Ask the law: Am I entitled to annual leave in the UAE if I am not a salaried employee?

Question: I have been working for a private company for a year as a sales representative. I am entitled to a commission of 20 per cent of the total sales that I generate and I do not have a monthly salary. According to the UAE Labour Law, do I have the right to claim paid annual leave? If I leave my job, how will the end-of-service benefit be calculated? Please advise.

Answer: The legislator in the Federal Labour Law, Article 75, didn’t limit the annual leave entitlement with any specific kind of worker — whether they are paid on a weekly or daily basis or on a piecemeal basis. The aforementioned article states that, “A worker shall, for each year of service, be entitled to an annual leave of not less than: 1. Two days a month, where the worker’s period of service is more than six months, but less than one year. 2. 30 days a year, where the worker’s period of service is more than one year. If a worker’s service is terminated, he shall be entitled to annual leave in respect of fractions of the last year.”

Your arrangement is that of a piecemeal worker. And your end-of-service benefit is calculated according to Article 134 of the labour law, which states: “Without prejudice to the provisions of laws that grant pensions or retirement benefits to employees in certain firms, severance pay shall be calculated on the basis of the wage last due for monthly, weekly and daily paid workers, and on the basis of the average daily wage referred to in Article 57 hereof for those paid on piecemeal. The wage used as a basis for calculating severance pay shall not include whatever is given to the worker in kind, housing allowance, transport allowance, travel allowance, overtime pay, representation allowance, cashier’s allowances, children’s education, UAE Labour Law 29 allowance, allowances for recreational and social facilities and any other bonuses or allowances.”

The severance pay shall be calculated as follows: 1. 21 days’ wage for each of the first five years of service. 2. 30 days’ wage for each additional year of service provided always that the aggregate amount of severance pay should not exceed two year’s wage.” (Article 133)

It is decided that although Article 134 of the aforementioned Labour Law stipulates that the last wage of the worker shall be taken as a basis for estimating the end-of-service gratuity, but if the worker’s wage or part thereof is not a lump sum but in the form of commission related to the amount of production and the amount of business return he or she brings in, then it is not fair and equitable, whether for the employee or the employer, to take the amount due to the worker in the last month of his service as the basis for calculating the end-of-service gratuity because this amount is not — in most general terms — expressing the reality and real amount of the wage. So its average should be taken over a reasonable period when calculating the end-of-service reward and accrued leave, so that this period is subject to the authority of the court — as it deems fit from the circumstances of the case, expressing the reality and the real amount of the last wage that the worker is entitled to.

It is related from all of the above that the commission, regardless of the designation given to it, is considered a wage or part of the wage that the worker is paid for his work and is included in the basic wage. Therefore, it is calculated in the months of leave and in the end-of-service bonus because it is a form of wage and not an allowance. (Appeal No 122/2017 Labour Appeal).

Personal liability in partnership firm

Question: As per the Commercial Companies Law, what are the responsibilities of partners towards bank creditors in case the partners are not holding personal liability?

Answer: A Limited Liability Company, as defined by Article 71 of UAE Federal Law No. 2 of 2015, concerning the Commercial Companies (New LLC), came into force on July 1, 2015, replacing the existing Federal Law No. 8 of 1984 and its amendments concerning the Commercial Companies: 1) An LLC Company is a company where the number of partners is at least two, but shall not exceed 50. A partner shall be liable only to the extent of its share in the capital; 2) A single natural or corporate person may incorporate and hold an LLC. The holder of the capital is as set out in its Memorandum of Association.

Therefore, as per the above-mentioned article, the general rule is that a shareholder in an LLC is responsible only to the extent of his share/shares in the capital of the company. The exception to this general rule, as the court reasoned, is that such shareholder will be personally liable, if he exploited the principle of the independent liability of the company, conceal his fraudulent acts or misappropriation of funds of the company in order to cause harm to his partners or creditors. In such case, the protection bestowed by law for the shareholder in a limited liability company will not apply. He will be held liable in his personal capacity for such disposition in a way that such liability will extend to his personal assets.