In the light of the unrest in Bahrain, the country has taken a step forward with the New Labour Law. Qays H. Zu’bi, Senior Partner of Zu’bi &Partners analyses and highlights various clauses of the employment regulations based on compensation.
The topic of most interest in Bahrain at present is the introduction of the New Bahrain Labour Law; The Labour Law for the Private Sector Law No.36 of 2012 (New Labour Law) which became effective from 2 September 2012 and repeals and replaces the old Labour Law for the Private Sector (No. 23 of 1976) (as amended). Implementing regulations are also expected to follow which will become effective within six months of the date of its issue.
The New Labour Law has certainly introduced some positives such as further recognition of women’s rights, the recognition of domestic staff rights, non-discriminatory practices and an expeditious resolution of labour disputes which, under the old law took up to four to five years to resolve through the courts. It has also, amongst others, introduced set compensation calculations for unjustified and unfair terminations (depending on the type of employment contract).
The calculation of the compensation an employee is entitled to in the event of his or her unfair dismissal or unjustified termination by the employer was calculated previously on the basis of custom and market practice. One of the advantages of the new labour law is that it provides a clear mechanism for the calculation of such compensation which is the reason we have witnessed many more out of court settlements taking place. The courts will be free to deal with legitimate claims.
Unjustified & Unfair Termination: The compensation entitlements in the event of unjustified termination are as follows:
Indefinite contract of employment
- If the employer terminates a contract of employment for an indefinite duration within the first three months from its effective date the employee will not be entitled to any compensation. However, in the event that it is established that the termination during the first three months was an unfair dismissal in accordance with the definition of unfair (Articles (104) and (105) of the New Labour Law) then the employee shall be entitled to compensation equivalent to one month’s wages.
- If the employer terminates a contract of employment for an indefinite duration without cause or for an unlawful cause after the first three months following the commencement of the employment, the employee will be entitled to the equivalent of two day’s wages for each month of service. The minimum compensation shall be one month’s wage up to a maximum of 12 months wages. Furthermore, if the termination is also considered to be a legally unfair dismissal, the employee would additionally be entitled to a further one half of the compensation determined for the unjustified termination aforementioned.
It is imperative to note that when calculating the amount of compensation due fractions of a month are deemed a complete month.
Definite contract of employment
- If the employer terminates a contract of employment of a definite duration without cause or for an unlawful cause, the compensation amount will be the equivalent of the wages for the remaining period of the fixed term. However the New Labour Law allows the parties to the contract to mutually agree a lesser amount, provided that the agreed amount for compensation is not less than three month’s wages or the remaining period of the contract whichever is less.
- In the event that the contract of employment was entered into for the completion of specific work and the contract was terminated without cause or for an unlawful cause prior to its completion, the employee would be entitled to the wage for the remaining period required for the completion of the agreed work (unless the parties agree a lesser compensation amount, provided it is not less than three months’ wage or the remaining period thereof) whichever is less.
Lawful Terminations: The New Labour Law has also clearly provided for justified terminations where the old law was silent.
- Poor Performance: The New Labour Law now grants the employer the right to terminate an employee in the event of their poor performance. The right to justifiably terminate the employee is subject to the employer giving the employee a minimum notice period of sixty days of such inefficiency and poor performance to allow the employee a reasonable time to achieve the required level of performance prior to termination, the failure of which would justify the termination of the employee and not entitle the employee to any compensation.
- Redundancies: Under the old law the term redundancy was not recognised neither was the amount of compensation as a result thereto. The courts would determine levels of compensation on the basis of the circumstances surrounding the termination as well as the market and the company’s customary practice.
The New Labour Law however allows an employer to terminate an employee in the event of the total or partial closure of their establishment, its scaling down or replacement of the production system therefore affecting the size of the workforce. However, the Ministry of Labour will require a notice and the reasons of such a termination 30 days prior to serving notice of termination on the employee. The amount of compensation is aso fixed in the law.
- Retirement age: A further major development under the New Labour Law is the provision providing for a retirement age, being 60 years of age (for both male and female employees).
Female employees: The old law prohibited women from working during certain hours and in certain occupations (unless otherwise prescribed in an Order by the relevant Ministers); the New Labour Law does not impose such restrictions unless otherwise prohibited pursuant to a resolution of the Minister of Labour. A non-discrimination clause has also been inserted in the new law which provides that “female employees shall be subject to all the provisions governing the employment of employees without discrimination between them where their employment conditions are similar”.
Other enhanced rights for women include an increased period of maternity leave of 60 days and nursing hours. Female employees have also been given the right to take up to 6 months without pay up to three times throughout her period of service with the employer for the purposes of caring for her child who is not more than six years of age.
Wage and basic wage: The old law did not distinguish between the components of the employee’s gross wage and their basic wage. Under the old law end of service indemnity was payable on the gross salary which included all the employee’s monthly allowances in addition to their basic pay. The New Labour Law however provides that an employee’s entitlements in relation to the calculation of his leaving indemnity payment are to be calculated only on the basis of the employee’s most recent basic wage in addition to social allowance, if any.
- Annual Leave: The New Labour Law provides that an employee who has completed at least one year of service is entitled to annual leave on full pay for a period of not less than 30 days accruing at the rate of two and a half days for each month (as opposed to 21 days increasing to 28 days after 5 years of service under the old law). However, the provision fails to specify whether the 30 days are calculated on the basis of calendar days or working days and we are still awaiting the issuance of a resolution amending the law or a court order making judgement on the interpretation of this Article. .
- Contingency Leave: A new provision was established under the New Labour Law which gives the employee a right under to take leave on a last minute basis in the case of an emergency calling for their urgent need to remain off duty. Such contingency leave may be taken for a period not exceeding six days during the year with a maximum of two days in each case and the same is set off against the employee’s annual leave days.
- Educational Leave: As opposed to the default position where the employer has the right to schedule the employee’s annual leave days in accordance with the business’s requirements and conditions, an employee is given the right under the new law to schedule his leave in the event that he has to sit for an examination at any educational level (provided that notice of the same is given to the employer at least thirty days before the employee proposes to take such leave).
- Sick leave: Under the New Labour Law employees’ now receive enhanced sick leave entitlements which have increased to 15 days sick leave on full pay, 20 days on half pay (previously 15 days) and 20 days on no pay (previously 15 days). Entitlements to sick leave on full or half pay may be accumulated for up to 240 days during the employee’s service; this was previously only 182 days under the old law.
Leaving indemnity: Employees who are not subject to the Bahrain Social Insurance Laws (expatriate employees and Bahraini employees whose salaries are in excess of BD 4,000) previously received less in leaving indemnity under the old law in the event that they resign prior to completing five full years of service in comparison to what they would receive should the employer terminate their employment (unless the termination was for cause under Article 113 of the old law). The calculation of leaving indemnity under the New Labour Law however would be the same irrespective of who terminated or why the employment relationship was terminated.
Labour Disputes & Litigation: Labour disputes under the old law were initially filed with the Ministry of Labour. Failure to reach settlement would lead to the dispute being transferred to the Labour Court for determination after a long court process which may take several years prior to a final determination. The New Labour Law attempts to minimize the number of cases that go through the courts. All claims must now be filed with the Labour Case Administration Office where the Labour Case Administration Judge will hear the case and prepare a report in the hope of attempting an amicable settlement. In the event that the parties do not reach an amicable settlement, the Labour Case Administration Judge refers the matter to the High Civil Court who will hear the labour dispute on an urgent basis within two months from the date of filing the case. However, subject to a resolution of the Labour Case Administration Office Chief, such period can be extended for an additional period of two months at the request of the Case Administration Judge. The New Labour Law requires the High Civil Court Judge to hear the case on an urgent basis and to render its judgment within 30 days from the date of the first hearing. The High Court Judge’s decision is final, and the parties may only appeal to the Court of Cassation on matters of law.
The New Labour Law is more in line with international standards as it aligns Bahrain’s domestic law with several of the Arab and international labour treaties and conventions to which it is a signatory. In this effort to introduce more efficient and cost effective employment regulations, it is expected that fewer disputes will be processed through the courts which will also in turn reduce the number of frivolous cases that are filed without merits by disgruntled employees.