*This client alert is merely a commentary on a draft law and may not be relied on in any manner whatsoever.

Introduction

Earlier this month, a new draft for the labour law was initially approved by the Senate and is expected to be issued soon, entirely replacing the current labour law no. 12 of 2003 (the “Draft Law”). The Draft Law seems to be catching up with the development and modernity in the employment field to adapt to the social and economic changes that Egypt has experienced in the recent period. In addition, the Minister of Manpower confirmed that the Draft Law is drafted in conformity with international labour standards and treaties Egypt is a party to.

The Minister of Manpower assures the public that the Draft Law regulates the relationship between employers and employees in a manner aiming to achieve more balance between the interests of both parties in an employment relationship. However, we note some provisions that might be more lenient towards the employees following the footsteps of the current labour law primarily since the main benefits under the Draft Law in favour of employers are more of clarifications (such as severance payments) tackling the existing grey areas rather than granting new rights. We also note that some employees’ rights granted under the Draft Law may create issues in practice (e.g., an employment agreement exceeding four years will be deemed an unlimited term agreement and has removed poor performance as a basis for lawful termination). In all cases, we expect that the Parliament will still introduce some revisions to the Draft Law that will continue to protect employees while considering the interests of employers and their investments.

Throughout this client alert, we will shed light on some of the main insights we have noted under the Draft Law. Meanwhile, keep an eye out for our comprehensive overview and commentary published once the Draft Law is officially issued.

New Principles

• Forced labour and explicit employers’ restrictions to have a person forced to work.
• Introducing the explicit option to hold digital ledgers.
• New leaves granted to employees for their actual days of exam, fully paid, and should not be deducted from their balance leave.
• New fund for irregular employees.
• Conciliation as a new means to settle collective disputes.
• Obligation on employers to notify the concerned authority about the escape of its foreign employee. Such obligation is triggered when the foreign employee is absent for fifteen consecutive days without lawful reason.
• Now, the principle is that the employment contract is for an unlimited period but may be made for a limited period of not less than one year.
• The employment contract will be deemed unlimited if renewed for more than four years, among other cases.
• Obligation on the employee to undertake the necessary tests to check for drug usage or any contagious diseases upon the employer’s request and at their expense.
• New Resignation Regulations:
  • Automatic Resignation: if an employee is absent for ten consecutive days or 20 non-consecutive days per annum without cause;
  • In case the employee wishes to resign, they must submit their resignation to the employer but must first have it ratified by the competent authority.
• New Renewals Regulations:
  • In case of renewing the contract for less than four years, any party may terminate it by giving a two months' notice provided that in case of termination from the employer’s side, they would be obliged to compensate the employee at the rate of one month per year of service.
• The concerned medical authorities may prohibit an employee from attending the work premises if they have been in contact with a family member having a contagious disease. The determined rest period is not from the employees leave balance and is fully paid.

New Amendments

• Annual periodic raise at the rate of 3% from the insured salary with an option to request an exemption in case of emergencies.
• One of the financial resources for the training fund is 0.25% from the total insured salaries instead of 1% from net profits.
• The retention period of the employee file is now five years (instead of one).
• Maternity leave is now four months with up to three times during the employee’s service.
• Revised conditions to obtain a license to undertake recruitment activities. Among these are: adjusted minimum share capitals; removal of nationality requirements for managers and founders; and the license term is now one year (renewable) instead of five.
• There are no requirements to obtain the approval of the competent authority for overtime, but a notification from the employer to the competent authority. In addition, the employee may not be at work for more than 12 hours per day.
• New categories of leaves:
  • 15 days for first-year employees; and
  • 45 days for employees above the age of 50.
• Neither of its parties may terminate unlimited term agreements unless lawful and sufficient reason. In case of termination from the employer side, they would be required to compensate the employee at the rate of two months per year of service and benefits.
• There are no caps on the number of official holidays.
• Causal days are now seven days instead of six.
• Currently, maximum aggravated penalties could reach EGP 100,000 while previously the maximum it could reach is EGP 20,000, in addition to optional and obligatory closures in certain cases.