Labour Case

Termination of Labour Contract under UAE Law

The United Arab Emirates (UAE) being a paradise for job seekers from all over the world, have specific laws and regulations governing the termination of labour contracts to ensure fair treatment and protect the rights of both employer and employees to balancing their interests.

Employment Contract is the foundation of employer-employee relationship enumerating the terms and conditions of employment. There are circumstances where termination becomes a necessity which would result in affecting either party’s interests and ultimately, the Court’s interference would be required to resolve such disputes.

It is important to note that while arbitration is a recognized method of dispute resolution in the UAE, it is typically used for resolving disputes arising from contractual matters. Employment-related disputes are usually handled through the Ministry of Human Resources and Emiratisation (MoHRE) or the relevant labor department, rather than through arbitration.

Grounds for Termination of Employment Contracts

As per the Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector, the ‘UAE Labour Law’, the employment contract can be terminated by the employer in the following situations;

if the term of the contract expires and is not, extended or renewed
if both, the employer and employee mutually agree in writing to end it
if either party wishes to end it, provided that the terminating party observes the provisions of termination of the employment contract and the notice period agreed upon (details below)
in the event of the employer’s death if the subject of the contract is related to its entity
in the event of the worker’s death or full permanent inability to work, based on a certificate issued by a medical entity
where a worker faces a final court judgement of a freedom-restricting penalty for a period of not less than three months
if the establishment is closed permanently, in accordance with the legislations in force in the UAE
if the employer becomes bankrupt or insolvent or faces any economic or exceptional reasons that prevent the continuation of the project.
if the worker fails to fulfil the conditions for renewing the work permit for any reason beyond the control of the employer.

Notice period of Termination

Article 43 of the UAE Labour law provides that either party in the employment contract can terminate the contract for any ‘legitimate reason’, provided that a written notification is given to the other party and the terminating party serves a notice of 1 month (30 days) to 3 months (90 days). However, the notice period may be reduced or waived as per mutual agreement between the employee and the employer.

Additionally, the following provisions must be adhered to:

work as agreed upon in the contract must be performed during the notice period,
the worker is entitled to his full wage as per the contract, for the notice period,
the party who fails to serve the notice period must pay the other a ‘notice period’ allowance, which is equal to the worker’s wage for the full notice period or in proportion to the remaining period. The allowance for the notice period is calculated according to the last wage received by the worker.

As per the UAE laws, the employee is eligible for an unpaid leave of one day per week during the notice period to search for another job in case of termination of the employment contract by the employer.

Termination of contract without notice by the employer and arbitrary dismissal

Article 44 of the UAE Labour Law mentions that an employer may terminate the services of the employee without notice, on the following grounds;

If the employee adopts a false identity or submits forged documents or certificates
If the employee commits an error causing substantial material loss to the employer or if he deliberately damages the properties of the employer and acknowledged the same. Note that the employer must inform MoHRE about the incident within seven working days from having knowledge of the same.
If the employee violates instructions concerning safety of the workers and the place of business provided that such instructions were displayed in writing at conspicuous places or verbally informed to an illiterate employee
If the employee fails to perform his basic duties under the employment contract and persists in violating them despite warning him twice of dismissal, if the same is repeated
If the employee divulges any secrets of the establishment resulting in losses or a missed opportunity to the employer, or achieving a personal benefit for self
If the employee is found to be drunk or under the influence of prohibited drugs during working hours, or commits an action breaching the public morals at the workplace
If the employee assaults the employer, the manager or any of his colleagues during the course of his work
If the employee absents himself without lawful excuse for more than 20 intermittent days or more than 7 successive days during one year
If the employee exploits his position illegally to obtain personal results and gains
If the employee joins another establishment without abiding by the rules and procedures in this regard.

As per the UAE Labour Law, any dismissal or termination of contract by the employee without providing a notice shall be treated as arbitrary dismissal, for which, the employee is eligible for a compensation.

The Law further mandates that termination of contract without notice shall be only after conducting a written investigation. Further, the termination shall be in writing, justified and handed over duly to the employee.

Termination of contract without notice by the employee

According to Article 45 of the UAE Labour Law, an employee can terminate the contract without notice under the following circumstances;

Failure to meet the contractual and legal obligations on the part of the employer subject to 14-days prior notification to the MoHRE before the date of quitting and the employer fails to rectify the breach despite being notified by MoHRE of the same.
Surviving assault or harassment at workplace by the worker provided that the latter informs the competent authorities and the MoHRE within five working days from the date on which he was able to report.
Instruction to worker to perform a work fundamentally different from the work agreed upon in the employment contract, without the worker’s written consent on the same, except for situations where work is absolutely required and as explained in Article 12 of the UAE Labour Law.
Failure to remove the factors that pose a grave danger and/or threaten the workers’ safety or health despite being aware of it. Article 26 of Cabinet Resolution No. 1 of 2022 on the Implementation Regulation of Federal Decree Law No. 33 of 2021 spells out circumstances of grave danger at the workplace.

Arbitrary dismissal

According to Article 47 of UAE Labour Law, if the employer terminates the employee for filing a complaint to MoHRE or filing a lawsuit against the employer, whose validity is proven, then such termination is illegal.

Further, if an employee believes that he has been dismissed illegally, he can complain to MoHRE. The ministry will try to solve the issue amicably. If an amicable settlement is not reached, the case will be referred to the court having competent jurisdiction.

On successfully proving the claim of arbitrary dismissal before the Court with support of sufficient documentary evidence, the court will order the employer to pay a compensation to the employee after considering the value of compensation taking into account the type of work, the extent of damage caused to the employee and the duration of his employment.

In all cases, the amount of compensation must not exceed the wage of the employee for a period of three months, calculated on the basis of the last wage he was entitled to.

In addition to compensation, the employee can claim his gratuity, notice period dues or any other unpaid dues he is entitled to, from his employer.

If you are facing a specific situation or need guidance regarding your employment in the UAE, it is recommended to consult with a legal professional who specializes in UAE labor law to ensure you receive accurate and up-to-date advice based on your circumstances.

Our team of lawyers at Legis Vista are well versed in dealing with labour matters providing consultation where we will analyse the case and provide advice on the suitable remedy available to you under the Law. While providing our services, we are committed to provide effective solutions to your ultimate goals.