End of Service Gratuity
End of Service Gratuity (Gratuity) remains a feature of the New Labour Law with a number of significant
changes:
• The entitlement is clearly stated to apply to foreign nationals only.
• Gratuity is now based on working days and not calendar days.
• There is no reduction of Gratuity due to employee resignation.
• Termination without notice does not impact an employee’s entitlement to Gratuity which remains intact
regardless of the reason for termination.
The provisions in the Old Law regarding the possible replacement of Gratuity with a pension scheme or
savings scheme have not been carried into the New Labour Law, although it provides that the Cabinet may
approve schemes as alternatives to Gratuity.
Compensation for Unlawful Termination
The New Labour Law no longer contains specific compensation entitlements for arbitrary dismissal (of an
unlimited-term contract) or early termination compensation (of a limited-term contract).
However, under the New Labour Law, an employee is entitled to compensation where the termination of
employment by the employer is considered to be “unlawful”, where a serious complaint is submitted to the
MHRE or a claim is filed and the lawsuit is proven to be valid. In such circumstances, the competent court will
determine the compensation due, which remains capped at three months’ remuneration (as is the case for
the compensation payments under the Old Law), to be determined with reference to the type of work,
volume of damage sustained, and the term of service of the employee. This compensation is in addition to
any notice and Gratuity payments due to the employee.
Timing of Payments
The New Labour Law imposes an obligation on the employer to pay the employee their wages and any other
dues within 14 days of the termination date.
Restrictive Covenants
The New Labour Law provides some further clarity on the validity of restrictive covenants. Previously,
restrictive covenants needed to be ‘reasonable’ in scope and thus a “reasonable” period of the restriction was
generally quite short. Under the New Labour Law, non-compete clauses may apply for up to two years but will
still need to specify the duration of the restriction, the restricted type of work and the geographical limits. In
addition, these are stated to be applicable either where the employee seeks to compete with the employer or
seeks to join a competing project in the same sector. Notably, an employer that violates the New Labour Law
on terminating employment will not be able to enforce its non-compete covenants, for example by not giving
proper notice.