Can partners get gratuity under UAE law?
Partners in a business are not considered as ‘employees’; they are treated as ‘investors’
Question: Are the labour laws applicable to general managers and partners in LLC companies? How about their end of service gratuity according to the UAE laws?
Answer: Labour cases in the UAE are governed by Federal Law No. 8 of 1980 Regulating Labour Relations. However, the Article 1 Article (1) of the mentioned law defines the employment contract as “Any Agreement, whether for a limited or for an unlimited period, concluded between an employer and an employee under which the latter undertakes to work in the service of the employer and under his management or control against a remuneration payable to him by the employer.”
The article no 3 of the same law states that the law applies to all employees and workers in the UAE including UAE nationals and expatriates.
Therefore, it should be noted that the partners in a business are not considered as ‘employees’; instead, they are treated as ‘investors’ in their businesses. However, if you hold an employee position, additional to your status as a manager, you will be considered as an ‘employee’ working in the company. For example, if the company sets your salary and other allowances, car expenses and annual leave for one month based on this you will be entitled to your labour rights including the end of service gratuity
So the intention of the parties to a business relationship, not a labour relationship, is sufficient in respect of the jurisdiction of the Dubai civil Court to hear the case, not the labour court.
Commission-based contract
Question: I have been working in a company based in Dubai for three years under the Ministry of Labour. In my labour contract, it is mentioned that my salary is on a commission basis only. It also mentions that I have no right to get paid for annual leave and that the employer is not entitled to pay the end of service right as long as I am working on a commission basis. Please advise on my case as per the UAE Labour Law.
Answer: I would like to clarify that as per the UAE labour law, the employee who works on a commission basis has the right to get a paid annual leave and is entitled to end of service benefits. If it is mentioned in the labour contract that the employee who works on a commission basis is not entitled for paid annual leave and not entitled for end of service, then such clauses are considered against the UAE labour law.
Questions answered by advocate Mohammad Ebrahim Al Shaiba of Al Shaiba Advocate and Legal Consultants