|Summary Of Arab Labor Law Rules And Practices -- Termination Of Employment (April 26, 2001)|
|By Howard L. Stovall|
In recent months, many US multi-national companies have reduced their work-forces, including employees based in Arab countries. Whether these reductions are attributable to the general economic down-turn in the United States, 'right-sizing' following corporate acquisitions and mergers, or other industry-specific causes, a US company's termination of employment arrangements in the Middle East may have local legal consequences.
The primary rules applicable to employment in Arab countries are contained in special statutory labor laws. These labor laws apply (with limited exceptions) to all employees working in the relevant Arab country, regardless of the nationality of the employer or employee. Arab labor laws contain detailed rules on such matters as probation, working hours, overtime and allowances, vacation and sick leave, safety conditions -- as well as rules on termination of employment (and compensation arising therefrom).
The following summary briefly examines some of the more important issues relating to termination of employment under Arab labor rules and practices. Of course, a thorough analysis of any employment relationship must consider all the circumstances relevant in the particular case.
In applying the relevant Arab labor law, local courts are likely to nullify any provision in an employment agreement whereby the employee waives a right established in his/her favor by virtue of the labor law. Thus, the local courts would not generally uphold an employee's advance waiver of statutory benefits or termination compensation. However, under most (if not all) Arab labor laws, local courts will enforce contractual provisions giving an employee more favorable rights than otherwise granted under the statutory rules.
2. Identity of Employer
Under Arab labor laws, the employment relationship (including any liability for termination of employment) is determined generally by the identity of the employer and employee listed in the locally registered employment agreement. (Of course, any local 'formal employer' might expect the US employer to acknowledge the latter's position of defacto employer, with all related financial responsibilities.) By ascertaining the details of the locally registered agreement, the US employer will be in a better position to effect the termination, e.g., draft the necessary releases, process the requisite documents, and arrange for appropriate severance payments to the employee.
3. Justification for Termination
In addition, some Arab labor laws allow an employer to terminate indefinite term employment agreements upon statutorily-defined advance notice or less stringent justification than may be required for termination of definite term employment agreements.
However, if an employee is dismissed without statutorily-adequate justification or cause, some Arab labor laws permit the employee to seek termination indemnities (beyond the end-of-service payment discussed below). In some Arab countries, these termination indemnities might be calculated by reference to such factors as the employee's type of work, professional qualifications and education, length of service, salary, as well as the employee's age, responsibility for supporting family and dependents, and the likelihood of finding another comparable job.
4. End-of-Service Payment
For example, under United Arab Emirates federal labor law, the end-of-service payment is computed at twenty-one days' basic wage for each of the employee's first five years of service, and thirty days' basic wage for each year thereafter, with end-of-service payment being capped at two years' wage. (UAE labor law end-of-service pay is computed proportionately for any partial year of employment and generally at the employee's last wage.)
Under Arab labor laws, an employee may forfeit some or all of this end-of-service pay if dismissed by the employer for statutory justification, or if the employee unilaterally ends the employment relationship without statutory justification.
5. Termination Process
In addition, upon termination of employment in some Arab countries, the expatriate employee must sign standard documentation at the local labor office in order to cancel her/his work permit and sponsorship, and to acknowledge receipt of end-of-service benefits and any other entitlements.
6. Other Important Circumstances
For example, if a US company proposes to terminate the employment of its branch office manager (or any other employee with signatory authority) in an Arab country, the US company should ensure that the employee executes all necessary office registrations, assignments of authority, annual filings and other paperwork before being released from employment.
In addition, according to labor laws in some Arab countries, local nationals must constitute a specified minimum percentage of the employer's work-force. Thus, a US employer should ensure that local nationals comprise the requisite percentage of staff following any reduction in work-force.