The Labour and Employment Disputes Review: Bahrain

Introduction

The primary legislation that governs the labour and employment framework in the Kingdom of Bahrain (Bahrain) is Legislative Decree No. 36 of 2012 promulgating the Labour Law (the Labour Law). The Labour Law replaced the old labour law No. 23 of 1976 (the Old Labour Law) and introduced significant changes to the employment and labour framework in Bahrain. The Ministry of Labour and Social Development (the Ministry) and the Labour Market Regulatory Authority (the LMRA) are responsible for issuing further guidance, including resolutions and circulars, with respect to the labour and employment framework in Bahrain and the implementation of the Labour Law.

Other legislation which forms a part of the statutory framework governing labour and employment disputes in the Bahrain includes Law No. 19 of 2006 with regard to the regulation of the Labour Market (the LMRA Law) and the Social Insurance Law (No. 24 of 1976 and its amendments) (the SIO Law).

Although other legislation is relevant to the employment and labour framework in Bahrain, as the main legislation is the Labour Law, this article will primarily focus on the provisions and of this law and its application.

In general, the employment and labour law framework is more favorable towards employees, as Article 4 of the Labour Law provides that any condition or agreement in violation of the provisions of the law shall be deemed null and void, if it prejudices the rights of the employees specified in it. The article further states that the better benefits or conditions which are decided under the employment contract or regulations at the establishment remain applicable.

For example, a provision in an employment contract which states that the employee is entitled to leave in addition to their entitlements under the Labour Law, will be valid and binding on the parties. However, an employment contract provision which states that the employee is entitled to leave which is less than their entitlements under the Labour Law, will not be valid or binding on the parties.

In addition, a clause in an employment contract that imposes an obligation, which is more burdensome on the parties to the contract than a provision in the Labour Law, will generally only be binding on the employer and not the employee. For example, under Article (99)(a) of the Labour Law either party to the contract may terminate the contract following the notification of the other party at least 30 days before the date of the termination. However, the article further states that if the labour contract is terminated by the employer, an agreement may be made for increasing the notice period to more than 30 days. Therefore, a clause which specifies a longer termination notice period will be binding on the employer but not on the employee, who will still be able to terminate the contract by giving the 30 days' notice.

Although the Labour Law generally favours the rights of employees, employers are also protected by the provisions of the law, provided they follow the required procedures stipulated in the law. For example, under Article 107 of the Labour Law, the employer is entitled to terminate the employment contract without notice or compensation in certain circumstances. However, the employer must comply with the steps in the Labour Law regarding disciplinary actions against the employee in order for the termination to be valid.2 If the employer does not dismiss the employee in accordance with the provisions of the Labour Law, then the dismissal shall be deemed an unfair dismissal by the relevant courts.

Procedure

i Individual labour disputes

Either the employer or the employee may raise an employment dispute to the Authority for the Settlement of Individual Labour Disputes (the Authority), which is charged with the role of amicably settling individual labour disputes submitted between the employer and employee with the approval of both parties before resorting to the judiciary. If the dispute is settled by the Authority then the parties will sign the minutes, which can then be enforced directly by the parties before the Court of Execution.3

Alternatively, the employer or employee can raise a claim by submitting a statement of claim to the Labour Disputes Directorate (the Directorate).4 The judge in charge of the Directorate shall then have a maximum of two months to review the statement of claim, which may be extended for an additional two months.5 The judge shall then draft a report including the facts of the action, the pleas and defences and evidence on which the parties relied on, as well as his or her opinion.6 The judge shall then propose to the parties to settle the dispute pursuant to his or her report.7 If the parties agree, the settlement shall be evidenced in minutes and can then be enforced directly by the parties before the Court of Execution.8

If the parties do not agree to the settlement or it is not reached within the periods specified in the Labour Law, then the judge should refer the action to the High Civil Court along with his or her report.9 At this stage, neither party may submit any new claims, pleas or defences to the High Civil Court and generally no new evidence may be submitted to the court either.10 The High Civil Court will then review the action and render its judgment within thirty days from the date of the first hearing.11 Judgments issued by the High Civil Court are considered final judgments and may be challenged in the Court of Cassation.12

ii Collective labour disputes

Where a collective labour dispute arises the parties must first seek to resolve the dispute by amicable settlement through collective bargaining.13 If the dispute is not resolved within 60 days of the date of the request to settle the dispute amicably, either party may request the Ministry to submit the dispute to the Council of Settlement of Collective Disputes (the Council).14 If the dispute is not settled within 60 days of the date of its submittal to the Council, either party may request the Ministry to submit the dispute to the Arbitration Court.15 Requests to submit the dispute to the Arbitration Court can be submitted by either the employer or the employees.16 If a request is submitted by the employees who are part of a trade union, the request should be submitted by the trade union's chairman and, if the employees are not affiliated to a trade union, the request must be submitted by the majority of the employees concerned by the dispute at the company or relevant department.17 The president of the Arbitration Court shall set the hearing for the examination of the dispute on a date not exceeding 15 days of the date of its receipt of the dispute.18

The Arbitration Court shall settle the dispute within a maximum period of 30 days of the date of the first hearing.19 The award issued by the Arbitration Court shall be deemed a final decision rendered by the Higher Civil Court of Appeal and either party may challenge the award rendered in the Court of Cassation.20

Types of employment disputes

In Bahrain, the main types of disputes which employees file against their employers are generally those related to unfair dismissal claims, leave entitlement claims, overtime payment claims, and claims for compensation for medical, retirement or other reasons.

Employers will generally file claims for the recovery of personal loans, housing loans or other amounts owed to them by their employees. In certain cases, employers will also file cases for breach of contract by their employees.

Year in review

i New decisions

Several decisions were issued during the course of 2020 to put into effect and supplement certain provisions of the Labour Law. Some of these decisions were specific to Bahrain's covid-19 response; for example, the use of electronic platforms in court proceedings was introduced.

The Authority was established by way of Decision No. 5 of 2020, issued by the Minister of Labour and Social Development (the Minister of Labour). This decision sets out the functions of the Authority and the prescribed time limits for settlement between the parties to a dispute.21

Decision No. 7 of 2020 also issued by the Minister of Labour sets out the rules and procedures regarding the classes of collective bargaining. Namely, it prevents an employer from issuing a decision or policy that is the subject matter of the collective bargaining unless such decision or policy is urgently required.22 This decision also splits collective bargaining actions into the following 'classes':

  1. collective bargaining within an organisation;
  2. collective bargaining within a profession or trade; and
  3. collective bargaining at a national level.23

It identifies examples of areas that may be negotiated between an employer and its employees by way of collective bargaining; these areas include working hours and overtime, paid leave days, benefits, and performance-based incentives.24

Decision No. 45 of 2020 issued by the Minister of Justice, Islamic Affairs and Waqf (the Minister of Justice) sets out the procedures in individual employment disputes. Employment claims may be raised by filing a statement of claim in person before the Directorate or by filing the statement of claim electronically to the Directorate.25 Pleadings, supporting documents and judicial requests can now be submitted electronically and notices to the parties regarding hearing dates and case documents are shared electronically.26 The decision further allowed the High Civil Court to inform the parties of its decision using an electronic platform.27

Similar measures were adopted in proceedings before the Court of Cassation in the Minister of Justice's Decision No. 46 of 2020. This decision permits the use of electronic means in relation to pleadings, supporting documents, notices, requests, and judgments of the Court of Cassation.28 An electronic platform on the Information and Electronic Government Authority's website (www.iga.gov.bh) was established to be used by the parties to the dispute and the relevant judicial authorities in the course of employment disputes.29

ii New precedents

In terms of labour dispute-related case law, the Court of Cassation has considered new questions in relation to employment disputes that were presented before the court for the first time.

For instance, the Court of Cassation has considered the entitlement of Gulf Cooperation Council (GCC) nationals to end-of-service benefits in accordance with Article 116 of the Labour Law. Pursuant to Article 116, employees that are not subject to the SIO Law shall be entitled to end-of-service benefits. The employee in the case, a Saudi national, was dismissed from their employment. The employee raised a claim seeking compensation for unfair dismissal and end of service benefits, which was accepted by the High Civil Court on the grounds of Article 116 of the Labour Law. The employer appealed the High Civil Court's judgment on grounds of misapplication of the law with reference to Article 2 of Law 68 of 2006, which specifically states that end-of-service benefits as provided for in Article 111 of the Old Labour Law shall be suspended in relation to GCC nationals. The appeal by the employer was accepted by the Court of Cassation who concluded that the exclusion of GCC nationals from end-of-service benefits should continue under the Labour Law, as this exception was not repealed expressly or implicitly (by way of new legislation).30

In another case, a question regarding Article 21 of the Labour Law, which addresses probation periods, was submitted to the Court of Cassation. Pursuant to Article (21) of the Labour Law, employment agreements may include a probation period, provided that this period does not exceed three months. Notwithstanding, a six-month probation period may be included in employment agreements that relate to certain professions as set out in a decision by the Minister of Labour.

In Appeal No. 102 of 2019, the Court of Cassation addressed the enforceability of a probation period exceeding three months. The claimant in the appeal was dismissed five months into the term of the employment agreement without reason or notice period. The High Civil Court found that the employer was entitled to terminate the agreement during the probation period and therefore ordered the employer to pay compensation in lieu of a one-day notice period. Upon appeal by the employee, the Court of Cassation found that an extension of the probation period to six months was unlawful under Article 21 of the Labour Law, and therefore the employee was found to have been unfairly dismissed and entitled to compensation.31

It seems that the employer sought to extend the probation period to six months as permitted under Article 21 of the Labour Law; however, although Article 21 allows an extension of the probation period to six months in specific professions that are determined by the Minister of Labour, to date, no such decision by the Minister of Labour has been issued. This leads us to conclude that all professions are subject to a maximum probation period of three months, until such a decision is made.

Outlook and conclusions

i Use of electronic means in judicial proceedings

There has recently been a significant shift towards the use of electronic means in relation to the submission of certain documents by the parties to a dispute to the courts and relevant authorities. However, there are still some areas where the courts and relevant authorities cannot exclusively rely on electronic means. For example, although the majority of pleadings and supporting documents can now be filed electronically, the courts still require witness testimonies to be made in person.

In addition, although the majority of communications from the courts and relevant authorities are now conducted electronically (through emails, messages and other electronic communications), the courts and authorities still rely on physical communication in certain situations. For example, in execution cases while the party who submits a request for an execution measure will be notified electronically regarding the progress of that request, the other party to the dispute will not generally be notified electronically of the decision taken.

Therefore, based on the above, the use of electronic communication will likely progress to include a wider scope of application and the reliance on physical documents will continue to decrease.

ii Termination of foreign employee contracts

Separately, there has been a recent development in court judgments related to the employment of foreign employees without work permits by employers in Bahrain. The LMRA Law provides that a foreign employee is prohibited from engaging in any work in Bahrain without a work permit and an employer is prohibited from employing foreign works without a work permit.32 Accordingly, where a foreign employee is terminated they are not able to claim their employment entitlements, if they do not have a valid work permit.

For instance, in Appeal No. 1 of 2018, the Court of Cassation considered the employment of a foreign individual without a work permit as a direct breach of the LMRA Law. The Court of Cassation concluded that any employment contract relating to a foreign employee employed without a work permit shall be deemed null and void.33

The above ruling should not encourage employers to hire foreign individuals without a work permit, as although the contract will be considered void, the employers will still be held liable for breaching Article 23(B) of the LMRA Law. Such a breach of Article 23(B) of the LMRA Law shall be considered a criminal offence under Article 36 of the LMRA Law.

We are of the view that as more judgments are issued regarding the above scenario, employees will become more aware of this requirement and will take steps to ensure that they have a valid work permit prior to entering into an employment contract.

iii Covid-19 pandemic

Owing to restraints imposed on businesses as a result of the covid-19 pandemic, some businesses have sought to reduce their financial liability by relying on certain provisions in the Labour Law to terminate or reduce the salaries of their employees.

For instance, employers have sought to rely on Article 109 of the Labour Law that allows employers to terminate the employment contract based on the employees performance. Under this Article, the employee may be terminated due to their limited or lack of competence, provided they are given the opportunity to reach the required level of competence (during a period of at least 60 days).

Employers have also relied on Article 110 of the Labour Law to terminate employment contracts. This Article provides that the employer may terminate employment contracts as a result of the total or partial closure of the establishment, downsizing of activities, replacement of the production system by another in a way that affects the number of the workforce. An employee who is terminated under Article 110 will be entitled to half the compensation specified under Article 111 of the Labour Law.

In addition, some employers have chosen to rely on Article 43 of the Labour Law to reduce the wages of their employees. Article 43 states that if an employee is available to perform his or her work at the workplace but is prevented from doing so owing to force majeure beyond the employer's control, the employee shall be entitled to half of his or her wage.

The reliance of employers on the articles referred to above will likely be disputed by their employees and may give rise to a significant amount of litigation in the future.

Footnotes

1 Ahmed Alfardan is a senior associate and Maryam Kamal and Nadia AlJaber are associates at Newton Legal Group.

2 Article 76 of the Labour Law.

3 Article 119 of the Labour Law.

4 Article 121 of the Labour Law and Article 120 of the Labour Law.

5 Article 122 of the Labour Law.

6 Article 130 of the Labour Law.

7 Article 130 of the Labour Law.

8 Article 130 of the Labour Law.

9 Article 131 of the Labour Law.

10 Article 132 of the Labour Law.

11 Article 133 of the Labour Law.

12 Article 134 of the Labour Law.

13 Articles 156 and 157 of the Labour Law.

14 Articles 158(a) of the Labour Law.

15 Articles 158(b) of the Labour Law.

16 Article 159 of the Labour Law.

17 Article 159 of the Labour Law.

18 Article 162 of the Labour Law.

19 Article 163 of the Labour Law.

20 Article 164 of the Labour Law.

21 Article 2 and 9 of the Minister of Labour Decision No. 5 of 2020.

22 Article 4 of the Minister of Labour Decision No. 7 of 2020.

23 Article 1 of the Minister of Labour Decision No. 7 of 2020.

24 Article 2 of the Minister of Labour Decision No. 7 of 2020.

25 Article 2 of the Minister of Justice Decision No. 45 of 2020.

26 Articles 3 and 4 of the Minister of Justice Decision No. 45 of 2020.

27 Article 5 of the Minister of Justice Decision No. 45 of 2020.

28 Articles 2, 3, 4 and 5 of the Minister of Justice Decision No. 46 of 2020.

29 Minister of Justice Decision No. 75 of 2020.

30 Judgment in Appeal No. 516 of 2019 issued in the hearing held on 12 November 2019.

31 Judgment in Appeal No. 102 of 2019 issued in the hearing held on 12 November 2019.

32 Article 23 of the LMRA Law.

33 Judgment in Appeal No. 1 of 2018 issued in the hearing held on 18 December 2018.

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