How is gratuity calculated?
■ I have worked in a company for two years under a contract for unlimited period. One month ago I submitted my resignation. In my labour contract, it is mentioned that my notice period is for three months. My employer is saying I need to work for the notice period and also until I clear all the clients’ dues, adding I can leave immediately if I clear all my dues with my clients otherwise my employer will deduct the same from my end of service gratuity. How do I calculate my end of service gratuity? My total service is for two years. My employer mentioned that the employee’s annual leave period is not included while calculating the end of service. Does the employer have the right to increase the notice period for more than 30 days?
Federal Labour Law No 8 of 1980, Article No 137 states that where a worker who is bound by a contract of unlimited duration leaves his work of his own accord after continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay. Where the continuous period of service exceeds three years but does not exceed five years, he shall entitled to two-third of such severance pay. Where the continuous period of service exceeds five years, he shall be entitled to the full severance pay.
As for the notice period of three months as mentioned by the questioner, the same is in accordance with the labour law and the questioner agreed on such period. Notice period as per UAE labour law, is 30 days only and the parties may not agree to reduce the period of notice, but may agree to increase it. Therefore, the questioner shall comply with the period stated in the employment contract. The employee is not entitled to work during a notice period more than what is mentioned in labour contract. As per the UAE labour law the annual leave period is included in the employee total service. Finally, as per UAE labour law, the employee is not obliged to collect the company dues from clients as long as the employee did not sign with the employer that he is a personal guarantor for such dues.
Commercial partners
■ As per the UAE’s new commercial law, how many partners are required to set up a limited liability company (LLC)? What are the responsibilities of the partners towards the company’s creditors, especially the banks?
A LLC as defined by Article 71 of UAE Federal Law No 2 of 2015 concerning commercial companies came into force on July 1, 2015. 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. A single natural or corporate person may incorporate and hold an LLC.
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 is that such shareholder will be held personally liable, if he exploits the principle of the independent liability of the company, as means to conceal his fraudulent acts or misappropriation of the funds.
■ Questions answered by advocate Mohammad Ebrahim Al Shaiba of Al Shaiba Advocates and Legal Consultants.