Employment and Labor Law

Issues like wrongful termination, discrimination, wage and hour, unpaid overtime pay are the most common issues in this area. Lack of awareness of the labor law framework can lead to failure and the clients’ deprivation of rights. Here in Libra, our legal experts are fully aware of the latest updates, changes and amendments of the relevant acts and bylaws to labor law, such as Iran’s Labor Code. They are also familiar with the procedure of the Administrative Court of justice.
Furthermore, every multinational company that wants to establish a business in Iran needs to know more about employment regulation of the local community. Having information on how many local and foreign employees they can hire in Iran; how they can hold a low risk contract with local employees. This is one of the foreign companies’ concerns. Our team will protect your interest by providing you comprehensive legal advice on employment law as well as consultancy services regarding relation between employees and employers, drafting agreements and other issues relating to labor law.
Our Labor and Employment attorneys have experience in all areas labor and employment services, including, but not limited to, the following:
Pensions and employee benefits
Executive and employee compensation
Hiring and termination issues
Retirement Standards and Workers’ Compensation
Safety and Health Standards
Unfair dismissal
Drafting employment contracts
If you need more information or legal advice, our team can help you meet your challenges. Libra is here for you!

The Basics of the Employment Contracts
How much do you know about the main provisions of an employment contract? There can be a lot of disputes over the terms of an employment contract between the parties. Whether you are an employer or employee, you should have some information about these contracts, as these types of contracts can protect your job security. Hence, here is a brief overview of the issues which need to be included in the contract.
The comprehensive Labor Law covers all labor relations in Iran, including hiring of local and foreign staff. The Labor Law provides a very broad and inclusive definition of the individuals it covers, and written, oral, temporary and indefinite employment contracts are all recognized.
The Iranian Labor Law is very employee-friendly and makes it extremely difficult to layoff staff. Employing personnel on consecutive six-month contracts is illegal, as is dismissing staff without proof of a serious offence. Labor disputes are settled by a special labor council, which usually rules in favor of the employee. The Labor Law provides the minimum standards an employer must adhere to when forming an employment relationship.
What are the main provisions of the Employment Contracts under Iranian labor law?
To have a valid contract concluded under the labor law of Iran, the following provisions must be included:
1. Type of work, vocation or duty that must be undertaken by the worker;
2. Basic compensation and supplements thereto;
3. Working hours, holidays and leaves;
4. Place of performance of duties;
5. Probationary period, if any;
6. Date of conclusion of contract;
7. Duration of employment; and
8. Any other terms and conditions required according to the nature of employment.

The employer may require the employee to be subject to a probationary period. However, the probation time may not exceed one month for unskilled workers and three months for skilled and professional workers. During the probation period, either party may immediately terminate the employment relationship without cause or payment of severance pay. The only caveat is that if the employer terminates the relationship, he must pay the employee for the entire duration of the probation period.

Suspension of Employment Contract
The fact that an employee under certain conditions can suspend the employment contract presents yet another challenge to employers. What this allows is suspension of the employment contract under the following conditions:
1. For the period of military service (active, contingency and reserve), as well as voluntary enlistment during conflicts. This period shall be considered part of the employee’s service record at place of employment;
2. The closure of a workshop;
3. Educational leave for up to four years; and
4. The period of detention that does not lead to conviction;
Once the conditions giving rise to the suspension of the contract are removed, the employer must allow for return of the employee to work. If the position is filled or eliminated, the employer is obligated to provide a similar position for the employee. Failure to do the above is considered wrongful discharge and subject to legal action.
Termination of Employment Contract
The Law allows for termination of the employment contract only under the following instances:
1. Death of employee;
2. Retirement of employee;
3. Total disability of employee;
4. Expiration of the duration of the employment contract;
5. Conclusion of work in task specific contracts; and
6. Resignation of the employee.
The employer is bound to pay benefits under all of the above scenarios according to the employee’s years of service.
Dismissal of an Employee
An employee may only be dismissed upon the approval of the Islamic Labor Council or the Labor Discretionary Board. Grounds for dismissal include an employee’s neglect in carrying out his/her duties or violation of disciplinary by-laws of the employer. The employer must have provided written prior notice of the employee’s violations. If the board is not convinced that the employee’s dismissal is justified, the employer must reinstate the employee. Once an employee is dismissed, the employer is obligated to provide the legal severance package.
Severance & Termination Benefits
The Law mandates the following compensation for suspended, terminated and disabled employee:
1. Suspended Employee – Where an employee is suspended without cause the employer must reinstate the employee and pay for all damages and compensation resulted from the wrongful suspension;
2. Terminated Employee – An employer is under legal obligation to provide thirty (30) days salary for every year of service for employees made redundant or retired;
3. Disabled Employee – The employer must pay 30 days salary for every year of service. Moreover, if the disability of an employee is due to working conditions, the employer must pay 60 days salary for every year of the employee’s service period.
Working Hours & Overtime
The workweek in Iran is based on a 44-hour week. Typically, employees work Saturday through Wednesday (8 hours per day) and a half a day on Thursday (4 hours). Any hours worked beyond these will entitle the employee to overtime. The Law mandates a payment of 40% above the hourly wage to employees for any accrued overtime. The employee must consent to overtime work.
Holidays & Leave
Employees are entitled to leave on all official state holidays (approximately 22 days a year) and Fridays. Any employee working during these holidays will be entitled to overtime pay. Additionally, employees are entitled to one-month holiday per annum. The annual leave for those employees engaged in hard and hazardous employment shall be five weeks per annum. Employees are entitled to save up to 9 days of their annual leave. In case of termination, disability or redundancies, employees must be compensated for any accrued leave.
Finally, employees are entitled to 3 days of paid vacation for marriage or death of a spouse, father, mother or child.
Maternity Leave
Female employees are entitled to 90 days of maternity leave. The employee’s salary during maternity leave will be paid according to the provisions of the Social Security Act. Maternity leave must be considered part of an employee’s service record. Employers must provide returning employees with the same position.
What about Employment of Foreign Nationals?
The Law forbids the employment of foreign nationals without a proper work permit. Diplomats, United Nations employees and foreign press reporters are exempt from this requirement.
A work permit to a foreign national will be issued if the following conditions are met:
1. Lack of expertise among Iranian nationals;
2. The foreign national being qualified for the position; and
3. The expertise of the foreign national will be used for training of, and later replacement by, Iranian individuals.
Work permits will be issued, renewed or extended for a maximum period of one year. Moreover, no exit permission will be granted to the foreign national unless the national has paid all due taxes, duties, etc.
What can be concluded?
As mentioned earlier, employment contracts legally set out the main working frameworks and establish the working relationship between the parties. In fact, a well drafted contract can avoid further risks and problems for both employers and employees. So one should keep in mind that drafting the provisions and clauses of such contracts needs trained legal specialist’s legal opinions.
Seeking legal advice on employment law related issues? You can simply contact us. Libra Law lawyers are ready to help you!

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