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UAE Labour Law – Termination Of Contract 

June 22nd 2022 / Haroon Juma / HR & Payroll Blogs

New Labour Law

Changes enacted in the New UAE Labour Law in effect from 2nd February 2022 are the greatest overhaul of the legislation in the last 40 years. The legislation marks an update to provide clarity to the full lifecycle of the employee and employer relationship to create a competitive labour market to attract and retain talent in the UAE economy.

A common question raised is how the Labour governs the termination of employee contracts which for mainland companies, the provisions under the new UAE Labour Law Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations apply. In this blog, we seek to answer the most common questions affecting employer and employee obligations

Under What Conditions Can Employment Be Terminated?

Termination of employment in the UAE usually occurs under several scenarios:

Termination without notice.

Under Article 44 of the New UAE Labour Law, an employer has the right to terminate the services of an employee without serving a notice period if the employee has been subjected to a written investigation for some form of gross misconduct.

The investigation must have been formalised through written notice and specific examples of gross misconduct can include employee breaches of employment that materially harm the company’s business performance, reputation, or negligence on behalf of the employee.

The investigation should documentation or evidence concerning assault of colleagues or employer, misrepresentation submitting false certificates or documents, breaching of confidentiality provisions, non-performance, abuse of position to obtain personal gains, under the influence of alcohol or drugs, breaching safety measures, committing immoral acts at the workplace and being absent from work for more than seven working days or 20 non-consecutive ones.

Termination with notice.

Under Article 43(1) of the Employment Law, which states:

“Either party to an employment contract may terminate the contract for a good cause, by giving the other a notice in writing. The employee shall perform his duties during the notice period agreed upon in the contract, provided that the notice period is not less than 30 days and not in excess of 90 days”

This section provides rights to an employer to terminate an employee with a valid reason by serving the notice period and discharging their end-of-service obligations in full. This termination should follow due process with any verbal and written warning in case of non-performance.

Termination without a valid reason.

This is considered an arbitrary termination and the employer may have to compensate the employee by paying up to three months of salary. Under Article 47 of the New UAE Labour Law:

  1. “A dismissal of an employee by his employer shall be arbitrary if the employee submits a serious complaint to the Ministry or files an action proven to be valid against the employer”
  2. “The employer shall pay the employee a fair compensation estimated by the competent court if it is found that the dismissal is arbitrary pursuant to paragraph (1) above”
  3. “The provisions of paragraph (2) above shall not prejudice the right of an employee to the pay in lieu of notice and severance pay due to him under the provisions hereof”

The final amount of compensation is determined by the type of work, the degree of harm suffered by the employee, and the length of service. However, the amount of compensation will not exceed the three months’ salary of the employee based on the last salary.

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