UAE Labour Law Section 3 - The employment contract

Full text of Article 3 of the UAE Labour Law

  • Gulf News
  • Published: 19:02 July 11, 2013

III. EMPLOYMENT CONTRACT

1. What are the permitted tenures of employment contracts?

Two types of employment contracts are permissible: Limited employment contracts which are contracts for a specified duration with specific commencement and completion dates, and unlimited contracts by which the employee will continue to work for the employer from a specific date till such time as the employment contract is terminated by either party after giving prior notice.

2. What is the difference between a limited and an unlimited employment contract?

A limited contract has the following characteristics:

It has a commencement and completion date.

Its term cannot be in excess of a period of 4 years. It can however be renewed on mutual consent for a similar or lessee period.

The employment will terminate at the end of the contract period.

If the employer terminates the contract for reason other than those specified in Article 120, he would be liable to pay compensation to the employee. This compensation shall be determined on the basis of the wages due for a period of three months or for the remaining period of the contract whichever is less, unless an article in the contract states otherwise.
If the contract is cancelled by the employee for reasons other than those stipulated in Article 121, he will be liable to compensate the employer against any loss resulting from its cancellation. The amount of compensation shall be computed on the basis of half-a-month's wages for three months or for the remaining period of the contract whichever is less, unless the contract states otherwise.

The characteristics of an unlimited contract are as follows:

The contract will state a commencement date but no completion date i.e. the date on which the contract will end.
A contract will be considered "unlimited" if it is a oral contract or if it is not for a specified period or it had been for a specified period and the parties continue to act on its terms & conditions after its expiry, without any written contract specifying the completion date, or if the purpose of the employment is to complete work not estimated within a specified time-frame or which is by very nature not renewable.

The contract may be terminated on a mutual agreement by either of the parties by giving the other 30 days notice of termination.

The contract may be terminated for a justified cause at any time on giving 30 days notice of termination by either party to the other. The notice period may be less for an employee working on daily basis.

The notice period may be extended for a period exceeding 30 days. It would then not be acceptable for the parties to waive this notice period.

The employees wages during the notice period should be paid in full for the entire notice period served.
In the event that no notice had been given, the person who ought to have given the notice must compensate the other with the payment of a month's wage in lieu of the notice period.

As per Article 120, the employer may terminate the employee's contract without notice.

The employee may terminate the employment contact without notice in accordance with Article 121.

The employee will be entitled to compensation if the termination of the contract had been for an unjustified cause. The court may award the employee damages, against the employer, provided that the damages so awarded does not exceed three months wages of the employee (calculation to be based on the last wage paid to the employee).

The compensation for damages if any, awarded to the employee for unreasonable dismissal, will be without prejudice to the employee's entitlement of end-of-service gratuity and payments in lieu of notice, if notice had not been properly given.

3. What information should be stated in an employment contract?

The only information required by law to be specified in the employment contract is as follows:

Date of the employment contract
Date of commencement of the employment contract
Nature of the contract (limited or unlimited)
Designation/category
Term of the contract (for limited contracts)
The compensation package

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