What Should You Know About UAE Law for Termination?

Understanding the UAE law for termination is essential for both employers and employees operating within the country. The UAE labour law provides a comprehensive framework that outlines the rights and responsibilities of both parties when an employment contract comes to an end.

Whether you are a business owner, HR professional, or an employee, being well-versed with these regulations can help navigate the termination process smoothly and ensure compliance with the legal requirements.

1. Types of Employment Contracts

The UAE labour law distinguishes between two main types of employment contracts: limited (fixed-term) contracts and unlimited contracts. The type of contract has significant implications for the termination process and end-of-service benefits.

Limited Contracts: These contracts have a specified duration, typically not exceeding two years. Termination before the end of the term by either party without mutual consent can lead to penalties unless it is for a reason specified by the law.

Unlimited Contracts: These are open-ended contracts that do not have a specified duration. Either party can terminate the contract for a valid reason, provided that the required notice period is given and end-of-service benefits are paid.

2. Notice Period

For unlimited contracts, the law mandates a notice period ranging from a minimum of one month to a maximum of three months. During this period, both the employer and the employee are expected to fulfil their obligations. Failure to observe the notice period can result in compensation to the aggrieved party.

3. Grounds for Termination

The UAE labour law sets forth specific grounds upon which an employment contract can be terminated. For employers, these include but are not limited to, the employee's failure to perform their duties, repeated misconduct, and violation of workplace policies.

Employees can terminate their contracts if they are subjected to ill-treatment, non-payment of salaries, or unilaterally changing the contract terms by the employer.

4. Arbitrary Dismissal

Arbitrary dismissal occurs when an employee is terminated without a valid reason or if the reason for termination is not related to work. The law provides protection against arbitrary dismissal, and employees may be entitled to compensation if the termination is deemed unjust.

5. End-of-Service Benefits

Upon termination, employees are entitled to end-of-service benefits, which vary depending on the type of contract, duration of service, and reason for termination. For limited contracts, the end-of-service gratuity is calculated based on the duration of the contract.

For unlimited contracts, the gratuity is calculated based on the length of service, with the calculation method changing after the first five years of service.

6. Termination due to Redundancy

Terminations due to redundancy are permissible under the UAE labour law. However, employers must follow certain procedures, such as notifying the Ministry of Human Resources and Emiratisation (MOHRE) and providing evidence of the necessity for redundancy.

7. Dispute Resolution

The UAE labour law encourages amicable resolution of disputes between employers and employees. In cases where a resolution cannot be reached, the parties can seek adjudication from the MOHRE or the UAE courts. The law stipulates specific procedures and time frames for filing claims and appeals.

8. Changes under the New Labor Law

It's important to note that the UAE introduced a new labour law, Federal Decree-Law No. 33 of 2021, which came into effect in February 2022. This law introduced several changes aimed at enhancing labour market flexibility and protection for employees.

Key changes include the introduction of new types of work (e.g., part-time, temporary, flexible work), changes in the calculation of end-of-service benefits, and enhanced protections against discrimination and harassment.

9. Recommendations for Employers and Employees

For Employers: It is crucial to ensure that employment contracts accurately reflect the terms of employment and that termination procedures comply with the UAE labour law. Employers should maintain clear records of employee performance, any disciplinary actions, and communications regarding termination.

For Employees: It is advisable to thoroughly understand the terms of your employment contract and the UAE labour law provisions regarding termination. If facing termination, seek to understand the reasons and, if necessary, obtain legal advice from competent best lawyers in Dubai to ensure your rights are protected.

In all, navigating the termination process in the UAE requires a thorough understanding of the labour law and the rights and obligations it establishes for both employers and employees. By adhering to these regulations, parties can ensure a fair and lawful termination process. As the UAE continues to evolve its labor laws, staying informed about the latest developments is essential for maintaining compliance and protecting the interests of all parties involved.