

Jenni PriestleyE: [email protected]

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Taxation issues for cross-border employees clarifiedSimon McConnell, partner, and Michelle Lai, associate, both based in Clyde & Co’s Hong Kong office discuss some tax issues which affect employees working in Hong Kong and mainland China.

In view of the closely-knit economic and social connection between Hong Kong and mainland China (the Mainland), cross-border employment/secondment arrangements have become increasingly popular. Employees from the Mainland who are working in Hong Kong need to understand how their salaries and benefits will be taxed in Hong Kong, and whether anything can be done to take advantage of double taxation arrangements between Hong Kong and the Mainland.

The Comprehensive Double Tax Arrangement between Hong Kong and the Mainland (the Treaty) aims to minimise the exposure of double taxation caused by overlapping of tax jurisdictions and help investors to better assess their potential tax liabilities. Besides the Mainland, Hong Kong has entered into double tax arrangements with other countries.

Recently, the Inland Revenue Department of Hong Kong (IRD) has attempted to clarify the application of Article 14 of the Treaty (Income from Employment). The interpretation affects a Mainland employee providing service in Hong Kong whose remuneration is partly paid by a Hong Kong resident employer.

Conditions to satisfy the Hong Kong salaries tax exemption

Under Article 14 of the Treaty, remuneration paid to a Mainland resident in respect of their employment in Hong Kong will not be taxable in Hong Kong if all the following three conditions are fulfilled:

1. The Mainland employee stays in Hong Kong for a period or periods not exceeding in the aggregate 183 days in any 12-month period commencing or ending in the taxable period concerned; and

2. The remuneration is paid by, or on behalf of, an employer who is not a resident of Hong Kong; and

3. The remuneration is not borne by a permanent establishment which the employer has in Hong Kong. A permanent establishment includes a place of management, a branch, and an office through which the business is carried on.

In other words, the Mainland employee won’t have to pay Hong Kong tax on their Hong Kong income if they don’t stay in Hong Kong for more than 183 days per year and the employer paying them is neither a Hong Kong resident nor permanently in Hong Kong. Broadly, the salaries exemption would therefore apply to expat Mainland employees paid by Mainland China companies without a base or residence in Hong Kong.

Allowance and hotel accommodation paid by Hong Kong subsidiaries

Despite the above, there have been some doubts as to whether allowance and hotel accommodation provided by a Hong Kong subsidiary to a Mainland employee would be regarded as remuneration paid by an employer who is a Hong Kong resident (such that the Mainland resident employee cannot enjoy the salaries tax exemption under Article 14 of the Treaty, assuming the other conditions are satisfied). It is also ambiguous whether in such a case, the whole employment income of the Mainland employee (including those borne by the Mainland employer), or only the allowance and rental value of the accommodation is subject to salaries tax in Hong Kong. The answer to these questions, it seems, depends on two questions: who is the true employer, and is the employer a Hong Kong resident?

Who is the employer?

The IRD gave partial clarification of these uncertainties in its recent annual meeting with the Hong Kong Institute of Certified Public Accountants. The IRD responded that whether there is a Hong Kong resident employer will be the crucial factor and has to be determined on a case by case basis. In other words, if the Hong Kong company is regarded as the true employer of the Mainland resident,

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remuneration derived from rendering services in Hong Kong will be subject to Hong Kong salaries tax. The IRD would assess the employee’s income according to the number of days that they spent in Hong Kong during the year of assessment concerned. Since the allowance paid by the Hong Kong company is specifically referable to the employee’s stay in Hong Kong, it will be fully taxable and no apportionment will be allowed. The IRD has not specifically addressed the question whether in that case, the Mainland resident can still enjoy the tax exemption under Article 14 of the Treaty in respect of the salary that is paid by the Mainland enterprise. The predominant view is that the salaries paid and borne by the Mainland employer should not be subject to salaries tax in Hong Kong.

Is the employer a Hong Kong resident?

To determine whether an employer is a Hong Kong resident, the IRD will take into account where the company’s central management and control is located. It is a question of fact and all circumstances in which the company carries on its business should be taken into account. Those factors include where the place of board meetings, the provisions of the company’s object clause, the place of incorporation, the place where the real trade and business is carried on, the place where the company’s books are kept or where administration is carried out, the place where its chief office is or where the company secretary is to be found, and the place where most significant assets are.

For the purpose of determining an employer’s residence, a parent company and its subsidiary will normally be regarded as separate entities being managed and controlled by its own board of directors. A subsidiary may not be regarded as a resident in the same territory as the parent if the board of directors of the subsidiary exercises substantive autonomy in relation to investment, production, marketing and procurement without reference to the parent. Therefore, where the management and control of the Hong Kong subsidiary of a Mainland company is exercised in Hong Kong, such subsidiary will be regarded as a Hong Kong resident employer.

To prove that the corporation is not a Hong Kong resident employer, information regarding the identities and capacities of the management team, the tasks undertaken by them and where they are located while exercising management and control may need to be provided to the IRD.

If you would like further information please contact

Simon McConellE: [email protected]

Michelle LaiE: [email protected]

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Consider recruiting Singaporeans firstYoga Vyjayanthimala, director, and Thomas Choo, senior associate, based in Clyde & Co Clasis Singapore office report on a new set of rules relating to the recruitment of Singaporeans, which come into force on 1 August 2014.

The new Fair Consideration Framework rules (Rules) will affect employers who apply for Employment Passes (EP) for foreign professionals who work in “managerial, executive or specialised jobs”.

The Rules will require employers who are planning to take out EP applications to first advertise the position in a job bank administered by Workforce Development Agency for at least 14 calendar days before they can make an EP application for a foreigner to fill the position.

Which roles do the Rules apply to?

The Rules apply to senior and professional roles that pay less than SGD 12,000 fixed salary per month.

Companies with fewer than 25 employees will not come within the Rules. The government has, however, made it clear that this category of companies will be under scrutiny, and their EP privileges will be curtailed, if complaints of unfair practice are made.

This is the first strong message by the Singapore government that companies must give priority to Singaporeans when recruiting for senior roles.

Will the new Rules be effective?

Questions have already been raised as to their effectiveness. Some feel that the Rules will have little impact because there are no tough reprisals or stiff penalties for breaches of the Rules. People have also raised the question why the Ministry of Manpower did not go further and require companies to provide evidence that they have properly considered local candidates.

Singaporeans, and in particular those who are potentially impacted by the Rules, are not convinced that the Rules will be effective in increasing the number of Singaporeans working in professional or senior roles – because employers will be able to play the system. However, their concerns may not be justified because, since the implementation of the Rules has been announced, the Ministry of Manpower has started to police recruitment practices. A number of companies have recently been hauled up and accused of discriminatory recruitment practices.

On a separate note, the cost for making EP applications will also be raised from SGD 3,000 to SGD 3,300 from January 2014.


Yoga Vyjayanthimala E: [email protected]

Thomas Choo E: [email protected]

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Qatar labour law – End of service benefits Emma Higham, senior associate and employment specialist in Clyde & Co’s Doha office considers end of service benefits, which employees qualify for them and how much they are entitled to.

Qatar Law No.(14) of 2004 (Labour Law) governs the terms of employment for the majority of individuals working in Qatar and establishes their minimum rights and obligations. These rights include an employee’s entitlement to be paid a sum of money by their employer on the termination of their employment locally referred to as an “end of service benefit or gratuity” (EOS). There may be various other termination payments, such as accrued but untaken holiday, payable to employees when their employment terminates however, these are beyond the scope of this article. Who is excluded from the Labour Law?

The Labour Law excludes the employees of Qatar Petroleum and its corporate establishments whose employment is governed by special laws; it also excludes Government/public employees whose employment is governed by the provisions of Law No.(8) of 2009 (Human Resources Law). In addition members of the armed forces, the Police, employees at sea, casual, domestic and agricultural employees and dependants are excluded from the Labour Law. Finally mention should be made of the Qatar Financial Centre (QFC) and the Qatar Science and Technology Park both of which each have their own employment regulations.

Where individuals are excluded from the Labour Law their employment is subject to alternative legal and regulatory provisions, including the Human Resources Law, which may or may not include the provisions of a form of EOS.

Who qualifies for EOS?

In addition to any other termination payments, employees whose employment is subject to the Labour Law are entitled to receive EOS provided they have completed at least one year’s continuous service with their employer when their employment is terminated.

If an employee has had their employment terminated lawfully for gross misconduct, (e.g. they have submitted fraudulent documentation, have caused material financial loss, etc), they will not qualify for EOS. However, employees who lawfully terminate their employment without notice in response to a material breach by their employer (e.g. physical assault, etc) should be paid EOS in addition to their other employment termination payments.

Employees who are entitled to receive a higher payment under their employer’s retirement or pension scheme than under their EOS, in most cases, will not be entitled to EOS in addition to the scheme benefits. Where, however, the scheme benefits are less generous than EOS, employees can choose to be paid EOS instead. If so, the employer must repay any contributions paid by the employee into the scheme, and/or any contributions paid into the scheme by the employer, on the employee’s behalf.

If an employee dies when they are working in Qatar and if they would have qualified for EOS then their employer is under an obligation to pay EOS to the employee’s heirs or beneficiaries in addition to any other employment termination payments which would have been payable to the deceased employee in the usual way.

How is EOS calculated?

Employers and employees can agree on the amount of EOS the employee will be paid on termination, provided the amount is equal to at least three weeks’ pay of the employee’s final basic salary, for every full year they have worked for the employer. Part years are pro-rated. Periods of valid leave, e.g. sick, maternity or annual leave, are generally included in the calculation. Periods of voluntary unpaid leave are generally excluded, but this depends on company policy.

If the employee’s employment began before 6 January 2005, EOS for the period to 6 January 2005 should be calculated in accordance with the terms of the previous Qatar labour law which had more generous provisions for employees than those provided by the Labour Law. In addition the previous labour law permitted the employer and employee

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to opt out of EOS if the employee was foreign, worked for a national enterprise and agreed to opt out in writing. Such an opt out is no longer possible.

When is EOS payable?

The Labour Law provides for EOS to be paid when employment is terminated. Recent entrants to Qatar have started introducing payment policies which provide for employees to be paid EOS throughout the duration of their employment in order to ease cash flow by avoiding material payments having to be made on termination. Where such policies are implemented it will be important for employers to ensure that their employees receive their full EOS entitlement in compliance with the Labour Law. A recalculation of the EOS should be undertaken and a final termination payment made to employees to ensure that full payments are made.

Note: Qatari Laws (save for those issued by the QFC to regulate internal business) are issued in Arabic and there are no official translations for the purpose of drafting this article, we have used our own translations and interpreted in the context of Qatari regulation and current market practice.


Emma Higham E: [email protected]

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UAE recruitment in light of Expo 2020: Securing the best talentSara Khoja, partner, and Jonathan Heath, associate in Clyde & Co’s Dubai office, reflect on recruitment issues in the context of Expo 2020

As the construction and services sectors seek to expand to meet the increase in demand anticipated for Expo 2020, recruiting and retaining the best staff will become more important (and more challenging) for businesses in the UAE. This article sets out an overview of the ways companies can increase the size of their workforce when immigration and labour constraints may otherwise apply, and improve the quality, effectiveness and length of service of their employees. Employment sponsorship

Employers in the UAE are required to sponsor non Gulf Cooperation Council national employees for UAE residence visas and labour cards. Such sponsorship is specific to the sponsoring company, with the result that an employee sponsored by one company must work only for that company and not provide services to another, with limited exceptions. The number of residence visas that employers can obtain is generally linked to the size of their office premises and the activities set out in the commercial trade licence. From time to time, there may also be visa limitations on certain nationalities as the Government monitors the make up of the foreign workforce. It is important to note that any individual working in the UAE must have a local employment contract with the UAE sponsoring entity, and UAE labour law will have mandatory application. This principle applies equally to international secondments and assignments. As demand for staff grows, employers will have difficulty recruiting the required number of staff with specialist skills.

Another issue likely to affect businesses seeking to exploit the opportunities of Expo 2020 is the Emiratisation regime. Very broadly, this is a Federal Government initiative that seeks to ensure that a minimum percentage of employees in a company are Emirati nationals. It does not (currently) apply to companies established in a free zone, and enforcement in the rest of the UAE is largely sector specific (insurance, banking and retail being the key sectors subject to Emiratisation) and certain roles are reserved for UAE nationals. As employers look to bring on more staff in the run up to 2020, it is likely that the UAE Government

will seek to enforce the Emiratisation requirements more strictly than they do currently. Employers may wish to consider focusing more closely on UAE university and school leavers to attract the best talent, and consider training or apprenticeship contracts to entice more UAE nationals into certain sectors at the start of their careers.

Alternative employment eelationships

An increasingly common method for increasing the size of the workforce in spite of the constraints of the UAE employment sponsorship regime is to secure manpower supply from agencies, or the provision of secondments or consultants from third party service providers.

Companies which supply manpower must have been granted special licences by the UAE Ministry of Labour (MOL) and Department for Economic Development (DED). Generally, commercial licences permitting manpower supply have been frozen and no new licences have been granted recently . Under MOL regulations, such a licence can only be held by a UAE national and the business must be managed by a UAE national General Manager (holding a university degree). Very few free zones grant such licences.

Many companies seek to obtain staff on secondment from local partners. Such relationships should be notified to the MOL which will issue the employee with a temporary work permit, which can last up to a year. If services are being provided by consultants or contractors, companies should ensure that the companies they are contracting with are licensed to perform consultancy activities or sub-contractor services and to base employees at sites other than their premises. The MOL has been known to conduct

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unannounced inspections of a company’s premises, and if workers are found to be working there without being sponsored by that company for UAE labour and residency purposes, or who do not work for a properly licensed manpower supply or consultancy service company, then the company and the workers can face fines of up to AED 20,000 and the senior management of the host company can face criminal sanctions including imprisonment and deportation.

With respect to agency workers, secondments and consultancy arrangements, it is vitally important that the hiring company benefits from adequate contractual protections. The services agreement should specify that the agency or services company bears all responsibility for payment of staff salaries, benefits and statutory entitlements such as end of service gratuity or state pension contributions (if relevant).

Generally, employees supplied by a third party to perform services for a company remain employees of that Agency. They are instructed by the company for which they perform services, but their contractual salary and benefits, as well as their statutory rights such as holiday and sick pay, end of service gratuity and any applicable pension rights, remain the responsibility of the Agency. The hiring company’s liabilities, as long as the services agreement provides adequate protection, will be limited to payment of the services fee. This is usually paid monthly in arrears based on the number of workers supplied and the number of days worked by them.

There is no special treatment required for agency workers in the UAE, nor specific legislation that must be complied with. They are entitled to the same minimum statutory benefits and treatment as ordinary workers. However, the Agency will be the employer and therefore responsible for payment of salaries and providing the required benefits.

Retaining talent

A high turnover of staff can be as disruptive to a company’s operations as limitations on the ability to recruit. Common methods of incentivising staff can include a performance or length of service bonus, lock step salary options, variable bonuses based on performance, or commission based on a percentage of sales made. Any contractual clauses offering such entitlements need to be carefully drafted to ensure that amounts are not payable in the event that the employee has served or been served with

notice of termination or has been placed on performance improvement measures. It should also be possible to allow for claw-back of payments in the event of corrections in sales or performance indicators after the payment has been made.

Along with the carrot, the stick can be equally persuasive in keeping employees from joining competitors. Post-termination restrictions on joining competitors in the same Emirate of the UAE in which they were employed are potentially enforceable, as long as the employee had access to a sufficient level of confidential information within the business, and the restriction does not last for longer than is strictly necessary, or generally longer than 6 months. Outside the Dubai International Financial Centre, it is not possible to obtain a prohibitory injunction from the UAE Courts to prevent a former employee from joining a competitor, and thereby immediately causing damage to the former employer’s legitimate business interests. Instead, a company’s recourse will be in a claim for damages based on the economic harm caused by the employee’s actions.

In addition, Article 379 of the UAE Penal Code (Federal Law No. 3 of 1987, as amended), makes it an offence for a person to reveal a secret which he gained knowledge of “by reason of his profession, craft, situation or art” without the permission of the person to whom the secret pertains, or more generally for his own advantage. The Penal Code does not define what is meant by “secret”, but it is likely that it will include an employer’s confidential information on pricing, strategy and client lists that former employees may share or take advantage of with their new employers. Breaches of Article 379 are punishable by a fine of up to AED 20,000 per breach and up to 12 months’ imprisonment.

Another method of preventing employees who are needed for short, defined tasks from leaving once they are recruited to the UAE is to place them on fixed term employment contracts, of perhaps one or two years’ duration. Should an employee seek to leave employment ahead of the end of the defined termination date, they will be liable to pay the employer half of their contractual salary for three months, or the remainder of the contract period – whichever is the shorter. Fixed term employment contracts therefore give employers greater certainty that the employee will not leave to join a competitor before the end of the contract period, but at the expense of sacrificing the ability to

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terminate employment by serving notice. If employers do terminate employment before the end of the fixed term, they are liable to pay the employee compensation equivalent to 3 months’ salary, or pay the remainder of the contract period, if shorter.

What does this mean for businesses?

Expo 2020 will mean that businesses, particularly in the construction and hospitality sectors, will need to increase the size and specialisms of their workforce. Nationalisation programmes may increasingly become an enforcement priority of the UAE authorities, as the country seeks to build a lasting legacy for the event. Businesses should be prepared for the hurdles of recruiting and retaining staff, to ensure that they can take full advantage of the opportunities the Expo offers.


Sara Khoja E: [email protected]

Jonathan Heath E: [email protected]

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Meet Jonathan Chaimovic, consultant in our UK immigration team

When did you start with Clyde & Co? I began as a trainee in 1991 and, save for a 3 months sojourn at Olswangs, have been with Clyde & Co, boy, man and older man.

How did you get here?Northern Line to Bank.

Who interviewed you?Andrew Wells. Quite clearly, the fact that Andrew is a lifelong Arsenal fanatic and season ticket holder, were irrelevant to my receiving an offer.

Tell us a bit about what the immigration team does: We do the full spectrum of UK inward Corporate Immigration work as well as managing foreign processes worldwide to exotic locations including Ghana, South Africa, Nigeria, Tanzania and ....... Ireland. Most importantly, I believe that clients feel we provide a good service which is a tribute to Tim, Neena and Nisha’s outstanding contributions.

Over the years that you have practiced Immigration, what changes have you seen being made and where do you think the future of Immigration lies? Over the last 5 years Immigration has been perhaps the most volatile area of English Law. This is in part due to the global economic crisis which has contributed to a more Protectionist approach, as well as UK Immigration policy, so it would appear, being formulated by the Editorial Board of the Daily Mail.

Cooking or baking?Definitely cooking. I am a hopeless baker which is a source of insecurity given the level of expertise within the wider London employment/pensions team. Tim’s Lemon Drizzle is to die for.

What are your hobbies/interests? Happily for me, work and hobbies coincide. I tend to spend my spare time reviewing Financial Information Packs, Disbursement ledgers and Debtor Day schedules. It drives my wife and kids crazy but they’ve grown to live with it.

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Jonathan ChaimovicConsultant, LondonE: [email protected]

Nick DentPartner, LondonE: [email protected]

Nick Elwell-SuttonPartner, LondonE: [email protected]

Robert HillPartner, LondonE: [email protected]

Corrina HarrisProfessional Support Lawyer, LondonE: [email protected]

Rebecca FordPartner, DubaiE: [email protected]

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Meet the team

Ruth BoninoProfessional Support Lawyer, LondonE: [email protected]

Emma HighamSenior Associate, QatarE: [email protected]

Mark HowardPartner, LondonE: [email protected]

mailto:[email protected]








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Sakate KhaitanPartner, India (Clasis Law)E: [email protected]

Sara KhojaPartner, DubaiE: [email protected]

Victor YangSenior Associate, ShanghaiE: [email protected]

Satyendra ShrivastavaSenior Associate, India (Clasis Law)E: [email protected]

Fernando MoraesPartner, Lazzarini Moretti Moraes Advogados, BrazilE: [email protected]

Julia YeoLegal Director, Singapore (Clyde & Co Clasis Singapore)E: [email protected]

Jenni PriestleyPartner, SydneyE: [email protected]

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Simon McConnellPartner, Hong KongE: [email protected]

Yoga VyjayanthimalaDirector, Singapore (Clasis LLC)E: [email protected]




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© Clyde & Co LLP 2013

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December 2013 - Clyde & Co international law firm · 2013-12-12 · 2 Employment International...

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