The new Labour Law in Oman is effective as of 26th July 2023, and employers must reconcile their positions in accordance with its provisions within (6) six months from now.
One significant change is the codification of termination of employment for economic reasons or hardships. To terminate an employee for such reasons, the employer must obtain approval from a committee to be established by the Ministry of Labour. Economic reasons are now clearly defined as experiencing financial losses for two consecutive years. It’s essential to note that failure to achieve profits or closure of company activity or branch due to feasibility issues does not qualify as a financial loss.
Discriminatory termination of employment based on factors like gender, race, disability, or labour union affiliation is now considered arbitrary and is prohibited by the new Labour Law.
Furthermore, the new law has increased the time limit for notifying the competent authority about an employee’s termination for committing a fault resulting in significant financial loss to the employer has been extended from 3 days to 30 days.
While most reasons for termination remain unchanged from the old Labour Law’s Article 40, there have been some adjustments. The period of absence from work as a result of assault has been removed. The commission of an immoral act during business hours is now also one of the reasons for termination.
If an employer fails to pay the employee’s salary for two consecutive months, the employee has the right to terminate the employment contract without adhering to the legal or contractual notice period.
Termination of employment for non-Omanis is considered justified if it aligns with the Omanization plan and involves hiring an Omani replacement for the same role.
In cases of unjustified termination, the compensation is now limited to 12 months of gross salary.
Employees who fail to meet the required level of competency after proper notification can be justifiably terminated. Additionally, partial or complete closure of the business, bankruptcy, downsizing of activities, or replacement of one production system with another that affects the workforce size can also serve as valid reasons for termination, subject to notice requirements.
The new Labour Law also imposes new obligations on employees, such as refraining from accepting gifts, commissions, or money from third parties, withholding original documents without approval, competing with the employer, and mistreating or disrespecting colleagues.
Furthermore, the new law introduces regulations regarding non-compete clauses, as well as significant changes to leave and overtime regulations.
Lastly, the Law includes a dedicated chapter to regulate the settlement of collective labour disputes, strikes, and lockouts.
Key Contacts
Haleem (Abdelhaleem) Amir Mohammed
Senior Counsel, Head of Litigation - Oman
ha.mohammed@tamimi.com