The Bahrain Labour Law has recently undergone fundamental reform. The Labour Law for the Private Sector, Law No. 36 of 2012 was introduced to replace the preceding Labour Law. One of the most prominent features of the new law is the introduction of a clear non-discrimination clause whereby “female employees shall be subject to all the provisions governing the employment of workers without discrimination between them where their employment conditions are similar”.

The new Labour Law has minimised the number of cases brought before the labour courts

Another prominent feature of the new law is that the employment of domestic servants, namely gardeners, house security guards, nannies, drivers and cooks, has been made subject to specified articles of the Labour Law. Such contracts shall be subject to the new labour courts system alongside articles of the new Labour Law pertaining to terminations, compensation and leaving indemnity entitlements, as well as annual leave entitlements.

More than a year after the introduction of the new Labour Law on 2 September 2012, the effectiveness of the framework is yet to be fully evaluated. Nevertheless, it is well acknowledged that, in practice, the new Labour Law has enabled the speedy resolution of labour cases as it specifies the timeframe in which the cases are to be examined and resolved and the pace at which they are to progress.

Alongside the expeditious resolution of cases, the new Labour Law has minimised the number of cases brought before the labour courts, due to its clear and specific formulas calculating compensation entitlements in cases of unfair dismissals or unjustified terminations.

Termination of contract of employment

The new Labour Law allows either party to an employment contract to terminate it upon giving the other party 30 days’ notice. The contract shall remain effective during the notice period and the parties shall be bound by all the obligations arising from it. An agreement may impose a longer notice period only on the employer’s part for terminating a contract. Failure to observe such a notice period will entitle the worker to compensation equivalent to his wage for the entire notice period or remainder of it.

In the calculation of compensation entitlements, fractions of the month shall be deemed as a complete month

The law provides that a worker shall be entitled to compensation for an employer’s termination of contract unless such termination is due to a legitimate cause, the onus of proof of which shall rest with the employer. The law provides a mechanism through which such compensation shall be calculated, thus enabling both the employer and the employee to identify their rights, obligations and entitlements without the need for lengthy and complicated judicial recourse.

Unfair dismissal

The law distinguishes between unjustified termination and unfair dismissal. Compensation calculations for each respective termination are provided for in the legislation. Unfair dismissal is defined as an employer’s termination of a worker’s contract of employment based on:

• The worker’s sex, colour, religion, belief, social status or family responsibilities
• The female worker’s pregnancy, child birth or nursing her infant
• The worker’s membership of a trade union or lawful participation in any of its activities
• The worker’s representation or previous engagement in a trade union organisation
• The worker’s filing of a complaint, report or court case against the employer, provided it is not of a vexatious nature
• The worker’s exercise of his right to leave as per the Labour Law
• The employer’s placement of an attachment upon the worker’s entitlements.

There is a differentiation in compensation entitlements arising from unfair dismissals and unjustified terminations.

Unjustified termination of a contract of employment

Contract for an indefinite term

In the event that an employer terminates an employee’s indefinite-term contract within the probationary period (the first three months of the contract), the employee shall not be entitled to compensation. However, if that termination constitutes an unfair dismissal, then the employee shall be entitled to compensation equivalent to one month’s wages.

Compensation is calculated on the basis of wages, which include everything a worker receives

In the event that the termination takes place after the three-month probationary period, without cause or for an unlawful cause, then the employee shall be entitled to compensation equivalent to two days’ wages for each month of service. The minimum compensation shall be one month’s wages and the maximum shall be 12 months’ wages.

In either case, where the termination of a contract is considered unfair dismissal, the worker shall be entitled to an additional compensation equivalent to one half of the compensation due according to the provisions of the above, unless the contract provides for a higher compensation.

In the calculation of compensation entitlements, fractions of the month shall be deemed as a complete month.

Contract for a definite term

In the event that the employer terminates an employee’s contract of employment for a definite term with or without lawful cause, the employee shall be entitled to compensation equivalent to the wages for the remaining period of the contract. This is unless both parties mutually agree a lesser compensation, provided that the agreed compensation is not less than three months’ wages or the remaining period of the contract, whichever is less.

Contract for performance of a specific work

Where the contract of employment was entered into for performance of a specific work, and the contract is terminated by the employer before then, regardless of the termination being with or without cause, the employee shall be entitled to compensation equivalent to the wages for the remaining period required for completion of the agreed work. This is unless the parties agree upon a lesser compensation, which must be at least three months’ wages or the remaining period required for performance of the work, whichever is less.

Leaving indemnity

A worker who is not subject to the Bahrain Social Insurance Law – namely a foreign employee or a Bahraini employee whose wages exceed BD4,000 ($10,611) – shall be entitled, upon termination of his employment, to a leaving indemnity at the rate of half a month’s wages for each of the first three years of employment and one month’s wages for each of the following years thereof. The worker shall be entitled to fractions of the year in proportion to the period spent in the employer’s service.

Wages

It is imperative to note that compensation is calculated on the basis of wages, which include everything that a worker receives in consideration of his employment, whether it is fixed or variable, in cash or in kind, including the basic wage and the supplementary allowances, benefits, grants, bonuses, commissions and other emoluments.

Justified termination of a contract of employment

Poor performance

An employer may terminate a contract of employment due to the worker’s poor performance or efficiency or decline thereof, subject to giving the worker notice of the aspects of such inefficiency. This notice must last at least 60 days to give the employer a reasonable opportunity to achieve the required level. Upon expiry of this period and in the event that the employee fails to achieve the required efficiency level, the employer may terminate the contract of employment after giving 30 days’ prior notice of the termination. Such termination will not entitle the employee to any compensation.

Redundancy

An employer may terminate a contract of employment because of total or partial closure of the establishment, scaling down of its business or replacement of its production system by another that may affect the size of the workforce, provided that the employer gives notice to the Ministry of Labour concerning the reason for termination 30 days prior to the date of giving the worker 30 days’ notice of the termination.

In this case, the employee shall be entitled to receive a bonus equivalent to one half of the compensation referred to above relating to unjustified termination.

Retirement age

An employer may terminate a contract of employment without compensation if the worker reaches the age of 60, unless the parties agree otherwise.

Leave entitlements

Annual leave

A worker who has completed at least one year’s service with his employer shall be entitled to leave on full pay for a period of not less than 30 days at the rate of two and a half days for each month. In relation to this, it is worth noting that there remains an issue to be resolved pertaining to whether annual leave is to be calculated on the basis of working days or calendar days. Bahrain still awaits the issuance of a court order or resolution amending the law in this respect. In the meantime, companies have the discretion to interpret this as they wish. It is argued by some companies opting to calculate annual leave on the basis of working days that as the law clearly states ‘working days’ in certain articles (for example, Hajj leave), its silence on this in relation to annual leave shall be construed so as to intend calendar days.

Sick leave

An employee is entitled to 15 days of sick leave on full pay, 20 days on half pay and 20 days without pay. The entitlement of a worker to sick leave on full pay or partial pay may be accumulated for a period not exceeding 240 days.

Educational leave

A worker shall have the right to schedule his annual leave if he has to sit for an examination at any educational level, provided that a 30-day notice period is given to the employer before going on leave.

Contingency leave

A worker shall be entitled to remain off duty for a contingency reason for a period not exceeding six days during the year, with a maximum of two days in each case. Such leave shall be reckoned as part of the worker’s annual leave entitlements.

Bereavement leave

A worker shall be entitled to leave for three days on full pay in the event of death of a spouse, a relative to the fourth degree of relationship, or a spouse’s relative to the second degree of relationship. Further, female workers shall have the right to one month of leave on full pay if her husband dies; she shall also be entitled to complete the death Eddah (period of waiting before a woman may remarry) from her annual leave for three months and 10 days, whereby in the event that she does not have annual leave balance, she shall be entitled to leave without pay.

Hajj leave

A Muslim worker who has served in his employment for a period of five years shall have the right to leave on full pay for 14 working days to perform his Hajj pilgrimage obligation.

Miscellaneous leave

A worker is entitled to leave for three days on full pay in the event of his marriage, and for one day on full pay upon the birth of his child.

Maternity leave and nursing periods

A female worker shall be entitled to maternity leave on full pay for 60 days, which shall include the period before and after her confinement, and she shall also be entitled to additional leave without pay for 15 days because of that confinement.

After her maternity leave, a female worker shall be entitled to two periods of one hour each a day to nurse her newly born child until the child reaches six months of age, and two periods of care for 30 minutes each until the child turns one. The female worker shall have the right to combine these two periods, which are part of her working hours, without any reduction in wage. The time of such care shall be fixed by the employer according to the worker’s conditions and the interest of business.

Furthermore, a female worker shall be entitled to leave without pay to provide care for her child who is under six years of age, for a maximum of six months in each case and for three cases throughout the period of service.

It must be noted that an employer is prohibited from employing a female worker during the 40 days following her confinement, and is also prohibited from dismissing a female worker or terminating her contract of employment because of marriage or during maternity leave.

The new Bahrain Labour Law as it currently stands is an upgrade to its precursor. It has undoubtedly improved the labour courts system and pushed it towards the realm of efficiency and workability by transforming it into a two-tiered system, removing the mid-tier of appeal in labour disputes litigation. This has efficiently promoted the expeditious resolution of cases, especially in operation alongside the substantive improvements in the law that effectively safeguard employee entitlements. Nevertheless, as with any new law, its provisions require guidance towards a unified interpretation and application.