UAE labour law: Termination of employment contract, protection from arbitrary dismissal

Foreign workers from around the world who have come to live in the UAE have played a vital role in building the Emirates’ diversified economy. As the UAE continues to welcome the best talent to join locals in bolstering its economy, the ever-evolving labour law provides protection for such workers, ensuring employees are safeguarded against unfair treatment and arbitrary dismissal.

These protections ensure that employees are not terminated without a valid reason or due process and that their rights are safeguarded after termination. It is important to understand these rights for employees and employers to ensure a fair and lawful termination process.

The employment contracts may be terminated under various situations, according to the UAE Labour Law (Federal Law No. 33 of 2021). The law states both legitimate and unlawful grounds for termination, which apply to both limited-term and unlimited-term contracts.

Below are the main situations in which an employment contract may be terminated:

1. If the term of the contract expires and is not, extended or renewed
2. If the employer and employee mutually agree in writing to end the contract
3. If either party wants to end the contract, they must follow the termination rules and notice period agreed upon (read below)
4. In the event of the employer’s death, if the subject of the employment contract is closely tied to the entity (such as in the case of small businesses or family-owned companies where the employer’s personal involvement is integral to the operations), the employment contract may be terminated
5. In the event of the worker’s death or full permanent inability to work, based on a certificate issued by a medical entity
6. Where a worker faces a final court judgement of a freedom-restricting penalty for a period of not less than three months
7. If the establishment is closed permanently, in accordance with the legislations in force in the UAE
8. If the employer becomes bankrupt or insolvent, or faces any economic or exceptional reasons that prevent the continuation of the project
9. 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

Either party in the employment contract can terminate the contract for any ‘legitimate reason’, provided that:

1. A written notification is given to the other party and
2. The terminating party serves a notice of one month (30 days) to three months (90 days).

The notice period may be reduced or exempted on mutual agreement between the two parties, with no violation of any parties’ rights.

Additionally, the following provisions must be followed:

1. Work as agreed upon in the contract must be performed during the notice period
2. The worker is entitled to his full wage as per the contract, for the notice period
3. The party that fails to serve the notice period must pay the other party a “notice period allowance,” equal to the worker’s wage for the full notice period or the remaining period. This allowance is based on the worker’s last received wage.
4. In the event that the employer terminates the contract, the worker is entitled to an unpaid leave of one day per week during the notice period to search for another job.

Employer terminates contract without notice

Termination of a contract without notice by the employer is allowed in certain circumstances under UAE labour law. The employer can end the contract of the employee immediately, without the obligation to provide a notice period or severance pay, if the latter:

1. Adopts a false identity or submits forged documents or certificates
2. Commits an error causing substantial loss to the employer or if he deliberately damages the properties and acknowledged the same. The employer must inform MoHRE about the incident within seven working days from having knowledge of the same.
3. 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
4. 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
5. Divulges any secrets of the establishment resulting in losses or a missed opportunity to the employer, or achieving a personal benefit for self
6. 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
7. Assaults the employer, the manager or any of his colleagues during the course of his work
8. Absent from work without lawful excuse for more than 20 intermittent days or more than seven successive days during one year
9. Exploits his position illegally to obtain personal results and gains
10. Joins another establishment without abiding by the rules and procedures in this regard.

Under employment law, an employer may terminate a worker without notice only after conducting a written investigation. The dismissal must be documented in writing, justified, and formally delivered to the employee.

Employee terminates contract without notice

An employee has the right to terminate their work contract without notice if the employer commits serious violations or breaches the terms of the agreement. An employee may end the contract immediately, if the employer:

1. Fails to meet his contractual or legal obligations towards the worker, provided that the worker notifies the Mohre 14 working days before the date of quitting and the employer fails to rectify the breach despite being notified by Mohre of the same
2. Assaulted or harassed the worker at workplace, 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
3. Instructed the 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
4. Failed to remove the factors that pose a grave danger and/or threaten the workers’ safety or health despite being aware of it. (What constitutes as grave danger?)

Arbitrary termination

Arbitrary dismissal refers to the wrongful termination of an employee without just cause or legal grounds, in violation of the UAE labour law.

According to Mohre, termination of an employee’s service is considered unlawful or arbitrary if it is due to the employee filing a genuine complaint with the ministry or pursuing a lawsuit against the employer, provided the lawsuit is proven valid.

If arbitrary dismissal is proven, the court will order the employer to pay compensation to the employee. The compensation amount will be determined based on the nature of the work, the extent of the damage caused to the employee, and the length of their employment. In all cases, the compensation will not exceed the employee’s salary for a period of three months, calculated based on their last received wage.

In addition, the employee can also claim their end-of-service gratuity, notice period pay, or any other unpaid dues owed by the employer.

Working for another employer after termination

An employee may work for another employer and obtain a new work permit after the termination or expiry of job contract if the term of the previous contract ends and is not renewed.

An employee may work for another employer and obtain a new work permit after the termination or expiry of job contract if: the term of the previous contract ends and is not renewed. The contract is terminated or the employer terminates the contract without providing a reason.

After termination or expiry of the contract, an employee gets a grace period from the date of cancellation, in which she/he can either obtain a new work permit and residency or leave the country.

An employee may be denied a work permit for one year from the date of departure from the UAE if:

• They terminate the employment contract during the probation period, provided the employer has not breached any contractual obligations; or
• A “work abandonment” report is found to be true.