There are two types of contracts in the UAE: limited and unlimited. And each of them has a set number of steps for their termination, again depending on if it is resignation, arbitrary dismissal or the end of a contract.
A limited contract cannot exceed two years' term and it must mention the notice period ranging from a minimum of one month to a maximum of three months.
Either party can singly terminate the original contract or a renewed contract provided he complies with the legal consequences of early termination which include:
- Notifying in writing at least one month in advance but no longer than three months.
- Honouring the contract obligation for the duration of the notice.
- Compensating the other party to the level that was agreed to by both the parties, provided this does not exceed the equivalent of three months' gross wages.
A limited contract can be terminated on the following basis:
- If the term of the contract expires and is not renewed.
- If both, the employer and employee mutually agree to end it.
- If a worker commits any of the violations as mentioned under Article 120 of the Labour Law.
In case of unlimited contracts, an employment relation is terminated in one of the following instances:
- Both, the employer and employee mutually agree to terminate the contract.
- When either party decides, at any time, to terminate the contract provided that the terminating party abides by the legal notice requirements and continues to honour his obligations for the duration of the notice period, which cannot be less than one month and no longer than three months.
- When either party acts unilaterally to terminate the contract, without complying with the legal notice and without reasons of default by the other party - in this case, the terminating party bears the legal consequences of early termination.
Termination without notice
An employment contract, whether limited or unlimited can be terminated without notice period by either party in accordance of the UAE Labour Law.
An employer can terminate an employment contract without notice and deprive the employee of his end of service gratuity, if the latter:
- Adopts a false identity or nationality or if he or she submits forged documents or certificates.
- Is appointed under a probationary period and dismissal occurred during or at the end of said period.
- Commits an error causing substantial material loss to the employer provided that the latter advises the labour department of the incident within 48 hours from having knowledge of the same.
- Violates instructions concerning safety of the place of business provided that such instructions are displayed in writing at conspicuous places or verbally informed to an illiterate employee.
- Fails to perform his or her basic duties under the employment contract and persists in violating them despite formal investigation with him or her in this respect and warning him or her of dismissal if the same is repeated.
- Divulges any secrets of the establishment where he or she is employed.
- Is awarded final judgement by the competent court in respect of an offence prejudicing honour, honesty or public morals.
- During working hours, is found drunk or under the influence of prohibited drugs.
- In the course of his work, commits an assault on the employer, the manager or any of his colleagues.
- Absents himself without lawful excuse for more than 20 intermittent days or for more than seven successive days during one year.
Termination of contract without notice by the employee
An employee can terminate an employment contract without notice period if:
- The employer has failed to meet contractual or legal obligations towards the worker (for example, if he fails to pay wages for a period exceeding 60 days)
- The employee has filed a court complaint against an employer who has failed to secure employment of the worker (for example, in case of a business shutdown or if the business has been inactive for a period exceeding two months)
- The final ruling for a labour complaint referred to the Labour court by Ministry of Human Resources & Emiratisation is in favour of the worker.
Arbitrary or unfair dismissal takes place when an employer terminates an employee or forces him to resign without any justifiable reasons.
According to Article 122 of the UAE Labour Law, arbitrary termination of an employee happens when an employee is fired for reasons not related to work performance, or when the employee files a valid complaint against an employer, which made the latter terminate him maliciously.
(Article 122 - The termination of the employment of the worker by the employer shall be deemed arbitrary should the cause of termination not be related to the work , in particular should the termination of the employment of the worker be made by reason of the filing by the latter of a serious complaint before the pertinent authorities or a valid claim against the employer.)
Article 120 of the UAE Labour lays out the reasons for which termination without notice is lawful.
They are that the employer may dismiss the worker without prior notice in any of the following cases:
a - Should the worker assume false identity or nationality, or submits false certificates or documents.
b - Should the worker be appointed under probation, and the dismissal occur during or at the end of the probation period.
c - Should the worker commit an error resulting in colossal material losses to the employer, provided that the Labour Department is notified of the incident within 48 hours of the knowledge of the occurrence thereof.
d - Should the worker violate the instructions related to the safety at work or in the work place, provided that such instructions be written and posted in a prominent location, and that he is notified thereof should he be illiterate.
e - Should the worker fail to perform his main duties in accordance with the employment contract, and fail to remedy such failure despite a written investigation on the matter and a warning that he will be dismissed in case of recidivism.
f - Should he divulge any of the secret of the establishment where he works.
g - Should he be convicted in a final manner by the competent court in a crime of honour, honesty or public ethics.
h - Should he be found in a state of drunkenness or under the influence of a narcotic during work hours.
i - Should he assault during the work the employer, responsible manager or co-worker.
j - Should he be absent without valid cause for more than twenty non-consecutive days in one year, or for more than seven consecutive days.
If an employee believes that he has been dismissed illegally, he can complain to Ministry of Human Resources and Emiratisation (MoHRE). The ministry will try to solve the issue amicably. If an amicable settlement is not reached, the case will be referred to the respective court.
As per Article 123 of the UAE Labour Law, if arbitrary dismissal is proven, the court will order the employer to pay a compensation to the employee.
(Article 123 - As amended by Federal Law no. 12 dated 29/10/1986:
a - Should the worker be arbitrarily dismissed, the competent court may order the employer to pay a compensation to the worker. The court shall assess such compensation, taking into account the type of work and the extent of damage incurred to the worker as well as the duration of employment and after the investigation of the work conditions. In all cases , the amount of compensation shall not exceed the wage of the worker for a period of three months calculated on the basis of the last due wage.
b - The provisions of the preceding paragraph shall not breach the right of the worker to the gratuity entitled thereto and the compensation in lieu of notice provided for herein.
The court will assess the value of compensation taking into account the type of work, the extent of damage incurred to the employee and the duration of the 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 the worker is 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.)
After termination of employment contract and cancellation of work visa, the terminated employee is granted a 30-day grace period from the date of cancellation, where he can either obtain a new residence permit or leave the country. Illegal residents are liable to be fined/deported.