The New UAE Civil Code: Key Employment Considerations

Federal Decree-Law No. 25 of 2025 (the New Civil Code) came into force on 1 June 2026, replacing the 1985 Civil Code. While the UAE Labour Law remains the primary source of employment regulation, the New Civil Code is expected to assume greater importance in shaping how employment disputes are determined, particularly where issues of consent, disclosure, reliance and fairness arise. The changes are not expected to result in a radical departure from existing employment practices. However, they are likely to increase the importance of careful drafting, documentation and process discipline, particularly during recruitment, negotiations and settlement discussions.

Recruitment and Negotiations

Article 121 of the New Civil Code expressly regulates pre-contractual negotiations for the first time, requiring parties to negotiate and withdraw from negotiations in good faith. While parties remain free not to conclude a contract, bad-faith negotiation conduct may give rise to liability for actual losses incurred in reliance on the negotiations.

In an employment context, this may become relevant during recruitment or senior hiring discussions, particularly where a prospective employee has taken steps in reliance on an offer, such as resigning from an existing role or relocating.

Employers may therefore wish to review offer documentation, ensure conditions are clearly stated and maintain appropriate records where offers are withdrawn.

Disclosure Obligations

Article 122 introduces a statutory obligation to disclose information that is material and decisive to the other party's consent, where their unawareness of that information is reasonable in the circumstances.

Employment negotiations often involve an inherent information imbalance. As a result, disputes may increasingly focus on whether certain information should have been disclosed during recruitment, discussions around role changes or promotions, or termination and settlement negotiations.

While employers are not required to disclose all internal or forward-looking considerations, greater emphasis may be placed on ensuring that key assumptions and material information are addressed clearly and accurately.

Settlement Agreements

Settlement agreements are an area where the New Civil Code's consent-based framework is likely to be tested most directly.

Employees negotiating exits may be under financial, immigration or time pressure. Against that background, arguments based on non-disclosure, mistake or exploitation may be advanced with greater frequency, particularly where settlement terms are presented on an expedited basis or there is limited evidence that the employee had sufficient opportunity to consider the terms or seek advice.

Employers should continue to focus on careful drafting and process management, including clear acknowledgements that agreements are entered into voluntarily and that employees have had adequate time to review the terms.

Key Takeaways for Employers

• The New Civil Code may increase scrutiny of recruitment, negotiation and settlement-stage conduct.
• Disclosure questions are likely to turn on whether information was truly decisive to consent.
• Settlement agreements warrant particular care, both in drafting and in negotiation process.
• Recruitment and settlement workflows should be reviewed through a Civil Code lens.
• Careful drafting, consistent records and measured communications remain central risk-management tools.

With the New Civil Code taking effect in June 2026, employers who review templates, train HR teams and maintain disciplined negotiation and documentation practices will be better placed to manage the evolving risk landscape. If you would like to discuss the implications of the New Civil Code for your organisation, please contact Sara Khoja or Ben Brown.

If you are a client of Clyde & Co, you can access an in-depth version of this article on our client facing platform In Focus. If you do not already have access, please speak to your usual Clyde & Co contact.

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