Sponsored briefing: Yemeni employment law overview

Abdulla Luqman and Firas Tarbosh explore employment legislation, contracts, disputes and malpractice in Yemen

The legal framework

The primary law that regulates employment relationships in Yemen is the Labour Code (Act No 5 of 1995) as amended in April 2008 (‘Labour Law’). This Labour Law is designed to operate more as a safeguard for an employee engaged in such a relationship be it deemed the weaker party. For instance, one of the main characteristics of this Labour Law is that it sets the baseline of employees’ rights in a manner that cannot be contractually waived or derogated unless such derogation aims to grant additional rights beyond those outlined in the Labour Law. Further, any ambiguity that might be encountered while interpreting its provisions shall be read in favour of the employee.

The Yemeni Civil Code (Law No 14 of 2002) (‘Civil Law’) also regulates employment matters in conjunction with the Labour Law. However, the Labour Law shall prevail over related Civil Law provisions in the event of any conflicts between the two.

Yemen’s Constitution founded the legal framework on Islamic Sharia principles, and placed such principles at the top of the hierarchical legislative system. As a result, any agreement, covenant or rule found to violate such principles shall be deemed null and void.

It should be flagged that Yemen’s regulatory system, including the Labour Law, is rather primitive compared to most Western and developed jurisdictions, suffering from vagueness, lack of detail and many unaddressed issues. This has compelled the firm to urge clients to adopt very well drafted and detailed employment contracts in order to overcome such shortfalls in the local laws.

It should also be emphasised that since the eruption of the Saudi-led war in 2015, almost two states were created in Yemen with totally independent governments and authorities. The first regime is the Southern government which is recognised by the international community as the legitimate government, while the second is the Northern government often called the Houthi government and known as the de facto ruler of Yemen’s northern part. As a ramification, each of the two governments adopted its own autonomous and separate jurisdiction and legislations. So far, the provisions of the Labour and Civil Laws remain in force with no amendments made by either government, with the exception of the dissolution of the Employment Arbitration Committee by the Northern government in 2021 (referred to in ‘Employment disputes’ below).

About the contract

In terms of language, the Labour Law explicitly stipulates that employment contracts should not be drafted in other than the Arabic language. This does not prohibit the drafting of bilingual contracts, where the Arabic version shall prevail in case of any dispute.

In general, the Labour Law recognises two forms of employment contract: fixed term and indefinite term. When opting for one of the former forms, it should be borne in mind that should the duration of a fixed-term contract exceed five years, it would be treated as an indefinite term.

Should the parties engage in an employment relationship absent of a written contract, the employee may use any means of admissible evidence to prove any details related to such employment.

On the contrary, the employer may only prove such matters through documentary evidence. In general, electronic forms of contracts or documents face difficulty standing before courts, especially if presented by the employer.

From a practical standpoint, local courts frequently construe any relationship, regardless of the title that was given by the parties, as employment if the two main elements of an employment relationship were established: (a) vicarious liability and (b) wages.

In reference to foreign employees, any non-citizen about to enter into an employment agreement within the Yemen jurisdiction would have to obtain prior approval from the Ministry of Social Affairs and Labour (‘the Ministry’). In addition, any employer may not recruit more foreign workers than 10% of its total workforce. Nevertheless, the aforesaid percentage may increase by acquiring permission from the Ministry.

‘Should the parties engage in an employment relationship absent of a written contract, the employee may use any means of admissible evidence to prove any details related to such employment.’

Regarding background checks, the Labour Law does not provide any specific regulations in regard to obtaining employment references or carrying out background investigations on employees. These are actions taken by the employer to ensure the employee is well suited for the position upon an offer of employment. The Labour Law merely requires employers to provide the authorities with basic information regarding employees and their contracts.

Since the Labour Law has set forth some mandatory provisions that should be observed in employment relationships, it might be necessary to outline a few of them:

• The probation period of an employee may not exceed six months; further, it is prohibited for an employee to be employed on probation more than once for the same position.
• If the relationship between the employer and employee continues after the expiry of a fixed employment term, such contract shall be considered extended for an indefinite term.
• In the case where the parties are in the process of negotiating an expired employment contract, the duration of such contract shall automatically be extended for a period of three months.
• Copies of all employment contracts must be deposited with the competent Ministry office.
• In the event of a change of employer, unless otherwise agreed, the previous employer’s obligations are automatically transferred to the new employer.
• The minimum wage payable to employees in Yemen cannot be less than the minimum wage paid by the state administration, which, as of 2016, amounts to approximately US$100 per month.
• Wage payments depend on the terms of the employment contract. Employees may be paid on a monthly, fortnightly, weekly, or hourly basis. The monthly basis must be paid not later than the sixth day of the following month; the fortnightly basis must be paid not later than the third day at the end of every fortnight; and the hourly, daily or weekly basis must be paid at least once each week.
• The maximum for working hours is eight per day or 48 hours per week distributed over a maximum of a six-day week, followed by one day of rest (with full pay). The public sector and most private entities adopt a 40-hour-five-day working week.
• Any overtime worked by employees is calculated as follows: 1.5 hours of basic wage per hour of overtime on normal working days; 2 hours of basic wage per hour of overtime during nights, weekends or holidays (in addition to applicable wage entitlements).
• The maximum for working hours is reduced during the month of Ramadan to six hours per day or 36 hours per week.
• The working day of an employee must be broken by a minimum rest period of one hour. The maximum permitted for continuous working hours is five.
• Night work constitutes any work performed between 8:00 pm and 5:00 am.
• By default, Friday is the weekly off day. It may be exchanged for another day of the week for work necessities.
• Employees are entitled to at least 30 working days of annual leave with full pay (for each year of effective service). Official holidays and days off falling within an employee’s annual leave may not be counted as part of his or her annual leave entitlement.
• Pregnant women are entitled to reduced working hours (to five hours per day, from the sixth month of pregnancy until the end of the sixth month after childbirth). According to the latest amendment to the Labour Law dated April 2008, women are also entitled to 70 days of maternity leave and employers are prohibited from dismissing any employee during such leave.
• Employees who are not covered by the provisions of the Social Insurance Act or any other regulation will be entitled to receive from the employer, at the end of their service, severance pay equal to at least one month’s salary for each year of service (calculated on the basis of the last wage received by the employee).
• Upon the termination of an employee’s contract, the employer must provide the employee, free of charge, with a certificate of experience indicating the date on which his or her employment began, the date on which his or her employment was terminated, the nature of his or her work and the amount of his or her remuneration.
• The statutory ‘minimum’ notice period, for terminating any employment contract under the Labour Law, is: 30 days for employees with monthly wages; 15 days for employees on fortnightly wages; and one week for employees working on hourly, daily or weekly wages, or working on a project basis.

Termination of employment contracts

Employers are entitled to unilaterally terminate a contract of employment without written notice or pay in lieu of notice only in certain circumstances, for instance in case of fraud, the employee being under the effect of drugs, assaulting a fellow employee or causing a material loss to the employer.

An employer is also entitled to terminate the employment contract, by notifying the employee, if (i) there is a need for a reduction in the number of employees due to technical or economic reasons (following notifying the Labour Office), (ii) the employee is absent without legitimate reason for over 30 days within the same year or 15 consecutive days (provided that a written warning is first given by the employer), (iii) the employee reaches retirement age, or (iv) the employee is declared unfit to work by the competent medical committee. Terminating the contract of employment for any of the above reasons should not be considered as unfair dismissal. However, if the employer terminates the employee’s contract for any other reason not specified or permitted by the Labour Law, it would be considered as a wrongful termination and the employee would be entitled to bring a claim against the employer for unfair dismissal which could result in a maximum compensation of six months’ pay.

An employer may not terminate a contract of employment during any of the employee’s leave, during the investigation of a dispute between the employer and the employee (unless the employee commits another violation that requires his or her dismissal), or during the employee’s detention by the competent authorities in connection with his or her work, while a final decision has not yet been made in relation to the matter.

According to the Labour Law, an employer may terminate the relationship for convenience by following very strict procedures laid down by the law, including serving witnessed verbal and written notices to the employee with copies to the Labour Office. Having stated so, unilateral termination by employers hardly ever passes unchallenged. Therefore, professional legal advice must be sought well in advance of any planned termination.

Employment disputes

Prior to 2021, labour disputes were adjudicated and settled via public and compulsory arbitration committees as the first degree of resolution. These committees were imposed by the Labour Law and not by the will of the disputed parties, contrary to the general principles of arbitration.

The arbitration procedures and panel were pre-determined by law. The arbitrators consisted of a representative of the labour union, the employer union and a member of the Ministry. However, in 2021 this committee was abolished, and a Labour Court was established to replace it.

In general, litigation in Yemen is practically known for its prolonged bureaucratic proceedings and partiality. With regards to employment disputes, the local courts are clearly inclined towards employees, especially where the dispute involves a foreign employer. The fact that the Labour Law grants exclusive jurisdiction to local courts leaves no alternative dispute mechanisms to be sought.

Exclusive malpractices to Yemeni courts

The firm has experienced a number of watertight ‘full discharge of liability and settlement agreements’ with terminated employees for cause, convenience or otherwise; whereby the employees would duly execute the agreements and receive all their legal dues, copies of which would then be filed with the Labour Office. Having been exposed to and practised in different jurisdictions, the following scenario was only experienced in Yemen: employees who were duly terminated subject to the aforementioned procedures would proceed with new claims against their employers even after the lapse of the prescribed one-year employment limitation period. Bewilderingly, the courts would admit such claims, setting aside the wilful settlement agreements and dismissing the internationally recognised and adopted doctrine of limitation periods. We personally find this outrageous!

Conclusion

Surprising as it may read to more developed jurisdictions, it is our duty, especially as the exclusive representative of the Employment Law Alliance in Yemen, to provide an objective overview of the issues surrounding employment relationships, both under the Labour Law and court practices. Therefore, we cannot emphasise further, especially to foreign employers, the importance of seeking professional legal assistance pre and throughout employment relationships in this jurisdiction.

Firm profile

Luqman Legal Advocates & Legal Consultants (the ‘firm’) was established in 2004 as the first modern law firm of Yemen. Through the provision of exceptional legal consultancy, international arbitration and litigation, the firm has become the premier choice of clients seeking international quality and professional legal services in Yemen.

The firm is an exclusive member of the Employment Law Alliance, the largest network of international employment lawyers in the world, one of the first to be listed by The Legal 500 and a Band 1 ranked firm by Chambers & Partners since its inception.

One of the many awards and testimonials received by the firm views it as ‘an important player with international clients, advising various companies on corporate and commercial matters relating to their business in Yemen’ (Chambers & Partners).

Team

Members of the firm have specialised expertise in diversified legal fields and systems, arising from qualifications obtained from recognised Eastern and Western institutions, enabling them to deliver their expertise in Arabic, English and French. This enables the firm to best serve its clients through its local legal and cultural knowledge, in addition to its cross-border intellect with the required international perspectives.

Luqman Legal is proud to offer the highest legal services to most international companies based or operating in Yemen, international law firms seeking local expertise, a number of the largest multinational corporations, government authorities and diplomatic entities.

The firm’s experience

The firm provides international-quality professional services to its clients in a wide range of practice areas including, but not limited to, arbitration, banking and finance, constitutional and civil, corporate and commercial, construction, oil and gas, maritime, telecoms, etc. For the last few years, the firm has been highly active in the oil and gas sector by representing clients in a number of related international arbitrations.

The firm has also advised clients from different industries on various legal issues. International law firms regularly call upon its assistance with all legal aspects, including employment, M&A transactions and telecommunications.

The firm is proud to have successfully managed and concluded a settlement agreement between the government of Yemen and one of the largest multinational GSM operators in the world. The firm also worked closely with leading technology names such as Apple, Facebook, Microsoft, Samsung, Nokia Siemens, etc.

The firm has also assisted various international NGOs in Yemen working on USAID projects in their local setup and registration, liaising with relevant ministries, drafting Yemeni law compliant agreements, reviewing and editing their internal policies and providing various other ad-hoc legal support.

Highlights of some of the firm’s recent transactions are listed below:

i. Appointed as an expert witness on Yemeni law in a multimillion arbitration conducted under the rules of the Stockholm Chamber of Commerce (SCC).

ii. Provided significant legal advice relating to oil and gas, and submitted expert statements in a number of industry-related arbitrations under ICSID, UNCITRAL and ICC rules.

iii. Acted as a counsel in a number of arbitrations.

iv. Appointed by the International Finance Corporation (IFC) to advise on the drafting of a lease law for Yemen which was ratified by the Parliament.

v. Provided significant advice and legal assistance to a group of international banks and finance institutions in respect of financing the first mining project for minerals in Yemen.

vi. Provided comprehensive advice on the acquisition of oil companies.

vii. Provided comprehensive legal advice and due diligence to the largest local bank in its acquisition of all the assets and liabilities of a foreign bank.

viii. Provided comprehensive advice and legal assistance to DP World relating to its joint venture and concession with the Yemen government to develop and manage Aden Port and Container Terminals.

ix. Provided significant legal advice to the IFC and Norton Rose in respect of the first IPP project in Yemen.

x. Provided comprehensive legal advice and due diligence to one of the largest international tobacco companies in the world in respect of their acquisition of the largest local tobacco business.

xi. Provided comprehensive legal advice to Zurich Insurance regarding insurance business related legislation.

xii. Acted as the local counsel for the IFC and the Islamic Corporation for the Development of the Private Sector in their various Islamic finance projects.

xiii. Represented BP and Shell in all their legal requirements to accomplish their exit from Yemen and the transfer of their assets and employees to local entities.

For more details about our firm, please check our website (www.luqmanlegal.com).