Termination of Employment Contract in UAE | Conditions and Arbitrary Dismissal Under UAE Labour Law

Expiration of contract period, death of an individual, or insolvency of the employer are such circumstances in which a job contract may be terminated as per the Federal decree law no. 33/2021 known as “UAE Labour Law”.This law deals with employment in the private sector. There are some important conditions to satisfy along with other legal requirements while serving the notice period for termination of the job by either side.

Each job contract contains different clauses that must be examined while serving the notice for terminating a contract by either party. If an employee is fired by their employer due to a valid complaint they filed with MoHRE or because they launched a lawsuit against the company, it will be deemed an arbitrary dismissal.

Also read: Final Settlement in UAE Under Labour Law

What Are the Criteria for Employment Contract Termination?

UAE labor law specifies the following circumstances in which an employment contract may be terminated:

  • Contract Termination and Renewal: Either party may cancel the employment contract by following the terms and notice period outlined in the agreement if it expires without renewal, or if both parties agree to do so in writing.
  • Circumstances of Contract Termination: Should the employer pass away and the contract’s subject matter pertains to its business; should the employee pass away or become completely and permanently incapable of working, as determined by a medical entity’s certificate;
  • Job Loss Scenarios: Workers may lose their jobs if they fail to renew their work permit for reasons unrelated to the employer, face a three-month freedom-restricting penalty under UAE law, or the employer files for bankruptcy or becomes insolvent. 

Period of Notice for Termination

Any party may end an employment contract for any “legitimate reason,” according to Article 43, as long as they provide the other party written notice and give them a notice period of either one month (30 days) or three months (90 days).

It is also necessary to comply with the following provisions:

  • Entitlement of full pay: The employee is entitled to his full pay for the notice period, as specified in the contract, and must execute the task as specified in the agreement during that time.
  • Notice period allowance/compensation: The opposite party will be compensated with the worker’s wage for the entire notice time or a portion of it as a “notice period” allowance if the employee fails to fill the notice period. Notice period allowance is calculated using the base pay of the employee.
  • During notice period termination: If the employer chooses to end the employment agreement, the worker is entitled to one day of paid leave per week to hunt for other employment during the notice period.
  • The notice period may be compromised: subject to mutual agreement and without violating anyone’s rights, the notice time may be shortened or eliminated.

Termination Without Notice

If an employer in the UAE needs to terminate an employee’s contract without prior notice, they have the right to do so under certain circumstances. According to the UAE Labour Law, specifically Article 44, an employer can let go of an employee immediately 

  • General Grounds for Immediate Termination: if the employee has provided false information about their identity, submitted fake documents or certificates, made a serious mistake that leads to significant losses for the employer, or intentionally damaged the employer’s property and admitted to it. 
  • Notification Requirement: The employer must notify the Ministry of Human Resources and Emiratization (MoHRE) of the occurrence within seven working days of becoming aware of it.
  • Breach of Safety Rules: An employee who does not follow safety rules for the workplace and its workers, unless those rules were verbally explained to an illiterate worker or posted in visible areas, is not meeting their basic job responsibilities as outlined in their employment contract. This behavior continues despite two warnings that the employee will be terminated if it persists.
  • Breach of Confidentiality: The employee also shares confidential business information, causing financial loss or missed opportunities for the employer and personal gain for themselves. 
  • Misconduct and Inappropriate Behavior: In case the employee is found to be under the influence of drugs or alcohol during work hours, engages in inappropriate behavior that violates public morals, and physically assaults their manager, employer, or coworkers.
  • Unauthorized Absences and Misuse of Position:  If an employee takes excessive unauthorized absences, missing more than 20 days intermittently or seven consecutive days in a year. The employee also illegally uses their position for personal gain.
  • Breach of Employment Procedures: When an individual decides to switch to a new company without following the established rules, regulations, and procedures, it can lead to complications. According to legal guidelines, an employer is only permitted to terminate an employee without cause after conducting a proper written investigation and providing a justified notice of termination to the employee as a consequence, of noncompliance with the legal procedure employment contract may be terminated without notice.
  • Employee Rights in Case of Employer Breach: Under Article 45, if an employer violates the terms of the employment contract or breaches legal obligations, the employee has the right to immediately terminate their employment agreement by providing the Ministry of Human Resources and Emiratisation (MoHRE) with a 14 working days’ notice. Additionally, employees are required to inform the MoHRE and relevant authorities within five working days of any breaches that the employer fails to rectify. For a lawful and fair working environment, the employees and employers are under a legal obligation to comply with the legal process.
  • Consent Requirement for Additional Tasks: If an employer requires a worker to do tasks that are not part of the original job description outlined in the employment contract, they must obtain the worker’s written consent, except in cases of emergency or where the employer has failed to eliminate serious safety or health hazards despite being aware as per UAE Labour Law (Article 12) and Cabinet Resolution No. 1/2022 (Article 26).
  • Redress for Unlawful Termination: In case an employment contract is terminated by an employer without any lawful justification, the employee has the right to file a complaint before MoHRE (the Ministry of Human Resources and Emiratization). The ministry will work towards resolving the issue, and if a settlement cannot be reached, the case will be taken to court. In case the court considers the dismissal as an unlawful arbitrary act, the employer may face the consequences i.e. compensation, etc. The court will also determine the appropriate amount of compensation based on the nature of the work, the harm done to the employee, and the length of their employment, with a maximum limit of three months’ salary.

Articles 42 to 45 of the UAE Labour Law address the circumstances surrounding the termination of an employment contract, even in cases where there is no cause given. For example, if an employer terminates an employment contract without giving a reason, the employee will be entitled to a grace period that begins on the date of the contract’s termination or expiration.