Situations in which an employment contract may be terminated

Following are the cases in which an employment contract may be terminated as per Article 42 of the Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relationships, the ‘UAE Labour Law’:

1. If both the employer and employee mutually agree in writing to end it
2. If the term of the contract expires and is not extended or renewed
3. If either party wishes to end it, provided that the terminating party complies with the provisions of the Labour Law regarding contract termination and the notice period agreed upon in the contract
4. In the event of the employer’s death, if the subject of the contract is related to the employer personally
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. The worker is convicted by a final court judgement of a freedom-restricting penalty for a period of no 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, insolvent, or faces any economic or exceptional reasons that prevent the continuation of business, in accordance with the conditions, regulations, and procedures specified by the executive regulations and the applicable legislation in the UAE
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

According to Article 43 of the UAE Labour Law, either party may terminate the employment contract ‘for any legitimate reason’, provided that:

1. a written notification is given to the other party and
2. the contract continues to be executed during the notice period, which must not be less than 30 days and not exceed 90 days.

Additionally, the following provisions must be adhered to:

1. The employment contract remains in effect throughout the notice period and ends only upon its expiry.
2. The worker is entitled to his full wage for the notice period based on their most recent salary.
3. The party who fails to serve the notice period must compensate the other with a ‘notice period’ allowance, even if no harm was caused to the other party by the lack of notice.
4. The allowance for the notice period is calculated according to the last wage received by the worker.
5. 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, and the worker may specify the day of absence provided that he notifies the employer of the same 3 days at least before the absence day.

Note: The notice period may be reduced or exempted on mutual agreement between the two parties, with no infringement of any parties’ rights. The notice period must be the same for both parties unless it is in favour of the worker.

Termination of contract without notice by the employer

Article 44 of the UAE Labour Law mentions that an employer may terminate the services of the employee without notice, if the latter:

1. adopts a false identity or submits forged documents or certificates
2. 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.
3. violates instructions concerning safety of the workers and the place of business provided that such instructions were displayed in writing at visible places and the worker was made aware of them.
4. fails to perform his basic duties under the employment contract and continues to do so despite warning him twice of dismissal.
5. discloses confidential information related to the establishment’s industrial or intellectual property, resulting in damage to the employer, loss of opportunity, or personal gain for the worker.
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, supervisor, manager or colleagues at the workplace whether verbal, physical, or in any other form of assault punishable under UAE law.
8. is absent without a legitimate reason or acceptable excuse for more than 20 non-consecutive days in a year or more than 7 consecutive days.
9. exploits his position unlawfully to obtain personal gain.
10. joins another establishment without abiding by the rules and procedures in this regard.

Note

The law stipulates that the employer may terminate without notice only after conducting a written investigation of the worker. The dismissal notice must be in writing, justified and handed over duly to the employee by the employer or their representative in the cases listed above.

Termination of contract without notice by the employee

According to Article 45 of the Labour Law, a worker may terminate employment without notice and retain their end-of-service entitlements if the employer:

1. fails to meet his contractual or legal obligations towards the worker, provided that the worker notifies 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 MoHRE within five working days from the date on which he was able to report.
3. instructed the worker to perform tasks fundamentally different from the work agreed upon in the employment contract, without the worker’s written consent on the same, except in cases of necessity as per Article 12 of the Labour Law.
4. failed 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 outlines circumstances of grave danger at the workplace.

Arbitrary dismissal

According to Article 47 of the Labour Law, termination of a worker is considered unlawful if the dismissal results from the worker submitting a serious complaint to MoHRE or filing a lawsuit against the employer that is proven valid.

If an employee believes that he has been dismissed arbitrarily, he may file a complaint with MoHRE. The ministry will investigate the reasons and attempt to resolve the dispute amicably. If an amicable settlement is not reached, the case will be referred to the competent court.

If arbitrary dismissal is proven, the court will order the employer to pay a compensation to the worker. The court will assess the value of compensation taking into account the type of work, the extent of damage caused to the worker 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.

Changing jobs or working for another employer after termination of contract

As per Article 27 of the Cabinet Resolution No. 1 of 2022 on the Implementation Regulation of Federal Decree Law No. 33 of 2021, a worker may work for another employer if the contract ends in accordance with the Labour Law and its regulations, under the following conditions:

• The agreed contract term has expired and was not renewed.
• The contract is terminated during its term in accordance with Articles 42 and 45 of the UAE Labour Law (Refer to ‘Situations in which an employment contract may be terminated’ and ‘Termination of contract without notice by the employee’).
• The employer terminates the contract without any fault on the part of the worker.

After termination or expiry of the contract, an individual is allowed to remain in the UAE for a specified grace period, during which they may search for a new job and obtain a new work permit, or leave the country within that period.

You may refer to the Ministry of Human Resources and Emiratisation (MoHRE) and Federal Authority for Identity, Citizenship, Customs & Ports Security (ICP) for information and services regarding grace periods, new work permits and residency.

Article 8 of the Ministerial Resolution No. 47 of 2022 Regarding the Settlement of Labour Disputes and Complaints Procedures states that an employee may not obtain a work permit for one year from the date of his departure from the UAE if:

• The worker terminated the employment relationship during the probation period, provided the employer did not breach their contractual obligations.
• A ‘work abandonment’ report against the worker was proven to be true.

Source: Ministry of Human Resources and Emiratisation