How Are Employment Contracts Issued in Free Zones?
Employment contracts in free zones are issued and attested by the relevant free zone authority, not by the Ministry of Human Resources and Emiratisation (MOHRE).
Key characteristics include:
- Employment visas are issued based on free zone contracts
- No MOHRE-issued work permit or labour card is required
- Employees of free zone companies are therefore distinct from employees of mainland companies licensed by the Department of Economic Development (DED), who fall under MOHRE’s jurisdiction
This distinction has direct consequences for how disputes are processed and resolved.
How Are Employment Disputes Initiated in Free Zones?
First Stage: Free Zone Authority
When a dispute arises between an employer and an employee in a free zone, the matter must first be referred to the relevant free zone authority.
At this stage:
- Both parties are invited to attend a meeting facilitated by a free zone officer
- The authority reviews the dispute and attempts to reach an amicable settlement
- The objective is to resolve the matter without escalation to external authorities
What Happens If Settlement Is Reached?
If the settlement attempt before the free zone authority is successful:
- A formal decision or settlement agreement is issued
- The agreement is signed by both parties
- The settlement becomes legally binding
The agreement may include payment of dues to the employee, termination of the employment relationship, or cancellation of the employment contract.
What Happens If Settlement Fails at the Free Zone Level?
Referral to MOHRE
If no settlement is reached, the dispute is referred to MOHRE for a second attempt at amicable resolution.
At this stage:
- The dispute is reviewed remotely, usually through telephone communication
- A MOHRE legal consultant contacts both parties to explore settlement options
Because free zone employment contracts are not registered in MOHRE’s system, the employee must submit supporting documentation, including:
- A referral letter from the free zone authority
- A copy of the employment contract
- Copies of the employee’s UAE ID and the company’s trade licence
This documentation is required because there is no MOHRE-issued labour card from which employment data can be retrieved.
How Does MOHRE Handle Unresolved Free Zone Disputes?
If settlement efforts at MOHRE fail, the dispute is assessed based on the total value of the claim, leading to one of two outcomes.
Claims Below AED 50,000
Where the claim value is less than AED 50,000:
- MOHRE issues a final decision pursuant to Article 54 of UAE Labour Law No. 33 of 2021
- If accepted, the decision may be enforced directly before the competent court
- If rejected, either party may challenge the decision before the Court of First Instance in the emirate where the free zone is located
Claims Above AED 50,000
Where the claim value exceeds AED 50,000:
- MOHRE issues a referral decision
- The dispute is referred to the competent Court of First Instance
- The case proceeds under the Civil Procedures Law until a final judgment is issued
Key Observation: Dual Review of Free Zone Disputes
A critical feature of free zone employment disputes is that they are reviewed twice for amicable settlement:
- First by the free zone authority
- Then by MOHRE
This contrasts with ordinary labour disputes, which are reviewed only once by MOHRE before a decision is issued.
What If the Relevant Free Zone Is Unknown?
If an employee is unsure which free zone the employer belongs to, a complaint may be filed directly with MOHRE.
The employee must submit:
- A copy of the residence visa
- A copy of the UAE ID
- A copy of the employment contract
MOHRE will identify the relevant free zone authority and direct the employee to file the complaint accordingly within two days, after which the standard procedure applies.
Key Differences Between Free Zone and Mainland Labour Disputes
Free zone labour disputes differ from ordinary labour complaints in several important ways:
- Free zone employees do not hold MOHRE-issued work permits or labour cards
- Employment records are not automatically available in MOHRE’s system
- Disputes take longer due to dual settlement review
- Claims require additional verification and audit due to the absence of registered labour data