OVERVIEW OF THE EGYPTIAN LABOR LAW

Employment and labor relationships in Egypt are regulated by the Egyptian Labor Law No. 12/2003 and relevant Decrees (the “Labor Law”). The Labor Law was promulgated on 7 April 2003 consisting of 257 Articles included in six chapters. The Labor Law organizes all legal aspects related to the Egyptian labor environment.

The provisions of the Labor Law represent the minimum rights and benefits of the employees. The Labor Law invalidates any provision or agreement diminishes or deprives any employee from one of the rights determined by virtue of the law. Conversely, agreements that are more advantageous to employees shall remain valid.

Constitution of Employment Contracts

According to Article 32 of the Labor Law, all individual employment contracts must be written in Arabic, in three copies; one copy for the employer, one for the employee, and the third shall be submitted to the competent Social Insurance Office.

Pursuant to the Labor Law, the following information must be incorporated in any employment contract:

1. the name of the employer, the address of the work place;
2. the employee’s name, qualifications, occupation, address, proof of identity and social insurance number, if any;
3. the nature and description of the agreed job; and
4. the salary agreed upon between the parties and all other financial and real privileges.

Duties of Employers

Article 77 of the Labor Law states that, employers shall hold a file for each employee. Said file shall detail the employee’s name, occupation, level of skills, educational degree, address, military status, social status, date of appointment, salaries and its changes, applied penalties, leaves obtained, and finally the date of service termination and the reasons for said termination.

• There are no restrictions to add any additional data such as: the employee’s age, sex (male, female), qualifications and certificates of experience.

• Employers shall also deposit any investigation reports, any reports by the employee’s supervisor concerning his performance, and any other document related to the employee’s service in the aforementioned files.

• Moreover, employers shall keep the above-mentioned files for at least one year after the termination of the labor relationship. Reasons justifying said one year commitment is to prevent any dispute that may arise related to the salaries, leaves, firing or dismissal reasons etc.

Foreign Employment

Article 28 of the Labor Law states that foreigners are not allowed to work in Egypt unless they obtain work permits from the Competent Manpower Authority.

As a rule, foreign workforce shall not exceed 10% of the total workforce in any establishment.

Foreign Employees’ Records

Employers who appoint foreign employees are obligated to make a record including the following:

• The foreigners’ names, surnames, nationalities and religions.
• Birth dates.
• Job titles and exact job descriptions.
• Qualifications.
• Dates and numbers of employment permits.
• Salaries.

Employment Contracts’ Duration

Under the Labor Law, employment contracts can be drawn up for a definite or indefinite period of time.

Indefinite Period Employment Contracts

Definite period employment contracts expire automatically upon the lapse of its term. However, according to Article 105 of the Labor Law, if the employee and employer continue in implementing a definite period contract after the expiration of its term, this shall be considered as an automatic renewal of the contract for an indefinite term. This provision does not apply to employment contracts signed with foreign employees.

If the employer and employee agree on employment duration of more than five years, then the employee shall have the right to terminate the contract after the initial five years, without receiving compensation; provided that the employee must notify the employer of his intention to terminate at least three months before the termination date.

An employment contract may be renewed after its expiration by an express agreement between both parties for one or several periods.

Indefinite Period Employment Contracts

Employment contracts may be concluded either for indefinite term or for performing specific work.

Probation Period

The probation period, if exists, shall not exceed 3 months and employee cannot be appointed under probation for more than one period by the same employer.

Working Hours and Break Periods

According to the Law, working hours should not exceed eight hours per day or forty eight hours a week, excluding break periods. At peak times, the employer, after notifying and obtaining the approval of the competent administration, may ask the employee to work extra hours to face the unusual necessities of the work. However, the employee’s actual working hours shall in no case exceed ten hours a day.??

Employees are entitled to one or more break periods which are not to exceed a one hour.

Financial Benefits

Basic Salary

The employee’s basic salary is to be determined in the employment contract, collective bargaining agreement, or the work’s regulations. Otherwise, the employee’s shall be entitled to a salary equal to the salary of his peers, if any, or the salary specified according to the custom of the profession, if such custom does not exist, the competent committee shall determine the reasonable salary.

Annual Increase

By virtue of the Labor Law, employees are entitled to a periodical annual increase of not less than (7%) of the basic salary used to calculate social insurance contributions.

Overtime Pay

If the employee was asked to work hours in addition to the normal working hours, he shall be entitled to overtime payments. The overtime payments shall not be less than:

• 135% of the employee’s daily salary for extra hours of work during daylight;
• 170% of the employee’s daily salary for extra hours of work during night;
• 100% of the employee’s daily salary for hours of work performed during weekends, and/or
• 200% of the employee’s daily salary for hours of work on official holidays.

Bonuses

There is no obligation to pay annual bonuses to employees. However, production incentive bonuses are tax-free.

Leaves

Annual Leaves

An employee, who has completed one year of service, is entitled to a minimum annual paid leave of 21 days for every year of service and proportionally if his period of service is less than one year and has been in service for 6 months.

The annual leave is increased to one month after the employee has worked for 10 consecutive years for one employer or more, or if the employee’s age is 50 years or more.

In addition, every employee is entitled, with full pay, to take the official public holidays designated by the Ministry of Manpower and Immigration.

If employees are required to work during official holidays, the employees are entitled to overtime (equivalent to double the employee’s daily salary). The weekly days off and the official holidays shall not be included as part of the annual leaves.

The employer has the authority to set the time of the employee’s annual leave according to the work’s circumstances and conditions. In all cases, the employee shall have an annual leave of 15 days, at least six of which are consecutive.? An employee shall be entitled to benefit from his accrued annual leaves.

Casual Leave

Article 51 of the Labor Law states that abstaining from work for casual reasons should not exceed a period of six days per year where each discrete time shall not exceed two working days.

Sick Leave

The Labor Law provides that an employee who’s diagnosed with an illness shall have the right to a sick leave as determined by the competent medical authority and shall be compensated according to the Social Insurance Law.

Official Public Holidays

• The 1st day of Moharam (Islamic New Year)
• The 12th day of Rabie the First (Prophet Mohamed’s Birthday)
• The 1st and 2nd days of Shawal (Islamic Feast)
• The 9th, 10th, and 11th days of Zoelhega (Islamic Feast)
• The seventh day of January (Eastern Christmas)
• The 25th of January (Police Day)
• Spring day (Sham El Nessim)
• The 25th of April (Sinai Liberation Day)
• The 1st of May (Labor Day)
• The 23rd of July (Revolution Day)
• The 6th of October (Armed Forces Day)

Making Pilgrimage Or Visiting Jerusalem

Article 53 of the Labor Law states that an employee who has spent five consecutive years in service has the right to a fully paid leave for a period not exceeding one month for performing pilgrimage or to visit Jerusalem. An employee is entitled to said leave only one time during his entire service.

Maternity And Child Care Leave

A female employee, who has completed 10 months of service, with one or more employers, shall be entitled to a fully paid maternity leave of 90 days which includes the period prior to and after giving birth. A female employee may enjoy only two maternity leaves during her entire service period.

During the 24 months following the date of childbirth, the female employee has the right to two daily rest periods (30 minute each) for breast-feeding her child. Said daily rest periods may be combined.

Termination of Employment

End Of Employment Contracts’ Duration

• Employment Contracts Exceeding 5 Years

In the event the original and renewed contractual periods of the employment contract exceed five years, the employee may terminate said contract by sending the employer a written notification of termination three months prior to the actual date of termination.

• Employment Contracts Concluded for Specific Task

The law regulates employment contracts executed to accomplish specific work. The termination of said contracts is terminated upon completion of the specified work. Said contract may be renewed by an express agreement between the parties or by continuing said contracts execution by both parties following the completion of the specified work.

• Indefinite Employment Contracts

According to Article 110 of the Labor Law, the employee may terminate the indefinite employment contract based on a legitimate cause related to either his health, social or economic condition.

However, an indefinite employment contract may not be terminated by the employer, unless the employee is deemed inefficient according to the provisions of the endorsed regulations or he has been fired for committing a significant mistake.

Dismissal Of Employees

Pursuant to Article 69 of the Labor Law, the employer cannot dismiss the employee unless he commits a gross mistake, the following acts are examples of what shall be considered a gross mistake:

• If the employee has assumed a false identity or submitted false documents;
• If the employee commits an error which results in material losses for the employer provided that the employer reports the incident to the competent authorities within 24 hours of his awareness of said incident;
• If the employee repeatedly fails to comply with the rules and regulations set to ensure the safety of both the employees and the company given that said rules and regulations are written and publicized in a noticeable place;
• If the employee is absent, without any legitimate justification, for a period of more than twenty (20) non-consecutive days during the same year, or more than ten (10) consecutive days.? In said event, the employer shall serve a registered written termination notification with acknowledgement of receipt to the employee ten (10) days subsequent to his absence in the first case and five (5) days subsequent to his absence in the second case;
• If it is established that the employee is in breach of his fiduciary duties causing severe damage to the company;
• If the employee competes with the employer in the same field of activity;
• If, during the working hours, the employee is in an evident state of drunkenness or affected by the use of intoxicating substance; or
• If it is established that the employee has committed an act of aggression against the employer or the general director, or commits a serious act of aggression against any of his superiors during working hours or as a result of work.

If one of the foregoing mistakes occurred, and the employer desires to dismiss the employee, the employer shall follow the process and procedures provided under Articles 70 and 71 of law No. 180/2008. According to said law, if any dispute relating to the employment relationship took place between the employer and the employee, the desiring party can settle the dispute as follows:

• Either to apply to the competent committee, within ten days from the occurrence of the dispute, to seek the amicable settlement. If the dispute has not been settled within twenty one days from the application date, either party may ask the committee to refer the dispute to the labor court;
• Or to submit the dispute directly to the labor court within a period of forty five days commences from the expiry of the period specified, as explained in the previous paragraph, for referring the dispute to the committee to reach an amicable settlement.

Employee’s Incapacity

Total Incapacity: pursuant to Article 124 of the Labor Law, the employment contract terminates with the employee’s total incapacity to perform his contractual duties.

Partial Incapacity: according to Article 124 of the Labor Law, in the event of the employee’s partial incapacity, the contract shall remain valid unless the employer establishes that the employee is unable to perform appropriately any of his job duties. In the event it is established that there is an alternative job the employee is able to perform in the establishment, the employer shall, upon the employee’s request, transfer the employee to perform the specified duties without prejudice to the provisions of the Social Insurance Law.

Employee’s Sickness

• According to Article 127 of the Labor Law, the termination of employment is not possible for reasons of the employee’s illness, unless the employee has exhausted sick leave entitlement as determined by the Social Insurance Law; in addition to his annual leave. The employer has to notify the employee of the contemplated termination fifteen days before the end of the employees’ leave entitlement
• The employer may not terminate the employment contract if the employee recovers prior to being served a notice.

Retirement

• Article 125 of the Labor Law states that the employer has the right to terminate the employment of an employee who reaches sixty years of age, unless the contract is for a definite period of time and extends beyond this age. In this case, the contract will be terminated on the date mentioned in the contract at the moment of its conclusion.
• Under Article 126, an employee who continues work after reaching the age of retirement is entitled to an indemnity equivalent to one half of a month salary for the first five years and one month salary for each following year in the event the employee does not have any payment rights for said period in accordance with the provisions of the Social Insurance Law.

Female Employee’s Right To Terminate

By virtue of Article 128, female employees’ have the right to terminate the employment contract, regardless of its period, without affecting her rights as prescribed in both the Labor and Social Insurance Laws for the following reasons:

• Marriage;
• Pregnancy; or
• Child bearing.

Termination For Disciplinary Reasons

Under Article 129, the employer is entitled to terminate the contractual relationship with an employee in the event the employee is convicted of an honorable, honesty, or moral crime or sentenced to a custodial penalty.

Termination For Economic Reasons

The Labor Law, Articles 196 to 200, regulates the employer right to close the establishment, fully or partially, and to downsize the workforce to confront economic necessities.

It is worth mentioning that the closure for economic reasons does not take place automatically, the employer shall adhere to certain procedures when requesting the closure.

By terminating the employment contract for economic reasons, the employee will be entitled to a compensation equivalent to one month salary for each of the first five years of service and one and a half of a month’s salary for the years following the first five years of service.

However, pursuant to Article 201 of the Labor Law, the employer has the right to abstain from exercising the aforementioned right to terminate by modifying the conditions of the contract temporarily. The employer may alter the nature of work to be conducted by the employee as well as reduce the agreed upon salary which may not be less than the minimum wage set by law. In the event the employer modifies the conditions set in the employment contract as stipulated above, the employee has the right to terminate the contract without sending a prior notification of termination to the employer.

Resignation

The employee must submit his resignation in writing and has the right to withdraw his resignation within a week from the date the employer accepts the resignation.

Unlawful Termination

According to Article 120, the following grounds are considered illegitimate and inadequate justifications for terminating the employment contract:

• Race, sex, social status, family obligations, pregnancy, religion or political views;
• An employee’s affiliation to a union, or his participation in the union’s activities if it is within the framework of the laws;
• An employee that has formerly, currently or seeking to represent his fellow employees;
• Submitting or filing, individually or jointly, a complaint against the employer protesting against the violation of laws, regulations or employment contracts;
• Sequestration of employees’ dues at the employer; and/or
• The employee’s exercising his right to the leaves outlined above.

In the event of an illegitimate termination by one of the parties to the contract, the party terminating the contract shall compensate the other party for the damage incurred as a result of the unlawful termination.

If the employer terminates the contract unlawfully, the employee has the right to claim compensation. The amount of compensation is to be determined by the court and shall not be less than two months of the employee’s comprehensive salary for each year of service, in addition to the employee’s other legally entitled dues.

Death Of Employee

• The contract shall end in the event of the employee’s death.
• The employer shall pay to the employee’s family an amount equivalent to two month salary (capped at a minimum amount of LE 250) as well as a grant equivalent to the employee’s salary for the month in which his death occurs. In addition, according to the Social Insurance Law the employer is to pay the said employee’s family the full salary of two months after the employee’s death.

Notice of Termination

• The termination’s notice shall be served two months prior to the date of the contract’s termination if the employee has been in service for a period that does not exceed ten years,? and three months if the employee has be in service for a period exceeding ten years.
• The employment contract is to remain valid and effective during the notification period.
• The notification period commences on the day the employee or employer is served with the notice and is valid upon receipt.
• Notifications to terminate employment contracts may not be sent to the employee during his leaves. The date of notification shall start once the employee returns to work.
• If the notification was submitted by the employer, the employee is entitled to a minimum of one work day or eight hours during the working week to find another job. The employee will be entitled to his salary during the said absence.
• In the event the employer terminates the employer contracts without notifying the employee or prior to the end of the notification period, the employer shall pay the employee an amount equivalent to the employee’s salary for remaining period of the notification period.
• In the event the contract is terminated by the employee it shall be terminated within a week from the date of the employer’s acceptance of the employee’s written resignation.
• Female employees’ willing to terminate their contractual relationship with the employer shall serve the employer a notice within three months from the date of marriage, established pregnancy, or date of childbirth.