Royal Decree 53/2023 promulgates the highly anticipated new Oman Labour Law which came into effect on 26 July 2023 (the New Labour Law) and repeals Royal Decree 35/2003 as amended (the Old Labour Law).
The New Labour Law's application to all workers in the private sector
Domestic workers were expressly excluded from the Old Labour Law whereas the New Labour Law provides that it shall apply to all employers and workers, subject to the proviso that the Ministry of Labour may decide to issue special laws or regulations in relation to domestic workers.
The New Labour Law includes anti-discrimination provisions: termination on the grounds of gender, origin, colour, language, religion, creed, social status, disability, pregnancy, childbirth, breastfeeding, or for affiliation with, legitimate participation in, or representation in a labour union is considered an arbitrary dismissal and so will require the employer to pay compensation.
Omanisation
Omanisation has always been a key motivating factor behind the regulation of labour in Oman. Indeed, certain sectors have also had their own Omanisation requirements imposed (e.g. in the utilities sector) and the developing the national labour force is also one of the priorities of the Omani government under its Vision 2040 plan. It therefore comes as no surprise that the New Labour Law introduces provisions that further emphasise the objectives of Omanisation. Most noticeably the new Labour Law declares that "[E]mployment is a right for Omanis" and in addition to meeting the Omanisation requirements, employers are also required to put in place an Omanisation plan to be approved by the Ministry of Labour one of the aims of which is to place Omanis in leadership positions. A new national training programme is also to be introduced by the Ministry of Labour, for which employers will potentially be required to contribute to financially.
Other new related provisions include:
- where an employer terminates an Omani worker's contract for poor performance, an Omani worker must be appointed to replace them;
- and where an employer is selecting workers for redundancy it must not terminate a contract of an Omani worker with the same competence and experience as a non-Omani worker.
Redundancy and other new terminable grounds
There are also provisions which give employers greater flexibility. The New Labour Law now regulates what were previously unclear issues surrounding redundancy and termination of employees.
Redundancy was previously an unrecognised concept under Omani law, its inclusion appears to make permanent the temporary allowance of redundancies during the COVID-19 pandemic. The New Labour Law allows employers to make its employees redundant as a result of an "economic cause". This is defined as "A financial loss suffered by the employer for a period of no less than 2 (two) consecutive years. The failure to make profits or the closure of one of the activities or branches of the employer for reasons related to the lack of feasibility of its continuation is not considered a financial loss".
Termination for an economic cause is subject to various and stringent conditions. For instance, redundancies can only be made after obtaining the approval of a newly formed government 'special committee' who may – to the extent required to maintain the continuity of the establishment's work and avoid bankruptcy risks – suggest the following alternative measures:
- reduce the number of working hours or days in return for reducing wages for a specified period
- grant unpaid leave to all workers for a specified period and in equal proportions
- reduce wages of all workers by certain percentages for a specified period
Interestingly however, Employers are not expressly permitted to demote workers; the New Labour Law does not address this concept.
Another key change brought in by the New Labour Law is the additional grounds introduced for termination. These include:
- Poor performance, provided that the worker has been notified of areas for improvement by the employer and fails to improve within 6 months of notification by the employer
- Closing down the establishment in whole or in part, or bankruptcy, or reduction in its activities or the replacement of a production system with another in a way that affects the size of the workforce.
Poor performance was not a recognized ground for termination under the Old Labour Law, and in our experience, the Oman Courts were reluctant to enforce a termination decision by an employer in absence of supporting evidence documenting continuous poor performance over a significant period and a wilful unwillingness by the employee to improve despite the employer's documented efforts.
These new provisions now clearly regulate this issue and introduce clear timelines and conditions. Similarly, the Old Labour Law did not expressly allow employers to terminate for closures or bankruptcies, and the practice had been for employers to agree compromise agreements with employees in order to close down a business. This new provision also seems to recognise employee redundancies in restructurings, which was also previously a grey area in Oman. That being said, it will take some time to see how the courts interpret these new provisions.
Leave available in more circumstances and for longer periods
Statutory leave has been introduced for several new circumstances, and leave has been extended in other circumstances. For maternity and paternity leave in particular, Oman is now closer aligned to international standards.
The New Labour Law introduces leave in the following circumstances:
- Leave granted to a nursing worker for 1 hour a day from the end of maternity leave for a period of 1 year
- Unpaid 'special' leave at the request of the worker and with no express time limitation, provided that the worker shall bear all contributions (from the worker, employer, and government) to the Social Protection Fund during the leave period. This seems to replace the emergency leave provisions in the Old Labour Law.
- Unpaid leave for childcare for a female worker for up to 1 year
Paid paternity leave for seven days provided that the child is born alive and the leave is not taken 98 days after the child's birth - Leave taken by a non-Muslim woman for 14 days in the event of the death of her husband
- Leave for an Omani worker for 15 days throughout the year to accompany a patient they are related to up to the third degree.
The New Labour Law also extends leave in the following circumstances:
- Maternity leave: increased to 98 days (from 50 days) and the number of times it can be availed is not specified, when under the Old Labour Law, maternity leave could only be availed 3 times under a single employer.
- Sick leave from 70 days to 182 days per year, at 100% pay from day 1-21, at 75% pay from day 22-35, at 57% from day 36-70, at 35% pay from day 71-182.
- In the event of death of a wife, son or daughter: extended to 10 days (from 3 days).
Arbitration for collective disputes
Historically, all employment related disputes were resolved exclusively by the Oman Courts, and the right to resort to the Court for employment disputes was guaranteed under the Old Labour Law. In an unprecedented move, the New Labour Law now requires that collective disputes are resolved by way of arbitration. The New Labour Law provides that if collective labour dispute negotiations fail and a dispute cannot be settled amicably, either party may apply for the dispute to be resolved by arbitration before the Collective Labour Disputes Arbitration Committee. The Committee, which shall be permanently based in the Ministry of Labour, shall consist of an arbitrator on behalf of the Ministry of Labour, an arbitrator on behalf of the employer, and an arbitrator on behalf of the workers. The decision may be challenged by either party before the Supreme Court. Arbitration proceedings will be subject to the provisions of the Oman Law of Arbitration in Civil and Commercial Disputes and the provisions of the Civil and Commercial Procedures Law in effect.
While the New Labour Law came into effect on 26 July 2023, employers have been given a grace period of 6 months from that date to "rectify their status". The grace period however does not pause the application of the provisions of the New Labour Law for 6 months, as these are indeed in effect as of 26 July 2023. This position is complicated by the fact that we do not yet have the regulations associated with the New Labour Law.
